Question 1

Explain the concept of externality and give an example.

Accepted Answer

The impact of one pe

Question 2

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce

Accepted Answer

A) efficiency. 
B) equality. 
C) externalities. 
D) productivity. 
A) efficiency. 
B) equality. 
C) externalities. 
D) productivity.

Question 3

When a society cannot produce all the goods and services people wish to have, the economy is experiencing

Accepted Answer

A) scarcity. 
B) surpluses. 
C) inefficiencies. 
D) inequalities. 
A) scarcity. 
B) surpluses. 
C) inefficiencies. 
D) inequalities.

Question 4

DeShawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. DeShawn discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He can sell the boat as it is now for $400. What should he do?

Accepted Answer

A) He should sell the boat as it is now for $400. 
B) He should keep the boat since it would not be rational to spend $1,000 on repairs and then sell the boat for $900. 
C) He should complete the repairs and sell the boat for $900. 
D) It does not matter which action he takes; the outcome is the same either way. 
A) He should sell the boat as it is now for $400. 
B) He should keep the boat since it would not be rational to spend $1,000 on repairs and then sell the boat for $900. 
C) He should complete the repairs and sell the boat for $900. 
D) It does not matter which action he takes; the outcome is the same either way.

Question 5

Equality means distributing society's resources in the most efficient manner.

Accepted Answer

A) True 
 B)False

Question 6

With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year.

Accepted Answer

The concept of working longer per year w

Question 7

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A) There is no such thing as a free lunch. 
B) People buy more when prices are low than when prices are high. 
C) No matter how much people earn, they tend to spend more than they earn. 
D) Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes. 
A) There is no such thing as a free lunch. 
B) People buy more when prices are low than when prices are high. 
C) No matter how much people earn, they tend to spend more than they earn. 
D) Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Question 8

Adam Smith's insight was that prices adjust to guide individual buyers and sellers to reach outcomes where, in many cases,

Accepted Answer

A) opportunity cost is minimized for buyers. 
B) scarcity is reduced for society. 
C) well-being of society is maximized. 
D) opportunity cost of production is maximized. 
A) opportunity cost is minimized for buyers. 
B) scarcity is reduced for society. 
C) well-being of society is maximized. 
D) opportunity cost of production is maximized.

Question 9

In a market economy,

Accepted Answer

A) households decide which firms to work for and what to buy with their incomes. 
B) firms decide whom to hire and what to make. 
C) a central planner makes decisions about production and consumption. 
D) Both a and b are correct. 
A) households decide which firms to work for and what to buy with their incomes. 
B) firms decide whom to hire and what to make. 
C) a central planner makes decisions about production and consumption. 
D) Both a and b are correct.

Question 10

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Accepted Answer

A) True 
 B)False

Question 11

In response to the deep economic downturn in the US in 2008 and 2009, the US

Accepted Answer

A) reduced taxes. 
B) increased government spending. 
C) increased the supply of money. 
D) All of the above are correct. 
A) reduced taxes. 
B) increased government spending. 
C) increased the supply of money. 
D) All of the above are correct.

Question 12

Which of the following statements about trade is false?

Accepted Answer

A) Trade increases competition. 
B) With trade, one country wins and one country loses. 
C) Bulgaria can benefit, potentially, from trade with any other country. 
D) Trade allows people to buy a greater variety of goods and services at lower cost. 
A) Trade increases competition. 
B) With trade, one country wins and one country loses. 
C) Bulgaria can benefit, potentially, from trade with any other country. 
D) Trade allows people to buy a greater variety of goods and services at lower cost.

Question 13

Inflation and unemployment both increase as the money supply increases.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following claims is consistent with the views of mainstream economists?

Accepted Answer

A) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall. 
B) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily rise. 
C) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently fall. 
D) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently rise. 
A) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall. 
B) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily rise. 
C) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently fall. 
D) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently rise.

Question 15

Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $6200. Bill discovers that he needs to do an additional $2400 of work to make the car worth $6200 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do?

Accepted Answer

A) He should sell the car now for $3800. 
B) He should keep the car since it wouldn't be rational to spend $6400 restoring a car and then sell it for only $6200. 
C) He should complete the additional work and sell the car for $6200. 
D) It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same either way. 
A) He should sell the car now for $3800. 
B) He should keep the car since it wouldn't be rational to spend $6400 restoring a car and then sell it for only $6200. 
C) He should complete the additional work and sell the car for $6200. 
D) It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same either way.

Question 16

Which of the following is an example of an externality?

Accepted Answer

A) A paper mill dumps waste into the river. 
B) A neighbor's loud music disrupts sleep. 
C) A drunk driver causes an accident that injures another person. 
D) All of the above are correct. 
A) A paper mill dumps waste into the river. 
B) A neighbor's loud music disrupts sleep. 
C) A drunk driver causes an accident that injures another person. 
D) All of the above are correct.

Question 17

If the government were to intervene and set a wage for unskilled labor above the market wage, then we would expect, relative to the market outcome,

Accepted Answer

A) an increase in the number of unskilled jobs available. 
B) a decrease in the number of unskilled jobs available. 
C) a decrease in the number of workers wanting unskilled jobs. 
D) None of the above is correct. 
A) an increase in the number of unskilled jobs available. 
B) a decrease in the number of unskilled jobs available. 
C) a decrease in the number of workers wanting unskilled jobs. 
D) None of the above is correct.

Question 18

You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should

Accepted Answer

A) compare the total cost of your education to the total benefits of your education. 
B) compare the total cost of your education to the benefits of staying one more semester. 
C) compare the cost of staying one more semester to the benefits of staying one more semester. 
D) compare the total benefits of your education to the cost of staying one more semester. 
A) compare the total cost of your education to the total benefits of your education. 
B) compare the total cost of your education to the benefits of staying one more semester. 
C) compare the cost of staying one more semester to the benefits of staying one more semester. 
D) compare the total benefits of your education to the cost of staying one more semester.

Question 19

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Accepted Answer

A) is more efficient and more equal for society. 
B) is more efficient but less equal for society. 
C) is more equal but less efficient for society. 
D) is less equal and less efficient for society. 
A) is more efficient and more equal for society. 
B) is more efficient but less equal for society. 
C) is more equal but less efficient for society. 
D) is less equal and less efficient for society.

Question 20

Maureen's college raises the cost of room and board per semester. This increase raises Maureen's opportunity cost of attending college

Accepted Answer

A) even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost reduces Maureen's incentive to attend college. 
B) even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost increases Maureen's incentive to attend college. 
C) only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Maureen's incentive to attend college. 
D) only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost increases Maureen's incentive to attend college. 
A) even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost reduces Maureen's incentive to attend college. 
B) even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost increases Maureen's incentive to attend college. 
C) only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Maureen's incentive to attend college. 
D) only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost increases Maureen's incentive to attend college.

Exam 1: Ten Principles of Economics

Explain the concept of externality and give an example.

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce

When a society cannot produce all the goods and services people wish to have, the economy is experiencing

Equality means distributing society's resources in the most efficient manner.

With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year.

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Adam Smith's insight was that prices adjust to guide individual buyers and sellers to reach outcomes where, in many cases,

In a market economy,

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

In response to the deep economic downturn in the US in 2008 and 2009, the US

Which of the following statements about trade is false?

Inflation and unemployment both increase as the money supply increases.

Which of the following claims is consistent with the views of mainstream economists?

Which of the following is an example of an externality?

If the government were to intervene and set a wage for unskilled labor above the market wage, then we would expect, relative to the market outcome,

You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Maureen's college raises the cost of room and board per semester. This increase raises Maureen's opportunity cost of attending college

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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