Question 1

Economics is the study of how fairly goods and services are distributed within society.

Accepted Answer

A) True 
 B)False

Question 2

The tenth principle of economics shows the short-run tradeoff between inflation and economic growth.

Accepted Answer

A) True 
 B)False

Question 3

In each of the following situations,identify the relevant economic principle and explain how it applies.
a) Peter has lived in his own apartment for many years.However,rents have recently increased so much that Peter considers moving into a smaller apartment and renting out his own.
b) Alfonso is a talented singer and he strongly wants to pursue an artist's career.However,he is two years short of graduating from law school.He is certain he will never be a lawyer because he does not like it and has no gift to be a lawyer.However,his family insists he finish his studies,since he has already spent so much time and money on law studies.What should he do
c) There are a few industrial sites in town,producing essential goods and services for the residents and providing the citizens with vital jobs.However,the businesses,including an airport in the very downtown,also produce pollution,congestion,and noise.People understand the blessings of economic and civil freedoms and are pleased and proud to have productive activities in their town.They started,though,to crave for a more pleasant place to live in.What economic principle can give these people some guidance about what to do

Accepted Answer

a) Though Peter does not pay rent for li

Question 4

Which of the following is NOT a reason for the government to intervene in the market

Accepted Answer

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

Question 5

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

Accepted Answer

A) True 
 B)False

Question 6

According to economists,what do people respond to

Accepted Answer

A) laws 
B) incentives 
C) threats more than rewards 
D) positives, but not negatives 
A) laws 
B) incentives 
C) threats more than rewards 
D) positives, but not negatives

Question 7

How does a tradeoff exist between a clean environment and a higher level of income

Accepted Answer

A) Studies show that individuals with higher levels of income purchase more environmentally friendly products than low-income individuals. 
B) To pay for pollution cleanup, the government must increase taxes, which lowers income. 
C) Laws that reduce pollution raise costs of production and reduce incomes. 
D) By employing individuals to clean up pollution, employment and income both rise. 
A) Studies show that individuals with higher levels of income purchase more environmentally friendly products than low-income individuals. 
B) To pay for pollution cleanup, the government must increase taxes, which lowers income. 
C) Laws that reduce pollution raise costs of production and reduce incomes. 
D) By employing individuals to clean up pollution, employment and income both rise.

Question 8

Which business most likely has market power

Accepted Answer

A) a furniture store in Kingston 
B) a vineyard in the Okanagan Valley 
C) a maple sugar candy store in Sherbrooke, Quebec 
D) a hockey arena in the small town of Invermere, British Columbia 
A) a furniture store in Kingston 
B) a vineyard in the Okanagan Valley 
C) a maple sugar candy store in Sherbrooke, Quebec 
D) a hockey arena in the small town of Invermere, British Columbia

Question 9

What concept does economics primarily deal with

Accepted Answer

A) scarcity 
B) poverty 
C) change 
D) power 
A) scarcity 
B) poverty 
C) change 
D) power

Question 10

What happened to the opportunity cost of gasoline from 1997 to 2014

Accepted Answer

A) increased significantly 
B) decreased significantly 
C) remained relatively constant 
D) decreased slightly 
A) increased significantly 
B) decreased significantly 
C) remained relatively constant 
D) decreased slightly

Question 11

What can cause market failure

Accepted Answer

A) low consumer demand 
B) government intervention and price controls 
C) externalities and market power 
D) high prices and foreign competition 
A) low consumer demand 
B) government intervention and price controls 
C) externalities and market power 
D) high prices and foreign competition

Question 12

How does the government enforce property rights

Accepted Answer

A) by requiring property owners to pay property taxes 
B) by providing police and courts 
C) by allowing people to decide whether or not they wish to own property 
D) by providing a system of recording property deeds 
A) by requiring property owners to pay property taxes 
B) by providing police and courts 
C) by allowing people to decide whether or not they wish to own property 
D) by providing a system of recording property deeds

Question 13

Which of the following is NOT a major area of study for economists

Accepted Answer

A) how people make decisions 
B) how countries choose national leaders 
C) how people interact with each other 
D) how forces and trends affect the overall economy 
A) how people make decisions 
B) how countries choose national leaders 
C) how people interact with each other 
D) how forces and trends affect the overall economy

Question 14

How good are markets at organizing economic activity

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 a good 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 a good 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 15

What is the effect of an increase in the money supply in the economy

Accepted Answer

A) It increases unemployment in the short run. 
B) It increases inflation in the long run. 
C) It increases inflation in the short run. 
D) It increases unemployment in the long run. 
A) It increases unemployment in the short run. 
B) It increases inflation in the long run. 
C) It increases inflation in the short run. 
D) It increases unemployment in the long run.

Question 16

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

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 labour force than South Africa. 
C) Kenya's climate allows for longer growing seasons and therefore Kenya can produce large quantities of grain. 
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 labour force than South Africa. 
C) Kenya's climate allows for longer growing seasons and therefore Kenya can produce large quantities of grain. 
D) Productivity in Kenya is higher than in South Africa.

Question 17

Which term refers to a single entity that has the ability to influence market prices

Accepted Answer

A) competition 
B) market power 
C) efficiency 
D) productivity 
A) competition 
B) market power 
C) efficiency 
D) productivity

Question 18

In economics,what is the cost of something

Accepted Answer

A) the dollar amount of obtaining it 
B) the value of the resources needed to produce it 
C) what you give up to obtain it 
D) the amount of labour to produce it 
A) the dollar amount of obtaining it 
B) the value of the resources needed to produce it 
C) what you give up to obtain it 
D) the amount of labour to produce it

Question 19

How are goods and services allocated in a market economy

Accepted Answer

A) by government decisions 
B) by giving each individual just enough for a decent standard of living 
C) by the actions of all firms and consumers 
D) by inherited rights and properties 
A) by government decisions 
B) by giving each individual just enough for a decent standard of living 
C) by the actions of all firms and consumers 
D) by inherited rights and properties

Question 20

What has been one effect of a government-imposed seat belt law

Accepted Answer

A) fewer pedestrian deaths 
B) safer driving 
C) an increase in the number of accidents 
D) everyone now wears seat belts 
A) fewer pedestrian deaths 
B) safer driving 
C) an increase in the number of accidents 
D) everyone now wears seat belts

Exam 1: Ten Principles of Economics

Economics is the study of how fairly goods and services are distributed within society.

The tenth principle of economics shows the short-run tradeoff between inflation and economic growth.

Which of the following is NOT a reason for the government to intervene in the market

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

According to economists,what do people respond to

How does a tradeoff exist between a clean environment and a higher level of income

Which business most likely has market power

What concept does economics primarily deal with

What happened to the opportunity cost of gasoline from 1997 to 2014

What can cause market failure

How does the government enforce property rights

Which of the following is NOT a major area of study for economists

How good are markets at organizing economic activity

What is the effect of an increase in the money supply in the economy

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

Which term refers to a single entity that has the ability to influence market prices

In economics,what is the cost of something

How are goods and services allocated in a market economy

What has been one effect of a government-imposed seat belt law

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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