Question 1

Which of the following statements is correct about how economists view the effects of increases in the quantity of money?

Accepted Answer

A) The short-run effects are well understood, but the long-run effects are still the subject of controversy among economists. 
B) The long-run effects are well understood, but the short-run effects are still the subject of controversy among economists. 
C) Both the short-run effects and the long-run effects are well understood. 
D) Neither the short-run effects nor the long-run effects are well understood. 
A) The short-run effects are well understood, but the long-run effects are still the subject of controversy among economists. 
B) The long-run effects are well understood, but the short-run effects are still the subject of controversy among economists. 
C) Both the short-run effects and the long-run effects are well understood. 
D) Neither the short-run effects nor the long-run effects are well understood.

Question 2

Approximately what percentage of the world's economies experience scarcity?

Accepted Answer

A) 25% 
B) 50% 
C) 75% 
D) 100% 
A) 25% 
B) 50% 
C) 75% 
D) 100%

Question 3

After much consideration,you have chosen Cancun over Ft.Lauderdale as your Spring Break destination this year.However,Spring Break is still months away,and you may reverse this decision.Which of the following events would prompt you to reverse this decision?

Accepted Answer

A) The marginal benefit of going to Cancun increases. 
B) The marginal cost of going to Cancun decreases. 
C) The marginal benefit of going to Ft.Lauderdale decreases. 
D) The marginal cost of going to Ft.Lauderdale decreases. 
A) The marginal benefit of going to Cancun increases. 
B) The marginal cost of going to Cancun decreases. 
C) The marginal benefit of going to Ft.Lauderdale decreases. 
D) The marginal cost of going to Ft.Lauderdale decreases.

Question 4

The term market failure refers to

Accepted Answer

A) a situation in which the market on its own fails to allocate resources efficiently. 
B) an unsuccessful advertising campaign which reduces demand for a product. 
C) a situation in which competition among firms becomes ruthless. 
D) a firm which is forced out of business because of losses. 
A) a situation in which the market on its own fails to allocate resources efficiently. 
B) an unsuccessful advertising campaign which reduces demand for a product. 
C) a situation in which competition among firms becomes ruthless. 
D) a firm which is forced out of business because of losses.

Question 5

In the United States,incomes have historically grown

Accepted Answer

A) about 10 percent per year. 
B) about 5 percent per year. 
C) about 2 percent per year. 
D) about 0.5 percent per year. 
A) about 10 percent per year. 
B) about 5 percent per year. 
C) about 2 percent per year. 
D) about 0.5 percent per year.

Question 6

The term used to describe a situation in which markets fail to allocate resources efficiently is called

Accepted Answer

A) economic meltdown. 
B) market failure. 
C) disequilibrium. 
D) the effect of the invisible hand. 
A) economic meltdown. 
B) market failure. 
C) disequilibrium. 
D) the effect of the invisible hand.

Question 7

For which of the following individuals would the opportunity cost of going to college be highest?

Accepted Answer

A) a promising young mathematician who will command a high salary once she earns her college degree 
B) a student with average grades who has never held a job 
C) a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree 
D) a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball 
A) a promising young mathematician who will command a high salary once she earns her college degree 
B) a student with average grades who has never held a job 
C) a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree 
D) a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball

Question 8

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 9

Which of the following is a principle concerning how people interact?

Accepted Answer

A) Markets are usually a good way to organize economic activity. 
B) Rational people think at the margin. 
C) People respond to incentives. 
D) All of the above are correct. 
A) Markets are usually a good way to organize economic activity. 
B) Rational people think at the margin. 
C) People respond to incentives. 
D) All of the above are correct.

Question 10

The government can potentially improve market outcomes if market inequalities or market failure exists.

Accepted Answer

A) True 
 B)False

Question 11

In a particular country in 1995,the average worker needed to work 30 hours to produce 40 units of output.In that same country in 2005,the average worker needed to work 20 hours to produce 29 units of output.In that country,the productivity of the average worker

Accepted Answer

A) decreased between 1995 and 2005, so we would expect the standard of living to have decreased accordingly. 
B) increased between 1995 and 2005, so we would expect the standard of living to have increased accordingly. 
C) decreased between 1995 and 2005, so we would expect inflation to have decreased accordingly. 
D) increased between 1995 and 2005, so we would expect inflation to have increased accordingly. 
A) decreased between 1995 and 2005, so we would expect the standard of living to have decreased accordingly. 
B) increased between 1995 and 2005, so we would expect the standard of living to have increased accordingly. 
C) decreased between 1995 and 2005, so we would expect inflation to have decreased accordingly. 
D) increased between 1995 and 2005, so we would expect inflation to have increased accordingly.

Question 12

Low rates of inflation are generally associated with

Accepted Answer

A) low rates of government spending. 
B) small or nonexistent government budget deficits. 
C) low rates of productivity growth. 
D) low rates of growth of the quantity of money. 
A) low rates of government spending. 
B) small or nonexistent government budget deficits. 
C) low rates of productivity growth. 
D) low rates of growth of the quantity of money.

