Question 1

A marginal change is a

Accepted Answer

A)  change that involves little, if anything, that is important. 
B)  large, significant adjustment. 
C)  change for the worse, and so it is usually a short-term change. 
D)  small, incremental adjustment. 
A)  change that involves little, if anything, that is important. 
B)  large, significant adjustment. 
C)  change for the worse, and so it is usually a short-term change. 
D)  small, incremental adjustment.

Question 2

Which of the following examples does not illustrate the principle represented by the adage,"There is no such thing as a free lunch"?

Accepted Answer

A)  Joe needs to pay his rent and his electric bill. 
B)  Pete must choose between buying a new flat screen television and buying his textbooks for this semester. 
C)  Kevin must decide between studying for his economics exam and working at his part-time job. 
D)  Lisa can spend her money on a new sweater or a pair of jeans. 
A)  Joe needs to pay his rent and his electric bill. 
B)  Pete must choose between buying a new flat screen television and buying his textbooks for this semester. 
C)  Kevin must decide between studying for his economics exam and working at his part-time job. 
D)  Lisa can spend her money on a new sweater or a pair of jeans.

Question 3

Which of the following can lead to market failure?

Accepted Answer

A)  externalities and market power 
B)  externalities but not market power 
C)  market power but not externalities 
D)  neither externalities nor market power 
A)  externalities and market power 
B)  externalities but not market power 
C)  market power but not externalities 
D)  neither externalities nor market power

Question 4

In the long run the primary effect of increasing the quantity of money is higher prices.

Accepted Answer

A) True 
 B)False

Question 5

Ellie decides to spend two hours taking a nap rather than attending her classes.Her opportunity cost of napping is

Accepted Answer

A)  the value of the knowledge she would have received had she attended class. 
B)  the $24 she could have earned if she had worked at her job for those two hours. 
C)  the value of her nap less the value of attending class. 
D)  nothing, since she valued sleep more than attendance at class. 
A)  the value of the knowledge she would have received had she attended class. 
B)  the $24 she could have earned if she had worked at her job for those two hours. 
C)  the value of her nap less the value of attending class. 
D)  nothing, since she valued sleep more than attendance at class.

Question 6

In the United States,the overall level of prices more than doubled during the

Accepted Answer

A)  1950s. 
B)  1960s. 
C)  1970s. 
D)  1980s. 
A)  1950s. 
B)  1960s. 
C)  1970s. 
D)  1980s.

Question 7

Productivity is defined as the quantity of goods and services produced from each unit of labor input.

Accepted Answer

A) True 
 B)False

Question 8

Which of these activities will most likely impose an external cost?

Accepted Answer

A)  Betty plants flowers in her garden. 
B)  Bonnie gets a flu vaccine. 
C)  Bridget drives her car after having too much alcohol to drink. 
D)  Becky buys a new flat screen television. 
A)  Betty plants flowers in her garden. 
B)  Bonnie gets a flu vaccine. 
C)  Bridget drives her car after having too much alcohol to drink. 
D)  Becky buys a new flat screen television.

Question 9

Economics is the study of

Accepted Answer

A)  production methods. 
B)  how society manages its scarce resources. 
C)  how households decide who performs which tasks. 
D)  the interaction of business and government. 
A)  production methods. 
B)  how society manages its scarce resources. 
C)  how households decide who performs which tasks. 
D)  the interaction of business and government.

Question 10

The amount of goods and services produced from each unit of labor input is called

Accepted Answer

A)  opportunity cost. 
B)  productivity. 
C)  externality. 
D)  marginal benefit. 
A)  opportunity cost. 
B)  productivity. 
C)  externality. 
D)  marginal benefit.

Question 11

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 12

Efficiency means that

Accepted Answer

A)  society is conserving resources in order to save them for the future. 
B)  society's goods and services are distributed equally among society's members. 
C)  society's goods and services are distributed fairly, though not necessarily equally, among society's members. 
D)  society is getting the maximum benefits from its scarce resources. 
A)  society is conserving resources in order to save them for the future. 
B)  society's goods and services are distributed equally among society's members. 
C)  society's goods and services are distributed fairly, though not necessarily equally, among society's members. 
D)  society is getting the maximum benefits from its scarce resources.

