Question 1

In which of the following decades was there both high inflation and rapid money supply growth in the US?

Accepted Answer

A) the 1970's and the 1990's 
B) the 1970's but not the 1990's 
C) the 1990's but not the 1970's 
D) neither the 1970's nor the 1990's 
A) the 1970's and the 1990's 
B) the 1970's but not the 1990's 
C) the 1990's but not the 1970's 
D) neither the 1970's nor the 1990's

Question 2

What is another word for "marginal"?

Accepted Answer

incrementa

Question 3

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is

Accepted Answer

A) the improvement in his grades from studying for the hour. 
B) the improvement in his grades from studying minus the enjoyment of watching TV. 
C) the enjoyment he would have received if he had watched TV with his friends. 
D) zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV. 
A) the improvement in his grades from studying for the hour. 
B) the improvement in his grades from studying minus the enjoyment of watching TV. 
C) the enjoyment he would have received if he had watched TV with his friends. 
D) zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV.

Question 4

In 2011, the average American earned about $48,000 while the average Nigerian earned about $1,200. Which of the following statements is likely?

Accepted Answer

A) The average American purchases more televisions than the average Nigerian. 
B) The average American has better nutrition and healthcare than the average Nigerian. 
C) The average American has a longer life expectancy than the average Nigerian. 
D) All of the above are correct. 
A) The average American purchases more televisions than the average Nigerian. 
B) The average American has better nutrition and healthcare than the average Nigerian. 
C) The average American has a longer life expectancy than the average Nigerian. 
D) All of the above are correct.

Question 5

When society requires that firms reduce pollution, there is

Accepted Answer

A) a tradeoff because of reduced incomes to the firms' owners and workers. 
B) a tradeoff only if some firms are forced to close. 
C) no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. 
D) no tradeoff, since everyone benefits from reduced pollution. 
A) a tradeoff because of reduced incomes to the firms' owners and workers. 
B) a tradeoff only if some firms are forced to close. 
C) no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. 
D) no tradeoff, since everyone benefits from reduced pollution.

Question 6

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

Accepted Answer

A) The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
B) The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
C) Only half of the cost of the parking permit is part of the opportunity cost of attending college. 
D) The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances. 
A) The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
B) The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
C) Only half of the cost of the parking permit is part of the opportunity cost of attending college. 
D) The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances.

Question 7

Rick buys a 1966 Mustang for $3,000, planning to restore and sell the car. He goes on to spend $9,000 restoring the car. At this point he can sell the car for $10,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $13,000. Rick should

Accepted Answer

A) complete the repairs and sell the car for $13,000. 
B) sell the car now for $10,000. 
C) never try such an expensive project again. 
D) be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it. 
A) complete the repairs and sell the car for $13,000. 
B) sell the car now for $10,000. 
C) never try such an expensive project again. 
D) be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it.

Question 8

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Accepted Answer

A) Yes, because cutting hair is profitable. 
B) No, because he may not be able to sell more services. 
C) It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D) It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients. 
A) Yes, because cutting hair is profitable. 
B) No, because he may not be able to sell more services. 
C) It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D) It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

Question 9

What is the most important factor that explains differences in living standards among countries?

Accepted Answer

A) labor unions 
B) minimum wage laws 
C) productivity 
D) efficiency 
A) labor unions 
B) minimum wage laws 
C) productivity 
D) efficiency

Question 10

In most societies, resources are allocated by

Accepted Answer

A) a single central planner. 
B) a small number of central planners. 
C) those firms that use resources to provide goods and services. 
D) the combined actions of millions of households and firms. 
A) a single central planner. 
B) a small number of central planners. 
C) those firms that use resources to provide goods and services. 
D) the combined actions of millions of households and firms.

Question 11

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.76 million. Which of the following statements is correct?

