Question 1

A tradeoff exists between a clean environment and a higher level of income in that

Accepted Answer

A) studies show that individuals with higher levels of income pollute less than low-income individuals. 
B) efforts to reduce pollution typically are not completely successful. 
C) laws that reduce pollution raise costs of production and reduce incomes. 
D) employing individuals to clean up pollution causes increases in employment and income. 
A) studies show that individuals with higher levels of income pollute less than low-income individuals. 
B) efforts to reduce pollution typically are not completely successful. 
C) laws that reduce pollution raise costs of production and reduce incomes. 
D) employing individuals to clean up pollution causes increases in employment and income.

Question 2

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 3

Under what conditions might government intervention in a market economy improve the economy's performance?

Accepted Answer

If there is a market failure, such as an

Question 4

A construction company has built 25 houses so far this year at a total cost to the company of $7.2 million. If the company builds a 26th house, its total cost will increase to $7.5 million. Which of the following statements is correct?

Accepted Answer

A) For the first 25 houses, the average cost per house was $288,000. 
B) The marginal cost of the 26th house, if it is built, will be equal to the average cost per house. 
C) If the company can experience a marginal benefit of $288,000 by building the 26th house, then the company should build it. 
D) All of the above are correct. 
A) For the first 25 houses, the average cost per house was $288,000. 
B) The marginal cost of the 26th house, if it is built, will be equal to the average cost per house. 
C) If the company can experience a marginal benefit of $288,000 by building the 26th house, then the company should build it. 
D) All of the above are correct.

Question 5

If the wage for unskilled labor were fixed above the current wage, then we would expect

Accepted Answer

A) an increase in the number of unskilled jobs available. 
B) a decrease in the number of unskilled jobs available. 
C) a decrease in the number of workers wanting unskilled jobs. 
D) None of the above is correct. 
A) an increase in the number of unskilled jobs available. 
B) a decrease in the number of unskilled jobs available. 
C) a decrease in the number of workers wanting unskilled jobs. 
D) None of the above is correct.

Question 6

Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following claims is consistent with the views of mainstream economists?

Accepted Answer

A) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall. 
B) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily rise. 
C) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently fall. 
D) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently rise. 
A) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall. 
B) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily rise. 
C) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently fall. 
D) If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently rise.

Question 8

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A) There is no such thing as a free lunch. 
B) People buy more when prices are low than when prices are high. 
C) No matter how much people earn, they tend to spend more than they earn. 
D) Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes. 
A) There is no such thing as a free lunch. 
B) People buy more when prices are low than when prices are high. 
C) No matter how much people earn, they tend to spend more than they earn. 
D) Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Question 9

A direct or positive relationship exists between a country's

Accepted Answer

A) productivity and its standard of living. 
B) amount of government spending and its productivity. 
C) total population and its average citizen's income. 
D) rate of population growth and the extent of its trade with other countries. 
A) productivity and its standard of living. 
B) amount of government spending and its productivity. 
C) total population and its average citizen's income. 
D) rate of population growth and the extent of its trade with other countries.

Question 10

Which of the following can lead to market failure?

Accepted Answer

A) externalities and market power 
B) externalities but not market power 
C) market power but not externalities 
D) neither externalities nor market power 
A) externalities and market power 
B) externalities but not market power 
C) market power but not externalities 
D) neither externalities nor market power

Question 11

According to a recent study of Chilean bus drivers, drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour. This result is an example of which principle of economics?

Accepted Answer

A) People face tradeoffs. 
B) The cost of something is what you give up to get it. 
C) Rational people think at the margin. 
D) People respond to incentives. 
A) People face tradeoffs. 
B) The cost of something is what you give up to get it. 
C) Rational people think at the margin. 
D) People respond to incentives.

Question 12

When a single person (or small group) has the ability to influence market prices, there is

Accepted Answer

A) competition. 
B) market power. 
C) an externality. 
D) a lack of property rights. 
A) competition. 
B) market power. 
C) an externality. 
D) a lack of property rights.

