Question 1

Which of the following is true?

Accepted Answer

A)  Efficiency refers to the size of the economic pie; equality refers to how the pie is divided. 
B)  Government policies usually improve upon both equality and efficiency. 
C)  As long as the economic pie continually gets larger, no one will have to go hungry. 
D)  Efficiency and equality can both be achieved if the economic pie is cut into equal pieces. 
A)  Efficiency refers to the size of the economic pie; equality refers to how the pie is divided. 
B)  Government policies usually improve upon both equality and efficiency. 
C)  As long as the economic pie continually gets larger, no one will have to go hungry. 
D)  Efficiency and equality can both be achieved if the economic pie is cut into equal pieces.

Question 2

Which of the following phrases best captures the notion of efficiency?

Accepted Answer

A)  absolute fairness 
B)  equal distribution 
C)  minimum waste 
D)  equitable outcome 
A)  absolute fairness 
B)  equal distribution 
C)  minimum waste 
D)  equitable outcome

Question 3

Market power refers to the

Accepted Answer

A)  power of a single person or small group to influence market prices. 
B)  ability of a person or small group to successfully market new products. 
C)  power of the government to regulate a market. 
D)  importance of a certain market in relation to the overall economy. 
A)  power of a single person or small group to influence market prices. 
B)  ability of a person or small group to successfully market new products. 
C)  power of the government to regulate a market. 
D)  importance of a certain market in relation to the overall economy.

Question 4

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 5

If the wage for unskilled labor were fixed above the current wage,then we would expect

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 6

Inflation is defined as

Accepted Answer

A)  a period of rising productivity in the economy. 
B)  a period of rising income in the economy. 
C)  an increase in the overall level of output in the economy. 
D)  an increase in the overall level of prices in the economy. 
A)  a period of rising productivity in the economy. 
B)  a period of rising income in the economy. 
C)  an increase in the overall level of output in the economy. 
D)  an increase in the overall level of prices in the economy.

Question 7

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Accepted Answer

A)  is a basic principle regarding individual decisionmaking. 
B)  amounts to a denial of one of the basic principles regarding interactions among people. 
C)  supports the idea that the "invisible hand" should guide economic activity. 
D)  was promoted by the economist Adam Smith in a well-known 1776 book. 
A)  is a basic principle regarding individual decisionmaking. 
B)  amounts to a denial of one of the basic principles regarding interactions among people. 
C)  supports the idea that the "invisible hand" should guide economic activity. 
D)  was promoted by the economist Adam Smith in a well-known 1776 book.

Question 8

A rational decisionmaker

Accepted Answer

A)  ignores marginal changes and focuses instead on "the big picture." 
B)  ignores the likely effects of government policies when he or she makes choices. 
C)  takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. 
D)  takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions. 
A)  ignores marginal changes and focuses instead on "the big picture." 
B)  ignores the likely effects of government policies when he or she makes choices. 
C)  takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. 
D)  takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.

Question 9

Which of the following is correct concerning opportunity cost?

Accepted Answer

A)  Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway. 
B)  To compute opportunity costs, you should subtract benefits from costs. 
C)  Opportunity costs and the idea of trade-offs are not closely related. 
D)  Rational people should compare various options without considering opportunity costs. 
A)  Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway. 
B)  To compute opportunity costs, you should subtract benefits from costs. 
C)  Opportunity costs and the idea of trade-offs are not closely related. 
D)  Rational people should compare various options without considering opportunity costs.

Question 10

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night,the hotel manager should

Accepted Answer

A)  rent the room because the marginal benefit exceeds the marginal cost. 
B)  rent the room because the marginal benefit exceeds the average cost. 
C)  not rent the room because the marginal benefit is less than the marginal cost. 
D)  not rent the room because the marginal benefit is less than the average cost. 
A)  rent the room because the marginal benefit exceeds the marginal cost. 
B)  rent the room because the marginal benefit exceeds the average cost. 
C)  not rent the room because the marginal benefit is less than the marginal cost. 
D)  not rent the room because the marginal benefit is less than the average cost.

Question 11

Suppose one county in Missouri decides it wants to reduce alcohol consumption,so the county passes a law that raises the price of a bottle of beer by $1.As a result,people drive to other counties to drink alcohol,which results in an increase in drunk driving.This illustrates the principle that people respond to incentives.

Accepted Answer

A) True 
 B)False

Question 12

The government enforces property rights by

Accepted Answer

A)  requiring property owners to pay property taxes. 
B)  providing police and courts. 
C)  forcing people to own property. 
D)  providing public parks and recreation facilities. 
A)  requiring property owners to pay property taxes. 
B)  providing police and courts. 
C)  forcing people to own property. 
D)  providing public parks and recreation facilities.

