Question 1

How does the study of economics depend upon the phenomenon of scarcity?

Accepted Answer

Because economics is the study of how so

Question 2

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

Accepted Answer

A) This loss of jobs has been detrimental to our economy. 
B) The government should provide subsidies to encourage more people to become farmers. 
C) The reduction in the number of farmers explains the increase in the price of food. 
D) This is progress because freed-up labor is used to produce other goods. 
A) This loss of jobs has been detrimental to our economy. 
B) The government should provide subsidies to encourage more people to become farmers. 
C) The reduction in the number of farmers explains the increase in the price of food. 
D) This is progress because freed-up labor is used to produce other goods.

Question 3

For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%. Country B had inflation of 4% for many years, but very recently inflation unexpectedly rose to 9%. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

Accepted Answer

A) both country A and country B 
B) neither country A nor country B 
C) country A but not country B 
D) country B but not country A 
A) both country A and country B 
B) neither country A nor country B 
C) country A but not country B 
D) country B but not country A

Question 4

In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

Accepted Answer

A) 3 percent per year 
B) 5 percent per year 
C) 7 percent per year 
D) 9 percent per year 
A) 3 percent per year 
B) 5 percent per year 
C) 7 percent per year 
D) 9 percent per year

Question 5

What are the two reasons for the government to intervene in a market?

Accepted Answer

To promote

Question 6

Mary and Martha both can make cookies and cakes of the same quality, though Mary can make more of both cookies and cakes per hour than Martha. With the bake-sale quickly approaching, they want to make as many cookies and cakes as possible. In which of the following situations will the most cookies and cakes be made?

Accepted Answer

A) Mary makes as many cookies and cakes as she can, while Martha does nothing. 
B) Martha makes as many cookies and cakes as she can, while Mary does nothing. 
C) ​Mary and Martha both specialize in what they are better at making. 
D) There is not enough information. 
A) Mary makes as many cookies and cakes as she can, while Martha does nothing. 
B) Martha makes as many cookies and cakes as she can, while Mary does nothing. 
C) ​Mary and Martha both specialize in what they are better at making. 
D) There is not enough information.

Question 7

Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

Accepted Answer

A) only if it allows us to obtain things that we couldn't make for ourselves. 
B) because it allows specialization, which increases total output. 
C) to us if we can gain and the others involved in the trade lose. 
D) in only a limited number of circumstances because others are typically self-interested. 
A) only if it allows us to obtain things that we couldn't make for ourselves. 
B) because it allows specialization, which increases total output. 
C) to us if we can gain and the others involved in the trade lose. 
D) in only a limited number of circumstances because others are typically self-interested.

Question 8

To raise productivity, policymakers could

Accepted Answer

A) increase spending on education. 
B) provide tax credits to firms for capital improvements. 
C) fund research and development. 
D) All of the above are correct. 
A) increase spending on education. 
B) provide tax credits to firms for capital improvements. 
C) fund research and development. 
D) All of the above are correct.

Question 9

Making rational decisions "at the margin" means that people

Accepted Answer

A) make those decisions that do not impose a marginal cost. 
B) evaluate how easily a decision can be reversed if problems arise. 
C) compare the marginal costs and marginal benefits of each decision. 
D) always calculate the dollar costs for each decision. 
A) make those decisions that do not impose a marginal cost. 
B) evaluate how easily a decision can be reversed if problems arise. 
C) compare the marginal costs and marginal benefits of each decision. 
D) always calculate the dollar costs for each decision.

Question 10

One advantage market economies have over centrally-planned economies is that market economies

Accepted Answer

A) provide an equal distribution of goods and services to households. 
B) establish a significant role for government in the allocation of resources. 
C) solve the problem of scarcity. 
D) are more efficient. 
A) provide an equal distribution of goods and services to households. 
B) establish a significant role for government in the allocation of resources. 
C) solve the problem of scarcity. 
D) are more efficient.

