Question 1

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 2

Brenda is an excellent baker and Floyd has a plentiful farm.If Floyd trades eggs and butter to Brenda for some of Brenda's bread and pastries,

Accepted Answer

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

Question 3

Communist countries worked under the premise that

Accepted Answer

A)  markets were the best way to organize economic activity. 
B)  central planners were in the best position to determine the allocation of scarce resources in the economy. 
C)  households and firms, guided by an "invisible hand," could achieve the most efficient allocation of scarce resources. 
D)  allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources. 
A)  markets were the best way to organize economic activity. 
B)  central planners were in the best position to determine the allocation of scarce resources in the economy. 
C)  households and firms, guided by an "invisible hand," could achieve the most efficient allocation of scarce resources. 
D)  allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources.

Question 4

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.He has decided to take the job.For him,the marginal

Accepted Answer

A)  cost of leaving was greater than the marginal benefit. 
B)  benefit of leaving was greater than the marginal cost. 
C)  benefit of teaching was greater than the marginal cost. 
D)  All of the above are correct. 
A)  cost of leaving was greater than the marginal benefit. 
B)  benefit of leaving was greater than the marginal cost. 
C)  benefit of teaching was greater than the marginal cost. 
D)  All of the above are correct.

Question 5

The price of diamonds is high,in part because the majority of the world's diamonds are controlled by a single firm.This is an example of

Accepted Answer

A)  a market failure caused by an externality. 
B)  a market failure caused by market power. 
C)  a market failure caused by equality. 
D)  There is no market failure in this case. 
A)  a market failure caused by an externality. 
B)  a market failure caused by market power. 
C)  a market failure caused by equality. 
D)  There is no market failure in this case.

Question 6

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 7

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 8

Benefits from trade would not include

Accepted Answer

A)  the ability of people and nations to specialize. 
B)  a greater variety of goods and services becoming available. 
C)  less competition. 
D)  lower prices. 
A)  the ability of people and nations to specialize. 
B)  a greater variety of goods and services becoming available. 
C)  less competition. 
D)  lower prices.

Question 9

The "invisible hand" directs economic activity through

Accepted Answer

A)  advertising. 
B)  prices. 
C)  central planning. 
D)  government regulations. 
A)  advertising. 
B)  prices. 
C)  central planning. 
D)  government regulations.

Question 10

Suppose after graduating from college you get a job working at a bank earning $30,000 per year.After two years of working at the bank earning the same salary,you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank.Which of the following should not be included in a calculation of your opportunity cost?

Accepted Answer

A)  the cost of tuition and books to attend the graduate program 
B)  the $30,000 salary that you could have earned if you retained your job at the bank 
C)  the $45,000 salary that you will be able to earn after having completed your graduate program 
D)  the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank 
A)  the cost of tuition and books to attend the graduate program 
B)  the $30,000 salary that you could have earned if you retained your job at the bank 
C)  the $45,000 salary that you will be able to earn after having completed your graduate program 
D)  the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank

Question 11

When a single person (or small group)has the ability to influence market prices,there is

Accepted Answer

A)  competition. 
B)  market power. 
C)  an externality. 
D)  a lack of property rights. 
A)  competition. 
B)  market power. 
C)  an externality. 
D)  a lack of property rights.

Question 12

Caroline eats two bananas during a particular day.The marginal benefit she enjoys from eating the second banana

Accepted Answer

A)  can be thought of as the total benefit Caroline enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana. 
B)  determines Caroline's marginal cost of the first and second bananas. 
C)  does not depend on how many bananas Caroline has already eaten. 
D)  All of the above are correct. 
A)  can be thought of as the total benefit Caroline enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana. 
B)  determines Caroline's marginal cost of the first and second bananas. 
C)  does not depend on how many bananas Caroline has already eaten. 
D)  All of the above are correct.

Question 13

Betty's Bakery bakes fresh bread every morning.Any bread not sold by the end of the day is thrown away.A loaf of bread costs Betty $2.00 to produce,and she prices loaves of bread at $3.50 per loaf.Suppose near the end of one day Betty still has 12 loaves of bread on hand.Which of the following is correct?

Accepted Answer

A)  Betty should only sell the remaining bread for $3.50 per loaf since that is the regular price. 
B)  Betty should only sell the remaining bread for $2.00 per loaf or more since that is what the bread costs to make. 
C)  Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something. 
D)  Betty should just throw the bread away and change the price of her bread starting tomorrow to make sure she sells all of her bread each day. 
A)  Betty should only sell the remaining bread for $3.50 per loaf since that is the regular price. 
B)  Betty should only sell the remaining bread for $2.00 per loaf or more since that is what the bread costs to make. 
C)  Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something. 
D)  Betty should just throw the bread away and change the price of her bread starting tomorrow to make sure she sells all of her bread each day.

