Question 1

Public policies

Accepted Answer

A) may be able to improve either economic efficiency or equality. 
B) may be able to improve economic efficiency but cannot improve equality. 
C) may be able to improve equality but cannot improve economic efficiency. 
D) cannot improve either equality or economic efficiency. 
A) may be able to improve either economic efficiency or equality. 
B) may be able to improve economic efficiency but cannot improve equality. 
C) may be able to improve equality but cannot improve economic efficiency. 
D) cannot improve either equality or economic efficiency.

Question 2

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

Accepted Answer

A) True 
 B)False

Question 3

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Accepted Answer

A) True 
 B)False

Question 4

In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker

Accepted Answer

A) decreased by 1.7 percent between 1998 and 2008. 
B) remained unchanged between 1998 and 2008. 
C) increased by 4.75 percent between 1998 and 2008. 
D) increased by 6.25 percent between 1998 and 2008. 
A) decreased by 1.7 percent between 1998 and 2008. 
B) remained unchanged between 1998 and 2008. 
C) increased by 4.75 percent between 1998 and 2008. 
D) increased by 6.25 percent between 1998 and 2008.

Question 5

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Accepted Answer

A) True 
 B)False

Question 6

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Accepted Answer

Whatever must be given up to obtain some

Question 7

What you give up to obtain an item is called your

Accepted Answer

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

Question 8

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 9

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents. As a student of economics, you know that

Accepted Answer

A) this is a case of the "broken window fallacy." 
B) this is a great use of taxpayer dollars. 
C) this policy diverts money from spending somewhere else in the economy. 
D) Both a and c are correct. 
A) this is a case of the "broken window fallacy." 
B) this is a great use of taxpayer dollars. 
C) this policy diverts money from spending somewhere else in the economy. 
D) Both a and c are correct.

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

To increase living standards, public policy should

Accepted Answer

A) ensure that workers are well educated and have the necessary tools and technology. 
B) make unemployment benefits more generous. 
C) move workers into jobs directly from high school. 
D) ensure a greater degree of equality, taking all income-earners into account. 
A) ensure that workers are well educated and have the necessary tools and technology. 
B) make unemployment benefits more generous. 
C) move workers into jobs directly from high school. 
D) ensure a greater degree of equality, taking all income-earners into account.

Question 12

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

Accepted Answer

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

Question 13

In an economy in which decisions are guided by prices and individual self-interest, there is

Accepted Answer

A) the potential to achieve efficiency in production. 
B) a strong need for government intervention in the market. 
C) less efficiency than would be observed in a centrally-planned economy. 
D) more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy. 
A) the potential to achieve efficiency in production. 
B) a strong need for government intervention in the market. 
C) less efficiency than would be observed in a centrally-planned economy. 
D) more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.

Question 14

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Accepted Answer

A) Yes, because cutting hair is profitable. 
B) No, because he may not be able to sell more services. 
C) It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D) It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients. 
A) Yes, because cutting hair is profitable. 
B) No, because he may not be able to sell more services. 
C) It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D) It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

Question 15

When government policies are enacted,

Accepted Answer

A) equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality. 
B) efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss. 
C) it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished. 
D) None of the above are correct. 
A) equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality. 
B) efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss. 
C) it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished. 
D) None of the above are correct.

Question 16

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Accepted Answer

A) True 
 B)False

Question 17

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Accepted Answer

A) the unexpected repairs and the increase in the price of gas 
B) the unexpected increase for repairs, but not the increase in the price of gas 
C) the increase in the price of gas, but not the unexpected repairs 
D) neither the unexpected increase in the price of gas nor the unexpected repairs 
A) the unexpected repairs and the increase in the price of gas 
B) the unexpected increase for repairs, but not the increase in the price of gas 
C) the increase in the price of gas, but not the unexpected repairs 
D) neither the unexpected increase in the price of gas nor the unexpected repairs

Question 18

You have driven 500 miles on a vacation and then you notice that you are only 25 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

Accepted Answer

A) both the cost of driving the first 500 and the next 25 miles. 
B) the cost of driving the first 500 miles, but not the cost of driving the next 25. 
C) the cost of driving the next 25 miles, but not the cost of driving the first 500. 
D) neither the cost of driving the first 500 miles nor the cost of driving the next 25 miles. 
A) both the cost of driving the first 500 and the next 25 miles. 
B) the cost of driving the first 500 miles, but not the cost of driving the next 25. 
C) the cost of driving the next 25 miles, but not the cost of driving the first 500. 
D) neither the cost of driving the first 500 miles nor the cost of driving the next 25 miles.

Question 19

Almost all variation in living standards is attributable to differences in countries'

Accepted Answer

A) population growth rates. 
B) productivity. 
C) systems of public education. 
D) taxes. 
A) population growth rates. 
B) productivity. 
C) systems of public education. 
D) taxes.

Question 20

Germany could have avoided the high inflation that it experienced in the 1920s by

Accepted Answer

A) not directing so many of its resources toward preparation for World War II. 
B) not increasing taxes so much on the German middle class. 
C) not allowing the quantity of money to increase so rapidly. 
D) using government policies to stimulate the economy more so than what was done. 
A) not directing so many of its resources toward preparation for World War II. 
B) not increasing taxes so much on the German middle class. 
C) not allowing the quantity of money to increase so rapidly. 
D) using government policies to stimulate the economy more so than what was done.

Exam 1: Ten Principles of Economics

Public policies

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

What you give up to obtain an item is called your

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

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents. As a student of economics, you know that

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

To increase living standards, public policy should

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

In an economy in which decisions are guided by prices and individual self-interest, there is

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

When government policies are enacted,

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

You have driven 500 miles on a vacation and then you notice that you are only 25 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

Almost all variation in living standards is attributable to differences in countries'

Germany could have avoided the high inflation that it experienced in the 1920s 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

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 Macroeconomic Models

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

Six Debates Over Macroeconomic Policy

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