Question 1

Which of the following products would be considered scarce?

Accepted Answer

A) golf clubs 
B) Picasso paintings 
C) apples 
D) All of the above are correct. 
A) golf clubs 
B) Picasso paintings 
C) apples 
D) All of the above are correct.

Question 2

Adam Smith argued that in a market system,when people act in their own self-interest,they typically

Accepted Answer

A) help only themselves. 
B) harm others. 
C) help others, but not as much as they would have if they were not self-interested. 
D) help others even more than when they deliberately try to help others. 
A) help only themselves. 
B) harm others. 
C) help others, but not as much as they would have if they were not self-interested. 
D) help others even more than when they deliberately try to help others.

Question 3

When policymakers implement policies that alter incentives,they usually

Accepted Answer

A) have carefully weighed the direct and indirect effects of the policy. 
B) do not observe the intended result of the policies. 
C) have considered all possible effects of the incentive changes when they developed the policy, which will make the policy effective. 
D) correctly anticipate the indirect effects, but often miss the direct effects. 
A) have carefully weighed the direct and indirect effects of the policy. 
B) do not observe the intended result of the policies. 
C) have considered all possible effects of the incentive changes when they developed the policy, which will make the policy effective. 
D) correctly anticipate the indirect effects, but often miss the direct effects.

Question 4

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 5

Which of the following statements about markets is most accurate?

Accepted Answer

A) Markets are usually a good way to organize economic activity. 
B) Markets are usually inferior to central planning as a way to organize economic activity. 
C) Markets fail and are therefore not an acceptable way to organize economic activity. 
D) Markets are a good way to organize economic activity in developed nations, but not in less developed nations. 
A) Markets are usually a good way to organize economic activity. 
B) Markets are usually inferior to central planning as a way to organize economic activity. 
C) Markets fail and are therefore not an acceptable way to organize economic activity. 
D) Markets are a good way to organize economic activity in developed nations, but not in less developed nations.

Question 6

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

Accepted Answer

A) The price of housing in Denver increased by 6 percent last year. 
B) Kim gets a big promotion at work.She also gets a raise from $35,000 per year to $55,000 per year. 
C) Mark graduates from college and takes a job.His income increases from $10,000 per year to $35,000 per year. 
D) A drought hits the upper Midwest and the price of wheat increases from $4.00 per bushel to $6.50 per bushel. 
A) The price of housing in Denver increased by 6 percent last year. 
B) Kim gets a big promotion at work.She also gets a raise from $35,000 per year to $55,000 per year. 
C) Mark graduates from college and takes a job.His income increases from $10,000 per year to $35,000 per year. 
D) A drought hits the upper Midwest and the price of wheat increases from $4.00 per bushel to $6.50 per bushel.

Question 7

In the early 1980s,U.S.economic policy was directed toward reducing inflation.What would you have expected to observe during this short period of time?

Accepted Answer

A) Inflation fell and unemployment fell. 
B) Inflation and unemployment were both unaffected. 
C) Inflation fell and unemployment increased. 
D) Inflation fell and unemployment was unchanged. 
A) Inflation fell and unemployment fell. 
B) Inflation and unemployment were both unaffected. 
C) Inflation fell and unemployment increased. 
D) Inflation fell and unemployment was unchanged.

Question 8

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 9

If Japan chooses to engage in trade,it

Accepted Answer

A) will only benefit if it trades with countries that produce goods Japan cannot produce. 
B) cannot benefit if it trades with less developed countries. 
C) should first attempt to produce the good itself. 
D) can benefit by trading with any other country. 
A) will only benefit if it trades with countries that produce goods Japan cannot produce. 
B) cannot benefit if it trades with less developed countries. 
C) should first attempt to produce the good itself. 
D) can benefit by trading with any other country.

Question 10

To say that government intervenes in the economy to promote efficiency is to say that government is attempting to

Accepted Answer

A) create a more fair distribution of income. 
B) change the way in which the economic pie is divided. 
C) enlarge the economic pie. 
D) All of the above are correct. 
A) create a more fair distribution of income. 
B) change the way in which the economic pie is divided. 
C) enlarge the economic pie. 
D) All of the above are correct.

Question 11

Evidence indicates that seat belt laws have led to

Accepted Answer

A) fewer pedestrian deaths. 
B) fewer automobile accidents. 
C) fewer deaths per automobile accident. 
D) All of the above are correct. 
A) fewer pedestrian deaths. 
B) fewer automobile accidents. 
C) fewer deaths per automobile accident. 
D) All of the above are correct.