Accepted Answer

A) For the first 30 houses, the average cost per house was $250,000. 
B) The marginal cost of the 31st house, if it is built, will be $260,000. 
C) If the company can experience a marginal benefit of $275,000 by building the 31st house, then the company should build it. 
D) All of the above are correct. 
A) For the first 30 houses, the average cost per house was $250,000. 
B) The marginal cost of the 31st house, if it is built, will be $260,000. 
C) If the company can experience a marginal benefit of $275,000 by building the 31st house, then the company should build it. 
D) All of the above are correct.

Question 12

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

A) the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B) the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C) producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D) water prices are held artificially low by governments, since water is necessary for life. 
A) the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B) the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C) producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D) water prices are held artificially low by governments, since water is necessary for life.

Question 13

Guns and butter are used to represent the classic societal tradeoff between spending on

Accepted Answer

A) durable and nondurable goods. 
B) imports and exports. 
C) national defense and consumer goods. 
D) law enforcement and agriculture. 
A) durable and nondurable goods. 
B) imports and exports. 
C) national defense and consumer goods. 
D) law enforcement and agriculture.

Question 14

The business cycle refers to fluctuations in economic activity such as employment and production.

Accepted Answer

A) True 
 B)False

Question 15

Adam Smith's book The Wealth of Nations was published in

Accepted Answer

A) 1692. 
B) 1776. 
C) 1816. 
D) 1936. 
A) 1692. 
B) 1776. 
C) 1816. 
D) 1936.

Question 16

In considering how to allocate its scarce resources among its various members, a household considers

Accepted Answer

A) each member's abilities. 
B) each member's efforts. 
C) each member's desires. 
D) All of the above are correct. 
A) each member's abilities. 
B) each member's efforts. 
C) each member's desires. 
D) All of the above are correct.

Question 17

The term used to describe a situation in which markets do not allocate resources efficiently is

Accepted Answer

A) economic meltdown. 
B) market failure. 
C) equilibrium. 
D) the effect of the invisible hand. 
A) economic meltdown. 
B) market failure. 
C) equilibrium. 
D) the effect of the invisible hand.

Question 18

Trade can make everyone better off except in the case where one person is better at doing everything.

Accepted Answer

A) True 
 B)False

Question 19

Scenario 1-6
It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors.
-Refer to Scenario 1-6. A customer is willing to pay $60 for the 601st heart rate monitor. Should the company produce and sell it? Explain.

Accepted Answer

No, because the marg

Question 20

If Switzerland chooses to engage in trade, it

Accepted Answer

A) will only benefit if it trades with countries that produce goods Switzerland cannot produce. 
B) cannot benefit if it trades with less developed countries. 
C) should first attempt to produce the good itself. 
D) can benefit by trading with any other country. 
A) will only benefit if it trades with countries that produce goods Switzerland cannot produce. 
B) cannot benefit if it trades with less developed countries. 
C) should first attempt to produce the good itself. 
D) can benefit by trading with any other country.

Exam 1: Ten Principles of Economics

In which of the following decades was there both high inflation and rapid money supply growth in the US?

What is another word for "marginal"?

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is

In 2011, the average American earned about $48,000 while the average Nigerian earned about $1,200. Which of the following statements is likely?

When society requires that firms reduce pollution, there is

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

What is the most important factor that explains differences in living standards among countries?

In most societies, resources are allocated by

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.76 million. Which of the following statements is correct?

People are willing to pay more for a diamond than for a bottle of water because

Guns and butter are used to represent the classic societal tradeoff between spending on

The business cycle refers to fluctuations in economic activity such as employment and production.

Adam Smith's book The Wealth of Nations was published in

In considering how to allocate its scarce resources among its various members, a household considers

The term used to describe a situation in which markets do not allocate resources efficiently is

Trade can make everyone better off except in the case where one person is better at doing everything.

If Switzerland chooses to engage in trade, it

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

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31^st house, its total cost will increase to $7.76 million. Which of the following statements is correct?