Question 1

Over the past century, the average income in the United States has risen about

Accepted Answer

A) twofold. 
B) fivefold. 
C) eightfold. 
D) tenfold. 
A) twofold. 
B) fivefold. 
C) eightfold. 
D) tenfold.

Question 2

Which of the following firms is likely to have the greatest market power?

Accepted Answer

A) an electric company 
B) a farmer 
C) a grocery store 
D) a local electronics retailer 
A) an electric company 
B) a farmer 
C) a grocery store 
D) a local electronics retailer

Question 3

In communism, central planners decide which of the following?

Accepted Answer

A) what goods and services will be produced 
B) how much will be produced 
C) who produced and consumed the goods and services 
D) All of the above are correct. 
A) what goods and services will be produced 
B) how much will be produced 
C) who produced and consumed the goods and services 
D) All of the above are correct.

Question 4

One advantage market economies have over centrally-planned economies is that market economies

Accepted Answer

A) provide an equal distribution of goods and services to households. 
B) establish a significant role for government in the allocation of resources. 
C) solve the problem of scarcity. 
D) are more efficient. 
A) provide an equal distribution of goods and services to households. 
B) establish a significant role for government in the allocation of resources. 
C) solve the problem of scarcity. 
D) are more efficient.

Question 5

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 6

Suppose Country A has a high average wage level and a high level of output per person, while Country B has a low average wage level and a low level of output per person. Which country can benefit from trade?

Accepted Answer

A) Only Country A can benefit. 
B) Only Country B can benefit. 
C) Both Country A and Country B can benefit. 
D) Neither Country A nor Country B can benefit. 
A) Only Country A can benefit. 
B) Only Country B can benefit. 
C) Both Country A and Country B can benefit. 
D) Neither Country A nor Country B can benefit.

Question 7

The broken window fallacy states that when a window breaks and someone spends money to repair it, they have created new economic activity that would not have otherwise taken place.

Accepted Answer

A) True 
 B)False

Question 8

Economics is the study of

Accepted Answer

A) production methods. 
B) how society manages its scarce resources. 
C) how households decide who performs which tasks. 
D) the interaction of business and government. 
A) production methods. 
B) how society manages its scarce resources. 
C) how households decide who performs which tasks. 
D) the interaction of business and government.

Question 9

In a market economy, economic activity is guided by

Accepted Answer

A) the government. 
B) corporations. 
C) central planners. 
D) self-interest and prices. 
A) the government. 
B) corporations. 
C) central planners. 
D) self-interest and prices.

Question 10

In considering how to allocate its scarce resources among its various members, a household considers

Accepted Answer

A) each member's abilities. 
B) each member's efforts. 
C) each member's desires. 
D) all of the above 
A) each member's abilities. 
B) each member's efforts. 
C) each member's desires. 
D) all of the above

Question 11

Ellie decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

Accepted Answer

A) the value of the knowledge she would have received had she attended class. 
B) the $24 she could have earned if she had worked at her job for those two hours. 
C) the value of her nap less the value of attending class. 
D) nothing, since she valued sleep more than attendance at class. 
A) the value of the knowledge she would have received had she attended class. 
B) the $24 she could have earned if she had worked at her job for those two hours. 
C) the value of her nap less the value of attending class. 
D) nothing, since she valued sleep more than attendance at class.

Question 12

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

Accepted Answer

A) trade can make everyone better off. 
B) rational people think at the margin. 
C) people face tradeoffs. 
D) people respond to incentives. 
A) trade can make everyone better off. 
B) rational people think at the margin. 
C) people face tradeoffs. 
D) people respond to incentives.

Question 13

One effect of the government-imposed seat belt law in the U.S. has been

Accepted Answer

A) a dramatic decrease in the number of pedestrian deaths. 
B) safer driving. 
C) an increase in the number of accidents. 
D) a dramatic decrease in the number of driver deaths. 
A) a dramatic decrease in the number of pedestrian deaths. 
B) safer driving. 
C) an increase in the number of accidents. 
D) a dramatic decrease in the number of driver deaths.