Question 12

Which of the following is most likely to raise the average material standard of living in the United States?

Accepted Answer

A) an increase in investment in new capital 
B) a continuation of the economic problems experienced by China, with whom the United States competes in world markets 
C) an increase in the minimum legal wage 
D) a shortening of the average work week 
A) an increase in investment in new capital 
B) a continuation of the economic problems experienced by China, with whom the United States competes in world markets 
C) an increase in the minimum legal wage 
D) a shortening of the average work week

Question 13

Senator Smith wants to increase taxes on people with high incomes and use the money to help the poor.Senator Jones argues that such a tax will discourage successful people from working and will therefore make society worse off.An economist would say that

Accepted Answer

A) we should agree with Senator Smith. 
B) we should agree with Senator Jones. 
C) a good decision requires that we recognize both viewpoints. 
D) there are no tradeoffs between equity and efficiency. 
A) we should agree with Senator Smith. 
B) we should agree with Senator Jones. 
C) a good decision requires that we recognize both viewpoints. 
D) there are no tradeoffs between equity and efficiency.

Question 14

What you give up to obtain an item is called your

Accepted Answer

A) opportunity cost. 
B) explicit cost. 
C) true cost. 
D) direct cost. 
A) opportunity cost. 
B) explicit cost. 
C) true cost. 
D) direct cost.

Question 15

Scarcity means that there is less of a good or resource available than people wish to have.

Accepted Answer

A) True 
 B)False

Question 16

College-age athletes who drop out of college to play professional sports

Accepted Answer

A) are not rational decision makers. 
B) are well aware that their opportunity cost of attending college is very high. 
C) are concerned more about present circumstances than their future. 
D) underestimate the value of a college education. 
A) are not rational decision makers. 
B) are well aware that their opportunity cost of attending college is very high. 
C) are concerned more about present circumstances than their future. 
D) underestimate the value of a college education.

Question 17

To promote good economic outcomes,policymakers should strive to enact policies that

Accepted Answer

A) enhance productivity. 
B) enhance individuals' market power. 
C) result in a rapidly-growing quantity of money. 
D) All of the above are correct. 
A) enhance productivity. 
B) enhance individuals' market power. 
C) result in a rapidly-growing quantity of money. 
D) All of the above are correct.

Question 18

The historical rise in living standards of American workers is primarily a result of

Accepted Answer

A) the influence of labor unions in America. 
B) tariff protection imposed by the American government. 
C) the enactment of minimum-wage laws in America. 
D) the rise in American productivity. 
A) the influence of labor unions in America. 
B) tariff protection imposed by the American government. 
C) the enactment of minimum-wage laws in America. 
D) the rise in American productivity.

Question 19

Which of the following is not generally regarded as a legitimate reason for the government to intervene in a market?

Accepted Answer

A) to promote efficiency 
B) to promote equity 
C) to enforce property rights 
D) to protect an industry from foreign competition 
A) to promote efficiency 
B) to promote equity 
C) to enforce property rights 
D) to protect an industry from foreign competition

Question 20

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.

Exam 1: Ten Principles of Economics

Which of the following products would be considered scarce?

Adam Smith argued that in a market system,when people act in their own self-interest,they typically

When policymakers implement policies that alter incentives,they usually

The mainstream view among economists is that

Which of the following statements about markets is most accurate?

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

In the early 1980s,U.S.economic policy was directed toward reducing inflation.What would you have expected to observe during this short period of time?

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

If Japan chooses to engage in trade,it

To say that government intervenes in the economy to promote efficiency is to say that government is attempting to

Evidence indicates that seat belt laws have led to

Which of the following is most likely to raise the average material standard of living in the United States?

Senator Smith wants to increase taxes on people with high incomes and use the money to help the poor.Senator Jones argues that such a tax will discourage successful people from working and will therefore make society worse off.An economist would say that

What you give up to obtain an item is called your

Scarcity means that there is less of a good or resource available than people wish to have.

College-age athletes who drop out of college to play professional sports

To promote good economic outcomes,policymakers should strive to enact policies that

The historical rise in living standards of American workers is primarily a result of

Which of the following is not generally regarded as a legitimate reason for the government to intervene in a market?

The "invisible hand" directs economic activity through

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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