Question 13

U.S.laws requiring that drivers wear seat belts have resulted in

Accepted Answer

A) a reduction in both driver deaths and pedestrian deaths. 
B) fewer accidents and fewer deaths per accident. 
C) fewer driver deaths, fewer accidents and fewer pedestrian deaths. 
D) little change in the number of driver deaths, but more accidents and more pedestrian deaths. 
A) a reduction in both driver deaths and pedestrian deaths. 
B) fewer accidents and fewer deaths per accident. 
C) fewer driver deaths, fewer accidents and fewer pedestrian deaths. 
D) little change in the number of driver deaths, but more accidents and more pedestrian deaths.

Question 14

Economists are particularly adept at understanding that people respond to

Accepted Answer

A) laws. 
B) incentives. 
C) punishments more than rewards. 
D) rewards more than punishments. 
A) laws. 
B) incentives. 
C) punishments more than rewards. 
D) rewards more than punishments.

Question 15

Which of the following questions is not answered by the decisions that every society must make?

Accepted Answer

A) What determines consumer preferences? 
B) What goods will be produced? 
C) Who will produce the goods? 
D) Who will consume the goods? 
A) What determines consumer preferences? 
B) What goods will be produced? 
C) Who will produce the goods? 
D) Who will consume the goods?

Question 16

A market economy rewards people according to their

Accepted Answer

A) need for goods and services. 
B) willingness to work. 
C) ability to produce things that other people are willing to pay for. 
D) ability to produce things of cultural importance. 
A) need for goods and services. 
B) willingness to work. 
C) ability to produce things that other people are willing to pay for. 
D) ability to produce things of cultural importance.

Question 17

Teresa eats three oranges during a particular day.The marginal benefit she enjoys from eating the third orange

Accepted Answer

A) can be thought of as the total benefit Teresa enjoys by eating three oranges minus the total benefit she would have enjoyed by eating just the first two oranges. 
B) determines Teresa's willingness to pay for the first, second, and third oranges. 
C) does not depend on how many oranges Teresa has already eaten. 
D) All of the above are correct. 
A) can be thought of as the total benefit Teresa enjoys by eating three oranges minus the total benefit she would have enjoyed by eating just the first two oranges. 
B) determines Teresa's willingness to pay for the first, second, and third oranges. 
C) does not depend on how many oranges Teresa has already eaten. 
D) All of the above are correct.

Question 18

When the "invisible hand" guides economic activity,prices of products reflect

Accepted Answer

A) only the values that society places on those products. 
B) only the costs to society of producing those products. 
C) both the values that society places on those products and the costs to society of producing those products. 
D) none of the above; when the "invisible hand" guides economic activity, prices of products are set by the government in a manner that is thought to be "fair." 
A) only the values that society places on those products. 
B) only the costs to society of producing those products. 
C) both the values that society places on those products and the costs to society of producing those products. 
D) none of the above; when the "invisible hand" guides economic activity, prices of products are set by the government in a manner that is thought to be "fair."

Question 19

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A) command economy. 
B) centrally-planned economy. 
C) market economy. 
D) All of the above are correct. 
A) command economy. 
B) centrally-planned economy. 
C) market economy. 
D) All of the above are correct.

Question 20

The basic principles of economics imply that policymakers should

Accepted Answer

A) rely on markets to guide economic activity, except when markets produce inefficient or inequitable outcomes. 
B) enact policies that discourage people from specializing in particular economic activities. 
C) enact policies that lead to high rates of growth of the quantity of money. 
D) All of the above are correct. 
A) rely on markets to guide economic activity, except when markets produce inefficient or inequitable outcomes. 
B) enact policies that discourage people from specializing in particular economic activities. 
C) enact policies that lead to high rates of growth of the quantity of money. 
D) All of the above are correct.

Exam 1: Ten Principles of Economics

Which of the following statements is correct about how economists view the effects of increases in the quantity of money?

Approximately what percentage of the world's economies experience scarcity?

After much consideration,you have chosen Cancun over Ft.Lauderdale as your Spring Break destination this year.However,Spring Break is still months away,and you may reverse this decision.Which of the following events would prompt you to reverse this decision?

The term market failure refers to

In the United States,incomes have historically grown

The term used to describe a situation in which markets fail to allocate resources efficiently is called

For which of the following individuals would the opportunity cost of going to college be highest?

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

Which of the following is a principle concerning how people interact?

The government can potentially improve market outcomes if market inequalities or market failure exists.

In a particular country in 1995,the average worker needed to work 30 hours to produce 40 units of output.In that same country in 2005,the average worker needed to work 20 hours to produce 29 units of output.In that country,the productivity of the average worker

Low rates of inflation are generally associated with

U.S.laws requiring that drivers wear seat belts have resulted in

Economists are particularly adept at understanding that people respond to

Which of the following questions is not answered by the decisions that every society must make?

A market economy rewards people according to their

Teresa eats three oranges during a particular day.The marginal benefit she enjoys from eating the third orange

When the "invisible hand" guides economic activity,prices of products reflect

The decisions of firms and households are guided by prices and self-interest in a

The basic principles of economics imply that policymakers should

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

Filters