Question 14

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

Accepted Answer

A) the value of a good to society, but not the cost of making it. 
B) the cost of making a good to society, but not its value. 
C) both the value of a good to society and the cost of making it. 
D) neither the value of a good to society nor the cost of making it. 
A) the value of a good to society, but not the cost of making it. 
B) the cost of making a good to society, but not its value. 
C) both the value of a good to society and the cost of making it. 
D) neither the value of a good to society nor the cost of making it.

Question 15

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

Accepted Answer

A) Joe needs to pay his rent and his electric bill. 
B) Pete must choose between buying a new flat screen television and buying his textbooks for this semester. 
C) Kevin must decide between studying for his economics exam and working at his part-time job. 
D) Lisa can spend her money on a new sweater or a pair of jeans. 
A) Joe needs to pay his rent and his electric bill. 
B) Pete must choose between buying a new flat screen television and buying his textbooks for this semester. 
C) Kevin must decide between studying for his economics exam and working at his part-time job. 
D) Lisa can spend her money on a new sweater or a pair of jeans.

Question 16

The opportunity cost of going to college is

Accepted Answer

A) the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. 
B) the value of the best opportunity a student gives up to attend college. 
C) zero for students who are fortunate enough to have all of their college expenses paid by someone else. 
D) zero, since a college education will allow a student to earn a larger income after graduation. 
A) the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. 
B) the value of the best opportunity a student gives up to attend college. 
C) zero for students who are fortunate enough to have all of their college expenses paid by someone else. 
D) zero, since a college education will allow a student to earn a larger income after graduation.

Question 17

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce

Accepted Answer

A) efficiency. 
B) equality. 
C) externalities. 
D) productivity. 
A) efficiency. 
B) equality. 
C) externalities. 
D) productivity.

Question 18

Which of the following principles is not one of the four principles of individual decisionmaking?

Accepted Answer

A) People face tradeoffs. 
B) Trade can make everyone better off. 
C) People respond to incentives. 
D) Rational people think at the margin. 
A) People face tradeoffs. 
B) Trade can make everyone better off. 
C) People respond to incentives. 
D) Rational people think at the margin.

Question 19

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision 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 Spain increases. 
B) The marginal cost of going to Spain increases. 
C) The marginal benefit of going to Ireland increases. 
D) The marginal cost of going to Ireland decreases. 
A) The marginal benefit of going to Spain increases. 
B) The marginal cost of going to Spain increases. 
C) The marginal benefit of going to Ireland increases. 
D) The marginal cost of going to Ireland decreases.

Question 20

Which of the following is correct concerning opportunity cost?

Accepted Answer

A) Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway. 
B) To compute opportunity costs, you should subtract benefits from costs. 
C) Opportunity costs and the idea of trade-offs are not closely related. 
D) Rational people should compare various options without considering opportunity costs. 
A) Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway. 
B) To compute opportunity costs, you should subtract benefits from costs. 
C) Opportunity costs and the idea of trade-offs are not closely related. 
D) Rational people should compare various options without considering opportunity costs.

Exam 1: Ten Principles of Economics

Over the past century, the average income in the United States has risen about

Which of the following firms is likely to have the greatest market power?

In communism, central planners decide which of the following?

One advantage market economies have over centrally-planned economies is that market economies

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

Suppose Country A has a high average wage level and a high level of output per person, while Country B has a low average wage level and a low level of output per person. Which country can benefit from trade?

The broken window fallacy states that when a window breaks and someone spends money to repair it, they have created new economic activity that would not have otherwise taken place.

Economics is the study of

In a market economy, economic activity is guided by

In considering how to allocate its scarce resources among its various members, a household considers

Ellie decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

One effect of the government-imposed seat belt law in the U.S. has been

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

The opportunity cost of going to college is

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce

Which of the following principles is not one of the four principles of individual decisionmaking?

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Which of the following is correct concerning opportunity cost?

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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