Question 14

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Accepted Answer

A)  enhance equality. 
B)  reduce efficiency. 
C)  reduce the reward for working hard. 
D)  All of the above are correct. 
A)  enhance equality. 
B)  reduce efficiency. 
C)  reduce the reward for working hard. 
D)  All of the above are correct.

Question 15

You have driven 500 miles on a vacation and then you notice that you are only 25 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 500 and the next 25 miles. 
B)  the cost of driving the first 500 miles, but not the cost of driving the next 25. 
C)  the cost of driving the next 25 miles, but not the cost of driving the first 500. 
D)  neither the cost of driving the first 500 miles nor the cost of driving the next 25 miles. 
A)  both the cost of driving the first 500 and the next 25 miles. 
B)  the cost of driving the first 500 miles, but not the cost of driving the next 25. 
C)  the cost of driving the next 25 miles, but not the cost of driving the first 500. 
D)  neither the cost of driving the first 500 miles nor the cost of driving the next 25 miles.

Question 16

Following the implementation of laws requiring automobiles to have seat belts,which of the following occurred?

Accepted Answer

A)  An individual's probability of surviving an auto accident rose. 
B)  There was an increase in pedestrian deaths. 
C)  There was an increase in automobile accidents. 
D)  All of the above are correct. 
A)  An individual's probability of surviving an auto accident rose. 
B)  There was an increase in pedestrian deaths. 
C)  There was an increase in automobile accidents. 
D)  All of the above are correct.

Question 17

Market failure is the ability of a single person to have a substantial influence on market prices.

Accepted Answer

A) True 
 B)False

Question 18

Market failure can be caused by

Accepted Answer

A)  low consumer demand. 
B)  equilibrium prices. 
C)  externalities and market power. 
D)  high prices and foreign competition. 
A)  low consumer demand. 
B)  equilibrium prices. 
C)  externalities and market power. 
D)  high prices and foreign competition.

Question 19

The ability of an individual to own and exercise control over scarce resources is called

Accepted Answer

A)  market failure. 
B)  property rights. 
C)  externality. 
D)  market power. 
A)  market failure. 
B)  property rights. 
C)  externality. 
D)  market power.

Question 20

If the rent for apartments in New York City were fixed below the current price,then we would expect

Accepted Answer

A)  an increase in the number of people wanting to rent apartments in New York City. 
B)  a decrease in the number of people wanting to rent apartments in New York City. 
C)  an increase in the number of apartments available for rent in New York City. 
D)  None of the above is correct. 
A)  an increase in the number of people wanting to rent apartments in New York City. 
B)  a decrease in the number of people wanting to rent apartments in New York City. 
C)  an increase in the number of apartments available for rent in New York City. 
D)  None of the above is correct.

To raise productivity,policymakers could

Brenda is an excellent baker and Floyd has a plentiful farm.If Floyd trades eggs and butter to Brenda for some of Brenda's bread and pastries,

Communist countries worked under the premise that

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.He has decided to take the job.For him,the marginal

The price of diamonds is high,in part because the majority of the world's diamonds are controlled by a single firm.This is an example of

When society requires that firms reduce pollution,there is

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

Benefits from trade would not include

The "invisible hand" directs economic activity through

When a single person (or small group)has the ability to influence market prices,there is

Caroline eats two bananas during a particular day.The marginal benefit she enjoys from eating the second banana

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

You have driven 500 miles on a vacation and then you notice that you are only 25 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

Following the implementation of laws requiring automobiles to have seat belts,which of the following occurred?

Market failure is the ability of a single person to have a substantial influence on market prices.

Market failure can be caused by

The ability of an individual to own and exercise control over scarce resources is called

If the rent for apartments in New York City were fixed below the current price,then we would expect

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.

To raise productivity,policymakers could

Brenda is an excellent baker and Floyd has a plentiful farm.If Floyd trades eggs and butter to Brenda for some of Brenda's bread and pastries,

Communist countries worked under the premise that

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.He has decided to take the job.For him,the marginal

The price of diamonds is high,in part because the majority of the world's diamonds are controlled by a single firm.This is an example of

When society requires that firms reduce pollution,there is

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

Benefits from trade would not include

The "invisible hand" directs economic activity through

When a single person (or small group)has the ability to influence market prices,there is

Caroline eats two bananas during a particular day.The marginal benefit she enjoys from eating the second banana

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

You have driven 500 miles on a vacation and then you notice that you are only 25 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

Following the implementation of laws requiring automobiles to have seat belts,which of the following occurred?

Market failure is the ability of a single person to have a substantial influence on market prices.

Market failure can be caused by

The ability of an individual to own and exercise control over scarce resources is called

If the rent for apartments in New York City were fixed below the current price,then we would expect

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