Question 13

A rational decisionmaker takes an action if and only if

Accepted Answer

A)  the marginal benefit of the action exceeds the marginal cost of the action. 
B)  the marginal cost of the action exceeds the marginal benefit of the action. 
C)  the marginal cost of the action is zero. 
D)  the opportunity cost of the action is zero. 
A)  the marginal benefit of the action exceeds the marginal cost of the action. 
B)  the marginal cost of the action exceeds the marginal benefit of the action. 
C)  the marginal cost of the action is zero. 
D)  the opportunity cost of the action is zero.

Question 14

The relatively low inflation experienced in the United States in the 1990s is attributable to

Accepted Answer

A)  slow growth of U.S. productivity during the 1990s. 
B)  slow growth of the quantity of money in the U.S. in the 1990s. 
C)  low levels of government spending in the U.S. in the 1980s and 1990s. 
D)  the eight-year presidency of William Jefferson Clinton during the 1990s. 
A)  slow growth of U.S. productivity during the 1990s. 
B)  slow growth of the quantity of money in the U.S. in the 1990s. 
C)  low levels of government spending in the U.S. in the 1980s and 1990s. 
D)  the eight-year presidency of William Jefferson Clinton during the 1990s.

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.If Chilean bus drivers are paid by the number of passengers they transport and Colombian bus drivers are paid by the hour,we can conclude that

Accepted Answer

A)  Chilean bus drivers likely have a higher standard of living than Colombian bus drivers. 
B)  Colombian bus drivers likely have a higher standard of living than Chilean bus drivers. 
C)  Chilean and Colombian bus drivers likely have the same standard of living. 
D)  Chilean and Colombian bus drivers likely have a higher standard of living than US bus drivers. 
A)  Chilean bus drivers likely have a higher standard of living than Colombian bus drivers. 
B)  Colombian bus drivers likely have a higher standard of living than Chilean bus drivers. 
C)  Chilean and Colombian bus drivers likely have the same standard of living. 
D)  Chilean and Colombian bus drivers likely have a higher standard of living than US bus drivers.

Question 16

Oil is considered to be a non-renewable energy source.Oil

Accepted Answer

A)  is an unlimited resource. 
B)  is a scarce resource. 
C)  is not a productive resource. 
D)  has no opportunity cost. 
A)  is an unlimited resource. 
B)  is a scarce resource. 
C)  is not a productive resource. 
D)  has no opportunity cost.

Question 17

The mainstream view among economists is that

Accepted Answer

A)  society faces a tradeoff between unemployment and inflation, but only in the short run. 
B)  society faces a tradeoff between unemployment and inflation, but only in the long run. 
C)  society faces a tradeoff between unemployment and inflation, both in the short run and in the long run. 
D)  no tradeoff exists between unemployment and inflation, either in the short run or in the long run. 
A)  society faces a tradeoff between unemployment and inflation, but only in the short run. 
B)  society faces a tradeoff between unemployment and inflation, but only in the long run. 
C)  society faces a tradeoff between unemployment and inflation, both in the short run and in the long run. 
D)  no tradeoff exists between unemployment and inflation, either in the short run or in the long run.

Question 18

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

Accepted Answer

A) True 
 B)False

Question 19

In the short-run,society faces a tradeoff between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 20

Ed 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 Ed chose to study rather than to watch tv, the value of studying must have been greater 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 Ed chose to study rather than to watch tv, the value of studying must have been greater than the value of watching tv.

Which of the following is true?

Which of the following phrases best captures the notion of efficiency?

Market power refers to the

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

If the wage for unskilled labor were fixed above the current wage,then we would expect

Inflation is defined as

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

A rational decisionmaker

Which of the following is correct concerning opportunity cost?

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night,the hotel manager should

The government enforces property rights by

A rational decisionmaker takes an action if and only if

The relatively low inflation experienced in the United States in the 1990s is attributable to

Oil is considered to be a non-renewable energy source.Oil

The mainstream view among economists is that

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

In the short-run,society faces a tradeoff between inflation and unemployment.

Ed spends an hour studying instead of watching tv with his friends.The opportunity cost to him of studying 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.

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.

Filters

Exam 1: Ten Principles of Economics.

Which of the following is true?

Which of the following phrases best captures the notion of efficiency?

Market power refers to the

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

If the wage for unskilled labor were fixed above the current wage,then we would expect

Inflation is defined as

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

A rational decisionmaker

Which of the following is correct concerning opportunity cost?

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night,the hotel manager should

The government enforces property rights by

A rational decisionmaker takes an action if and only if

The relatively low inflation experienced in the United States in the 1990s is attributable to

Oil is considered to be a non-renewable energy source.Oil

The mainstream view among economists is that

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

In the short-run,society faces a tradeoff between inflation and unemployment.

Ed spends an hour studying instead of watching tv with his friends.The opportunity cost to him of studying 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.

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.

Filters