Question 1

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Accepted Answer

A) the pie gets larger, and there will be more pie overall. 
B) the pie gets smaller, and there will be less pie overall. 
C) it increases the reward for working hard, resulting in people producing more goods and services. 
D) those who earn more income pay less in taxes. 
A) the pie gets larger, and there will be more pie overall. 
B) the pie gets smaller, and there will be less pie overall. 
C) it increases the reward for working hard, resulting in people producing more goods and services. 
D) those who earn more income pay less in taxes.

Question 2

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an important cause of inflation in an economy?

Accepted Answer

A) increases in productivity in the economy 
B) the influence of positive externalities on the economy 
C) lack of property rights in the economy 
D) growth in the quantity of money in the economy 
A) increases in productivity in the economy 
B) the influence of positive externalities on the economy 
C) lack of property rights in the economy 
D) growth in the quantity of money in the economy

Question 4

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

Accepted Answer

A) $50. 
B) $500. 
C) $50,000. 
D) This cannot be determined from the information given. 
A) $50. 
B) $500. 
C) $50,000. 
D) This cannot be determined from the information given.

Question 5

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

Accepted Answer

A) the value of a good to society, but not the cost of making it. 
B) the cost of making a good to society, but not its value. 
C) both the value of a good to society and the cost of making it. 
D) neither the value of a good to society nor the cost of making it. 
A) the value of a good to society, but not the cost of making it. 
B) the cost of making a good to society, but not its value. 
C) both the value of a good to society and the cost of making it. 
D) neither the value of a good to society nor the cost of making it.

Question 6

In the 1990s, inflation in the United States was

Accepted Answer

A) very close to zero. 
B) about 3 percent per year. 
C) about 6 percent per year. 
D) commonly referred to as "public enemy number one." 
A) very close to zero. 
B) about 3 percent per year. 
C) about 6 percent per year. 
D) commonly referred to as "public enemy number one."

Question 7

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Accepted Answer

A) True 
 B)False

Question 8

The amount of goods and services produced from each unit of labor input is called

Accepted Answer

A) opportunity cost. 
B) productivity. 
C) externality. 
D) marginal benefit. 
A) opportunity cost. 
B) productivity. 
C) externality. 
D) marginal benefit.

Question 9

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

Accepted Answer

A) True 
 B)False

Question 10

A rational decision maker takes an action if and only if

Accepted Answer

A) the average benefit of the action exceeds the average cost. 
B) the average cost of the action exceeds the average benefit. 
C) the marginal benefit of the action exceeds the marginal cost. 
D) the marginal cost of the action exceeds the marginal benefit. 
A) the average benefit of the action exceeds the average cost. 
B) the average cost of the action exceeds the average benefit. 
C) the marginal benefit of the action exceeds the marginal cost. 
D) the marginal cost of the action exceeds the marginal benefit.

Question 11

In the short run, which of the following is not correct?

Accepted Answer

A) Increasing the money supply increases the demand for goods and services. 
B) Increasing the money supply encourages firms to hire more workers. 
C) Lowering the money supply leads to a higher level of unemployment. 
D) Policies that encourage higher employment will also induce a lower rate of inflation. 
A) Increasing the money supply increases the demand for goods and services. 
B) Increasing the money supply encourages firms to hire more workers. 
C) Lowering the money supply leads to a higher level of unemployment. 
D) Policies that encourage higher employment will also induce a lower rate of inflation.

Question 12

The historical rise in living standards of American workers is primarily a result of

Accepted Answer

A) the influence of labor unions in America. 
B) tariff protection imposed by the American government. 
C) the enactment of minimum-wage laws in America. 
D) the rise in American productivity. 
A) the influence of labor unions in America. 
B) tariff protection imposed by the American government. 
C) the enactment of minimum-wage laws in America. 
D) the rise in American productivity.

Question 13

Consider Mandy's decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. Mandy's cost of going to college is

Accepted Answer

A) $32,000. 
B) $42,000. 
C) $50,000. 
D) $58,000. 
A) $32,000. 
B) $42,000. 
C) $50,000. 
D) $58,000.

Question 14

Efficiency means that

Accepted Answer

A) society is conserving resources in order to save them for the future. 
B) society's goods and services are distributed equally among society's members. 
C) society's goods and services are distributed fairly, though not necessarily equally, among society's members. 
D) society is getting the maximum benefits from its scarce resources. 
A) society is conserving resources in order to save them for the future. 
B) society's goods and services are distributed equally among society's members. 
C) society's goods and services are distributed fairly, though not necessarily equally, among society's members. 
D) society is getting the maximum benefits from its scarce resources.

Question 15

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

Accepted Answer

A) inefficiency 
B) inequality 
C) scarcity 
D) market failure 
A) inefficiency 
B) inequality 
C) scarcity 
D) market failure

Question 16

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

Accepted Answer

A) True 
 B)False

Question 17

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The average cost per seat is

Accepted Answer

A) $50. 
B) $500. 
C) $50,000. 
D) This cannot be determined from the information given. 
A) $50. 
B) $500. 
C) $50,000. 
D) This cannot be determined from the information given.

Question 18

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

Accepted Answer

A) its average cost is greater than its marginal cost. 
B) its average cost and its marginal cost are equal. 
C) its average cost is less than its marginal cost. 
D) This cannot be determined from the information given. 
A) its average cost is greater than its marginal cost. 
B) its average cost and its marginal cost are equal. 
C) its average cost is less than its marginal cost. 
D) This cannot be determined from the information given.

Question 19

In the United States, the overall level of prices more than doubled during the

Accepted Answer

A) 1950s. 
B) 1960s. 
C) 1970s. 
D) 1980s. 
A) 1950s. 
B) 1960s. 
C) 1970s. 
D) 1980s.

Question 20

Tim decides to spend four hours playing video games rather than attending his classes. His opportunity cost of playing games is

Accepted Answer

A) the value of the knowledge he would have received had he attended his classes. 
B) the $50 he could have earned if he had worked at his job for those four hours. 
C) the value of his time playing video games minus the value of attending classes. 
D) nothing, since he valued playing video games more than attending classes. 
A) the value of the knowledge he would have received had he attended his classes. 
B) the $50 he could have earned if he had worked at his job for those four hours. 
C) the value of his time playing video games minus the value of attending classes. 
D) nothing, since he valued playing video games more than attending classes.

Exam 1: Ten Principles of Economics

As a result of a successful attempt by government to cut the economic pie into more equal slices,

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Which of the following is an important cause of inflation in an economy?

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

In the 1990s, inflation in the United States was

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

The amount of goods and services produced from each unit of labor input is called

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

A rational decision maker takes an action if and only if

In the short run, which of the following is not correct?

The historical rise in living standards of American workers is primarily a result of

Consider Mandy's decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. Mandy's cost of going to college is

Efficiency means that

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The average cost per seat is

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

In the United States, the overall level of prices more than doubled during the

Tim decides to spend four hours playing video games rather than attending his classes. His opportunity cost of playing games is

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26^th table. If the company produces 26 tables, then