Question 13

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 14

For markets to work well,there must be

Accepted Answer

A)  market power. 
B)  a central planner. 
C)  property rights. 
D)  abundant, not scarce, resources. 
A)  market power. 
B)  a central planner. 
C)  property rights. 
D)  abundant, not scarce, resources.

Question 15

One tradeoff society faces is between efficiency and equality.Define each term.If the U.S.government redistributes income from the rich to the poor,explain how this action affects equality as well as efficiency in the economy.

Accepted Answer

Efficiency is the property of society ge

Question 16

Which of the following products would be considered scarce?

Accepted Answer

A)  automobiles 
B)  baseballs autographed by Babe Ruth 
C)  pickles 
D)  All of the above are correct. 
A)  automobiles 
B)  baseballs autographed by Babe Ruth 
C)  pickles 
D)  All of the above are correct.

Question 17

The short-run tradeoff between inflation and unemployment implies that,in the short run,

Accepted Answer

A)  a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
B)  an increase in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
C)  policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate. 
D)  policymakers can influence the inflation rate, but not the unemployment rate. 
A)  a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
B)  an increase in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
C)  policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate. 
D)  policymakers can influence the inflation rate, but not the unemployment rate.

Question 18

The business cycle is the

Accepted Answer

A)  relationship between unemployment and inflation. 
B)  irregular fluctuations in economic activity. 
C)  positive relationship between the quantity of money in an economy and inflation. 
D)  predictable changes in economic activity due to changes in government spending and taxes. 
A)  relationship between unemployment and inflation. 
B)  irregular fluctuations in economic activity. 
C)  positive relationship between the quantity of money in an economy and inflation. 
D)  predictable changes in economic activity due to changes in government spending and taxes.

Question 19

Rick buys a 1966 Mustang for $3,000,planning to restore and sell the car.He goes on to spend $9,000 restoring the car.At this point he can sell the car for $10,000.As an alternative,he can spend an additional $3,000 replacing the engine.With a new engine the car would sell for $13,000.Rick should

Accepted Answer

A)  complete the repairs and sell the car for $13,000. 
B)  sell the car now for $10,000. 
C)  never try such an expensive project again. 
D)  be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it. 
A)  complete the repairs and sell the car for $13,000. 
B)  sell the car now for $10,000. 
C)  never try such an expensive project again. 
D)  be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it.

Question 20

Large or persistent inflation is almost always caused by

Accepted Answer

A)  excessive government spending. 
B)  excessive growth in the quantity of money. 
C)  foreign competition. 
D)  higher-than-normal levels of productivity. 
A)  excessive government spending. 
B)  excessive growth in the quantity of money. 
C)  foreign competition. 
D)  higher-than-normal levels of productivity.

Exam 1: Ten Principles of Economics.

A marginal change is a

Which of the following examples does not illustrate the principle represented by the adage,"There is no such thing as a free lunch"?

Which of the following can lead to market failure?

In the long run the primary effect of increasing the quantity of money is higher prices.

Ellie decides to spend two hours taking a nap rather than attending her classes.Her opportunity cost of napping is

In the United States,the overall level of prices more than doubled during the

Productivity is defined as the quantity of goods and services produced from each unit of labor input.

Which of these activities will most likely impose an external cost?

Economics is the study of

The amount of goods and services produced from each unit of labor input is called

In a market economy,

Efficiency means that

For markets to work well,there must be

One tradeoff society faces is between efficiency and equality.Define each term.If the U.S.government redistributes income from the rich to the poor,explain how this action affects equality as well as efficiency in the economy.

Which of the following products would be considered scarce?

The short-run tradeoff between inflation and unemployment implies that,in the short run,

The business cycle is the

Rick buys a 1966 Mustang for $3,000,planning to restore and sell the car.He goes on to spend $9,000 restoring the car.At this point he can sell the car for $10,000.As an alternative,he can spend an additional $3,000 replacing the engine.With a new engine the car would sell for $13,000.Rick should

Large or persistent inflation is almost always caused by

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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