Question 11

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

Accepted Answer

A) 1960s. 
B) 1970s. 
C) 1980s. 
D) 1990s. 
A) 1960s. 
B) 1970s. 
C) 1980s. 
D) 1990s.

Question 12

In the early 1980s, U.S. economic policy was directed toward reducing inflation. What would you have expected to observe during this short period of time?

Accepted Answer

A) Inflation fell and unemployment fell. 
B) Inflation and unemployment were both unaffected. 
C) Inflation fell and unemployment increased. 
D) Inflation fell and unemployment was unchanged. 
A) Inflation fell and unemployment fell. 
B) Inflation and unemployment were both unaffected. 
C) Inflation fell and unemployment increased. 
D) Inflation fell and unemployment was unchanged.

Question 13

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Accepted Answer

A) True 
 B)False

Question 14

You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

Accepted Answer

A) both the cost of driving the first 800 miles and the next 15 miles. 
B) the cost of driving the first 800 miles, but not the cost of driving the next 15 miles. 
C) the cost of driving the next 15 miles, but not the cost of driving the first 800 miles. 
D) neither the cost of driving the first 800 miles nor the cost of driving the next 15 miles. 
A) both the cost of driving the first 800 miles and the next 15 miles. 
B) the cost of driving the first 800 miles, but not the cost of driving the next 15 miles. 
C) the cost of driving the next 15 miles, but not the cost of driving the first 800 miles. 
D) neither the cost of driving the first 800 miles nor the cost of driving the next 15 miles.

Question 15

Scenario 1-5
Suppose that you have a choice between going to the movies with a friend for three hours or working at your job. If you go to the movies, you will spend $12 on a ticket and $6 on popcorn. If you choose to work, you will earn $10 an hour.
-Refer to Scenario 1-5. What is your opportunity cost of going to the movies?

Accepted Answer

The answer of Scenario 1-5
Suppose that you have a choice...

Question 16

Germany could have avoided the high inflation that it experienced in the 1920s by

Accepted Answer

A) not directing so many of its resources toward preparation for World War II. 
B) not increasing taxes so much on the German middle class. 
C) not allowing the quantity of money to increase so rapidly. 
D) using government policies to stimulate the economy more so than what was done. 
A) not directing so many of its resources toward preparation for World War II. 
B) not increasing taxes so much on the German middle class. 
C) not allowing the quantity of money to increase so rapidly. 
D) using government policies to stimulate the economy more so than what was done.

Question 17

What is the main difference between a centrally planned economy and a market economy?

Accepted Answer

In a market economy, decisions

Question 18

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

Accepted Answer

A) the amount you value the first movie + $3 
B) the amount you value the first movie + $9 
C) $3 
D) $9 
A) the amount you value the first movie + $3 
B) the amount you value the first movie + $9 
C) $3 
D) $9

Question 19

An example of a firm with market power is a

Accepted Answer

A) delicatessen in New York. 
B) cable TV provider in Tulsa. 
C) clothing store in Chicago. 
D) family farm in Kansas. 
A) delicatessen in New York. 
B) cable TV provider in Tulsa. 
C) clothing store in Chicago. 
D) family farm in Kansas.

Question 20

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A) command economy. 
B) centrally-planned economy. 
C) market economy. 
D) All of the above are correct. 
A) command economy. 
B) centrally-planned economy. 
C) market economy. 
D) All of the above are correct.

Exam 1: Ten Principles of Economics

How does the study of economics depend upon the phenomenon of scarcity?

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

What are the two reasons for the government to intervene in a market?

Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

To raise productivity, policymakers could

Making rational decisions "at the margin" means that people

One advantage market economies have over centrally-planned economies is that market economies

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

In the early 1980s, U.S. economic policy was directed toward reducing inflation. What would you have expected to observe during this short period of time?

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

Germany could have avoided the high inflation that it experienced in the 1920s by

What is the main difference between a centrally planned economy and a market economy?

An example of a firm with market power is a

The decisions of firms and households are guided by prices and self-interest in a

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

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