Question 1

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 2

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 3

If an externality is present in a market,economic efficiency may be enhanced by

Accepted Answer

A) government intervention. 
B) increased competition. 
C) better informed market participants. 
D) weaker property rights. 
A) government intervention. 
B) increased competition. 
C) better informed market participants. 
D) weaker property rights.

Question 4

The phenomenon of scarcity stems from the fact that

Accepted Answer

A) most economies' production methods are not very good. 
B) in most economies, wealthy people consume disproportionate quantities of goods and services. 
C) governments restricts production of too many goods and services. 
D) resources are limited. 
A) most economies' production methods are not very good. 
B) in most economies, wealthy people consume disproportionate quantities of goods and services. 
C) governments restricts production of too many goods and services. 
D) resources are limited.

Question 5

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

Accepted Answer

A) the influence of the invisible hand. 
B) trade. 
C) externalities. 
D) market power. 
A) the influence of the invisible hand. 
B) trade. 
C) externalities. 
D) market power.

Question 6

Economists use the phrase "There is no such thing as a free lunch," to illustrate the principle that

Accepted Answer

A) inflation almost always results in higher prices over time. 
B) nothing is free in a market economy. 
C) making decisions requires trading off one goal against another. 
D) if something looks too good to be true, it probably is not worth pursuing. 
A) inflation almost always results in higher prices over time. 
B) nothing is free in a market economy. 
C) making decisions requires trading off one goal against another. 
D) if something looks too good to be true, it probably is not worth pursuing.

Question 7

Prices direct economic activity in a market economy by

Accepted Answer

A) influencing the actions of buyers and sellers. 
B) reducing scarcity of the goods and services produced. 
C) eliminating the need for government intervention. 
D) allocating goods and services in the most equitable way. 
A) influencing the actions of buyers and sellers. 
B) reducing scarcity of the goods and services produced. 
C) eliminating the need for government intervention. 
D) allocating goods and services in the most equitable way.

Question 8

The word "margin" means

Accepted Answer

A) edge. 
B) distance. 
C) space. 
D) measure. 
A) edge. 
B) distance. 
C) space. 
D) measure.

Question 9

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

Accepted Answer

A) 1960s. 
B) 1970s. 
C) 1980s. 
D) 1990s. 
A) 1960s. 
B) 1970s. 
C) 1980s. 
D) 1990s.

Question 10

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

Accepted Answer

A) government actions that distort prices. 
B) increased competition in markets. 
C) enforcement of property rights. 
D) too much attention paid to efficiency. 
A) government actions that distort prices. 
B) increased competition in markets. 
C) enforcement of property rights. 
D) too much attention paid to efficiency.

Question 11

The economy of the former Soviet Union is best described as a

Accepted Answer

A) primitive economy. 
B) market economy. 
C) hybrid economy. 
D) centrally-planned economy. 
A) primitive economy. 
B) market economy. 
C) hybrid economy. 
D) centrally-planned economy.

Question 12

Which of the following is the best example of a marginal change?

Accepted Answer

A) After graduating college, Audrey's income increases from $500 per month to $3,000 per month. 
B) Morgan gets a raise at her part-time job and is now paid $7.25 per hour instead of $7.00. 
C) Housing prices in an area increase by 40 percent when a new interstate is built that passes nearby. 
D) A hard freeze wipes out half of the orange crop in Florida and the price of orange juice doubles. 
A) After graduating college, Audrey's income increases from $500 per month to $3,000 per month. 
B) Morgan gets a raise at her part-time job and is now paid $7.25 per hour instead of $7.00. 
C) Housing prices in an area increase by 40 percent when a new interstate is built that passes nearby. 
D) A hard freeze wipes out half of the orange crop in Florida and the price of orange juice doubles.

Question 13

The primary determinant of a country's standard of living is

Accepted Answer

A) the country's ability to prevail over foreign competition. 
B) the country's ability to produce goods and services. 
C) the total supply of money in the economy. 
D) the average age of the country's labor force. 
A) the country's ability to prevail over foreign competition. 
B) the country's ability to produce goods and services. 
C) the total supply of money in the economy. 
D) the average age of the country's labor force.

Question 14

In the United States,higher income tax rates on rich people could be justified on the basis of

Accepted Answer

A) superior decision-making by market participants. 
B) superior resource allocation. 
C) enhanced market efficiency. 
D) enhanced equity for society. 
A) superior decision-making by market participants. 
B) superior resource allocation. 
C) enhanced market efficiency. 
D) enhanced equity for society.

Question 15

An increase in the overall level of prices in an economy is referred to as

Accepted Answer

A) economic growth. 
B) inflation. 
C) the price effect. 
D) the demand effect. 
A) economic growth. 
B) inflation. 
C) the price effect. 
D) the demand effect.

Question 16

The term "invisible hand" was coined by

Accepted Answer

A) Adam Smith. 
B) David Ricardo. 
C) Karl Marx. 
D) Benjamin Franklin. 
A) Adam Smith. 
B) David Ricardo. 
C) Karl Marx. 
D) Benjamin Franklin.

Question 17

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

Question 18

Suppose that the average income of a Kenyan is higher than the average income of a South African.You might conclude that

Accepted Answer

A) South African firms are faced with stricter government regulations than Kenyan firms. 
B) total income is divided among fewer workers in Kenya since it has a smaller labor force than South Africa. 
C) Kenya's climate allows for longer growing seasons and therefore Kenya can produce large quantities of grain and other crops. 
D) productivity in Kenya is higher than in South Africa. 
A) South African firms are faced with stricter government regulations than Kenyan firms. 
B) total income is divided among fewer workers in Kenya since it has a smaller labor force than South Africa. 
C) Kenya's climate allows for longer growing seasons and therefore Kenya can produce large quantities of grain and other crops. 
D) productivity in Kenya is higher than in South Africa.

Question 19

Mike has spent $500 purchasing and repairing an old fishing boat,which he expects to sell for $800 once the repairs are complete.Mike discovers that,in addition to the $500 he has already spent,he needs to make an additional repair,which will cost another $400,in order to make the boat worth $800 to potential buyers.He can sell the boat as it is now for $300.What should he do?

Accepted Answer

A) He should sell the boat as it is now for $300. 
B) He should keep the boat since it would not be rational to spend $900 on repairs and then sell the boat for $800. 
C) He should complete the repairs and sell the boat for $800. 
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 $300. 
B) He should keep the boat since it would not be rational to spend $900 on repairs and then sell the boat for $800. 
C) He should complete the repairs and sell the boat for $800. 
D) It does not matter which action he takes; the outcome is the same either way.

Question 20

Equity refers to how the pie is divided,and efficiency refers to the size of the economic pie.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Inflation is defined as

Market power refers to the

If an externality is present in a market,economic efficiency may be enhanced by

The phenomenon of scarcity stems from the fact that

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

Economists use the phrase "There is no such thing as a free lunch," to illustrate the principle that

Prices direct economic activity in a market economy by

The word "margin" means

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

The economy of the former Soviet Union is best described as a

Which of the following is the best example of a marginal change?

The primary determinant of a country's standard of living is

In the United States,higher income tax rates on rich people could be justified on the basis of

An increase in the overall level of prices in an economy is referred to as

The term "invisible hand" was coined by

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

Suppose that the average income of a Kenyan is higher than the average income of a South African.You might conclude that

Equity refers to how the pie is divided,and efficiency refers to the size of the economic pie.

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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