Question 1

Which of these activities will most likely result in an external benefit?

Accepted Answer

A)  Jake purchases a dilapidated house and cleans up the yard and exterior of the house. 
B)  John purchases an iPhone and downloads new apps. 
C)  Jack purchases a new SUV and drives it to work every day. 
D)  Joe purchases a suit and wears it on his interviews. 
A)  Jake purchases a dilapidated house and cleans up the yard and exterior of the house. 
B)  John purchases an iPhone and downloads new apps. 
C)  Jack purchases a new SUV and drives it to work every day. 
D)  Joe purchases a suit and wears it on his interviews.

Question 2

One of the 20th century's worst episodes of inflation occurred in

Accepted Answer

A)  the United States in the 1960s. 
B)  Italy in the 1950s. 
C)  Russia in the 1930s. 
D)  Germany in the 1920s. 
A)  the United States in the 1960s. 
B)  Italy in the 1950s. 
C)  Russia in the 1930s. 
D)  Germany in the 1920s.

Question 3

The average cost per seat on the 75-passenger Get-There-Safe Bus company's trip from Milwaukee to Minneapolis,on which no refreshments are served,is $37.In advance of a particular trip,three seats remain unsold.The bus company could increase its profit only if it

Accepted Answer

A)  charged any ticket price above $0 for the three remaining seats. 
B)  charged at least $18.50 for each of the three remaining seats. 
C)  charged at least $37 for each of the three remaining seats. 
D)  paid three people to occupy the three remaining seats. 
A)  charged any ticket price above $0 for the three remaining seats. 
B)  charged at least $18.50 for each of the three remaining seats. 
C)  charged at least $37 for each of the three remaining seats. 
D)  paid three people to occupy the three remaining seats.

Question 4

One reason we need government,even in a market economy,is that

Accepted Answer

A)  there is insufficient market power in the absence of government. 
B)  property rights are too strong in the absence of government. 
C)  the invisible hand is not perfect. 
D)  Both a and b are correct. 
A)  there is insufficient market power in the absence of government. 
B)  property rights are too strong in the absence of government. 
C)  the invisible hand is not perfect. 
D)  Both a and b are correct.

Question 5

A marginal change is a small incremental adjustment to an existing plan of action.

Accepted Answer

A) True 
 B)False

Question 6

When calculating the cost of college,which of the following should you probably not include?

Accepted Answer

A)  The cost of tuition 
B)  The cost of books required for college classes 
C)  The income you would have earned had you not gone to college 
D)  The cost of rent for your off-campus apartment. 
A)  The cost of tuition 
B)  The cost of books required for college classes 
C)  The income you would have earned had you not gone to college 
D)  The cost of rent for your off-campus apartment.

Question 7

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 8

Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out.Both the amplifier and the mp3 player cost $100,so he can only buy one.This illustrates the basic concept that

Accepted Answer

A)  trade can make everyone better off. 
B)  people face trade-offs 
C)  rational people think at the margin. 
D)  people respond to incentives. 
A)  trade can make everyone better off. 
B)  people face trade-offs 
C)  rational people think at the margin. 
D)  people respond to incentives.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Government policies that improve equality usually increase efficiency at the same time.

Accepted Answer

A) True 
 B)False

Question 11

The adage,"There is no such thing as a free lunch," is used to illustrate the principle that

Accepted Answer

A)  goods are scarce. 
B)  people face tradeoffs. 
C)  income must be earned. 
D)  households face many decisions. 
A)  goods are scarce. 
B)  people face tradeoffs. 
C)  income must be earned. 
D)  households face many decisions.

Question 12

After much consideration,you have chosen Ireland over Spain for your Study Abroad program next year.However,the deadline for your final decision is still months away and you may reverse this decision.Which of the following events would prompt you to reverse this decision?

Accepted Answer

A)  The marginal benefit of going to Spain increases. 
B)  The marginal cost of going to Spain increases. 
C)  The marginal benefit of going to Ireland increases. 
D)  The marginal cost of going to Ireland decreases. 
A)  The marginal benefit of going to Spain increases. 
B)  The marginal cost of going to Spain increases. 
C)  The marginal benefit of going to Ireland increases. 
D)  The marginal cost of going to Ireland decreases.