Question 13

In the early 1920s,

Accepted Answer

A) Germany experienced a very high rate of inflation. 
B) the quantity of German money was declining rapidly. 
C) the value of German money remained almost constant. 
D) All of the above are correct. 
A) Germany experienced a very high rate of inflation. 
B) the quantity of German money was declining rapidly. 
C) the value of German money remained almost constant. 
D) All of the above are correct.

Question 14

Trade can make everyone better off except in the case where one person is better at doing everything.

Accepted Answer

A) True 
 B)False

Question 15

You go to the movieplex where movies ordinarily cost $10. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

Accepted Answer

A) the amount you value the first movie + $3 
B) the amount you value the first movie + $10 
C) $3 
D) $10 
A) the amount you value the first movie + $3 
B) the amount you value the first movie + $10 
C) $3 
D) $10

Question 16

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

Accepted Answer

A) should be counted in full, regardless of the costs of eating and sleeping elsewhere. 
B) should be counted only to the extent that they are more expensive at college than elsewhere. 
C) usually exceed the opportunity cost of going to college. 
D) plus the cost of tuition, equals the opportunity cost of going to college. 
A) should be counted in full, regardless of the costs of eating and sleeping elsewhere. 
B) should be counted only to the extent that they are more expensive at college than elsewhere. 
C) usually exceed the opportunity cost of going to college. 
D) plus the cost of tuition, equals the opportunity cost of going to college.

Question 17

With careful planning, we can usually get something that we like without having to give up something else that we like.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is correct?

Accepted Answer

A) The word economy comes from the Greek word for "rational thinker." 
B) Economists study the management of scarce resources. 
C) Because economists believe that people pursue their best interests, they are not interested in how people interact. 
D) All of the above are correct. 
A) The word economy comes from the Greek word for "rational thinker." 
B) Economists study the management of scarce resources. 
C) Because economists believe that people pursue their best interests, they are not interested in how people interact. 
D) All of the above are correct.

Question 19

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Accepted Answer

A) is more efficient and more equal for society. 
B) is more efficient but less equal for society. 
C) is more equal but less efficient for society. 
D) is less equal and less efficient for society. 
A) is more efficient and more equal for society. 
B) is more efficient but less equal for society. 
C) is more equal but less efficient for society. 
D) is less equal and less efficient for society.

Question 20

In response to the deep economic downturn in the US in 2008 and 2009, the US

Accepted Answer

A) reduced taxes. 
B) increased government spending. 
C) increased the supply of money. 
D) All of the above are correct. 
A) reduced taxes. 
B) increased government spending. 
C) increased the supply of money. 
D) All of the above are correct.

Exam 1: Ten Principles of Economics

A tradeoff exists between a clean environment and a higher level of income in that

Low rates of inflation are generally associated with

Under what conditions might government intervention in a market economy improve the economy's performance?

A construction company has built 25 houses so far this year at a total cost to the company of $7.2 million. If the company builds a 26th house, its total cost will increase to $7.5 million. Which of the following statements is correct?

If the wage for unskilled labor were fixed above the current wage, then we would expect

Which of the following claims is consistent with the views of mainstream economists?

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

A direct or positive relationship exists between a country's

Which of the following can lead to market failure?

According to a recent study of Chilean bus drivers, drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour. This result is an example of which principle of economics?

When a single person (or small group) has the ability to influence market prices, there is

In the early 1920s,

Trade can make everyone better off except in the case where one person is better at doing everything.

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

With careful planning, we can usually get something that we like without having to give up something else that we like.

Which of the following is correct?

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

In response to the deep economic downturn in the US in 2008 and 2009, the US

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

Filters

A construction company has built 25 houses so far this year at a total cost to the company of $7.2 million. If the company builds a 26^th house, its total cost will increase to $7.5 million. Which of the following statements is correct?