Question 13

Government policies designed to equalize the distribution of economic well-being include
(i)the welfare system
(ii)unemployment insurance
(iii)progressive income tax

Accepted Answer

A)  (i) only 
B)  (ii) only 
C)  (i) and (ii) only 
D)  (i), (ii), and (iii) 
A)  (i) only 
B)  (ii) only 
C)  (i) and (ii) only 
D)  (i), (ii), and (iii)

Question 14

The invisible hand works to promote general well-being in the economy primarily through

Accepted Answer

A)  government intervention. 
B)  the political process. 
C)  people's pursuit of self-interest. 
D)  altruism. 
A)  government intervention. 
B)  the political process. 
C)  people's pursuit of self-interest. 
D)  altruism.

Question 15

According to a recent study of Chilean bus drivers,drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour.This result is an example of which principle of economics?

Accepted Answer

A)  People face tradeoffs. 
B)  The cost of something is what you give up to get it. 
C)  Rational people think at the margin. 
D)  People respond to incentives. 
A)  People face tradeoffs. 
B)  The cost of something is what you give up to get it. 
C)  Rational people think at the margin. 
D)  People respond to incentives.

Question 16

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 17

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents.As a student of economics,you know that

Accepted Answer

A)  this is a case of the "broken window fallacy." 
B)  this is a great use of taxpayer dollars. 
C)  this policy diverts money from spending somewhere else in the economy. 
D)  Both a and c are correct. 
A)  this is a case of the "broken window fallacy." 
B)  this is a great use of taxpayer dollars. 
C)  this policy diverts money from spending somewhere else in the economy. 
D)  Both a and c are correct.

Question 18

Penny is piano teacher and Dan is a tile layer.If Penny teaches Dan's daughter to play the piano in exchange for Dan tiling her kitchen floor,

Accepted Answer

A)  only Penny is made better off by trade. 
B)  only Dan is made better off by trade. 
C)  both Penny and Dan are made better off by trade. 
D)  neither Penny nor Dan are made better off by trade. 
A)  only Penny is made better off by trade. 
B)  only Dan is made better off by trade. 
C)  both Penny and Dan are made better off by trade. 
D)  neither Penny nor Dan are made better off by trade.

Question 19

Trade between countries tends to

Accepted Answer

A)  reduce both competition and specialization. 
B)  reduce competition and increase specialization. 
C)  increase competition and reduce specialization. 
D)  increase both competition and specialization. 
A)  reduce both competition and specialization. 
B)  reduce competition and increase specialization. 
C)  increase competition and reduce specialization. 
D)  increase both competition and specialization.

Question 20

Trade allows each person to specialize in the activities he or she does best,thus increasing each individual's productivity.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics.

Which of these activities will most likely result in an external benefit?

One of the 20th century's worst episodes of inflation occurred in

The average cost per seat on the 75-passenger Get-There-Safe Bus company's trip from Milwaukee to Minneapolis,on which no refreshments are served,is $37.In advance of a particular trip,three seats remain unsold.The bus company could increase its profit only if it

One reason we need government,even in a market economy,is that

A marginal change is a small incremental adjustment to an existing plan of action.

When calculating the cost of college,which of the following should you probably not include?

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

Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out.Both the amplifier and the mp3 player cost $100,so he can only buy one.This illustrates the basic concept that

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

Government policies that improve equality usually increase efficiency at the same time.

The adage,"There is no such thing as a free lunch," is used to illustrate the principle that

After much consideration,you have chosen Ireland over Spain for your Study Abroad program next year.However,the deadline for your final decision is still months away and you may reverse this decision.Which of the following events would prompt you to reverse this decision?

Government policies designed to equalize the distribution of economic well-being include (i)the welfare system (ii)unemployment insurance (iii)progressive income tax

The invisible hand works to promote general well-being in the economy primarily through

According to a recent study of Chilean bus drivers,drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour.This result is an example of which principle of economics?

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

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents.As a student of economics,you know that

Penny is piano teacher and Dan is a tile layer.If Penny teaches Dan's daughter to play the piano in exchange for Dan tiling her kitchen floor,

Trade between countries tends to

Trade allows each person to specialize in the activities he or she does best,thus increasing each individual's productivity.

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.

Application: 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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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