Question 1

Ed spends an hour studying instead of watching tv with his friends. The opportunity cost to him of studying is

Accepted Answer

A) the improvement in his grades from studying for the hour. 
B) the improvement in his grades from studying minus the enjoyment of watching tv. 
C) the enjoyment he would have received if he had watched tv with his friends. 
D) zero. Since Ed chose to study rather than to watch tv, the value of studying must have been greater than the value of watching tv. 
A) the improvement in his grades from studying for the hour. 
B) the improvement in his grades from studying minus the enjoyment of watching tv. 
C) the enjoyment he would have received if he had watched tv with his friends. 
D) zero. Since Ed chose to study rather than to watch tv, the value of studying must have been greater than the value of watching tv.

Question 2

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 3

In a market economy, who makes the decisions that guide most economic activity?

Accepted Answer

A) firms only 
B) households only 
C) firms and households 
D) government 
A) firms only 
B) households only 
C) firms and households 
D) government

Question 4

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 5

Efficiency

Accepted Answer

A) and equality both refer to how much a society can produce with its resources. 
B) and equality both refer to how fairly the benefits from using resources are distributed between members of a society. 
C) refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society. 
D) refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources 
A) and equality both refer to how much a society can produce with its resources. 
B) and equality both refer to how fairly the benefits from using resources are distributed between members of a society. 
C) refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society. 
D) refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources

Question 6

Which of these activities will most likely impose an external cost?

Accepted Answer

A) Betty plants flowers in her garden. 
B) Bonnie gets a flu vaccine. 
C) Bridget drives her car after having too much alcohol to drink. 
D) Becky buys a new flat screen television. 
A) Betty plants flowers in her garden. 
B) Bonnie gets a flu vaccine. 
C) Bridget drives her car after having too much alcohol to drink. 
D) Becky buys a new flat screen television.

Question 7

Which of the following could reduce economic efficiency?

Accepted Answer

A) laws that encourage lawsuits 
B) policies that redistribute income 
C) policies that impose significant restrictions on international trade 
D) All of the above are correct 
A) laws that encourage lawsuits 
B) policies that redistribute income 
C) policies that impose significant restrictions on international trade 
D) All of the above are correct

Question 8

Market power refers to the

Accepted Answer

A) power of a single person or small group to influence market prices. 
B) ability of a person or small group to successfully market new products. 
C) power of the government to regulate a market. 
D) importance of a certain market in relation to the overall economy. 
A) power of a single person or small group to influence market prices. 
B) ability of a person or small group to successfully market new products. 
C) power of the government to regulate a market. 
D) importance of a certain market in relation to the overall economy.

Question 9

When a government program is justified not on its merits but on the number of jobs it will create,

Accepted Answer

A) the program is an efficient use of taxpayer dollars. 
B) it should be approved only if the unemployment rate is low. 
C) taxes should be raised to fund the program. 
D) it is known as the "broken window fallacy." 
A) the program is an efficient use of taxpayer dollars. 
B) it should be approved only if the unemployment rate is low. 
C) taxes should be raised to fund the program. 
D) it is known as the "broken window fallacy."

Question 10

In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy?

Accepted Answer

A) 1 percent per year 
B) 2 percent per year 
C) 3 percent per year 
D) 4 percent per year 
A) 1 percent per year 
B) 2 percent per year 
C) 3 percent per year 
D) 4 percent per year

Question 11

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 12

In the United States, the overall level of prices more than doubled during the

Accepted Answer

A) 1950s. 
B) 1960s. 
C) 1970s. 
D) 1980s. 
A) 1950s. 
B) 1960s. 
C) 1970s. 
D) 1980s.

Question 13

Scarcity means that there is less of a good or resource available than people wish to have.

Accepted Answer

A) True 
 B)False

Question 14

Efficiency means that

Accepted Answer

A) society is conserving resources in order to save them for the future. 
B) society's goods and services are distributed equally among society's members. 
C) society's goods and services are distributed fairly, though not necessarily equally, among society's members. 
D) society is getting the maximum benefits from its scarce resources. 
A) society is conserving resources in order to save them for the future. 
B) society's goods and services are distributed equally among society's members. 
C) society's goods and services are distributed fairly, though not necessarily equally, among society's members. 
D) society is getting the maximum benefits from its scarce resources.

Question 15

Trade between countries tends to

Accepted Answer

A) reduce both competition and specialization. 
B) reduce competition and increase specialization. 
C) increase competition and reduce specialization. 
D) increase both competition and specialization. 
A) reduce both competition and specialization. 
B) reduce competition and increase specialization. 
C) increase competition and reduce specialization. 
D) increase both competition and specialization.

Question 16

How does the study of economics depend upon the phenomenon of scarcity?

Accepted Answer

Because economics is the study of how so

Question 17

The relatively low inflation experienced in the United States in the 1990s is attributable to

Accepted Answer

A) slow growth of U.S. productivity during the 1990s. 
B) slow growth of the quantity of money in the U.S. in the 1990s. 
C) low levels of government spending in the U.S. in the 1980s and 1990s. 
D) the eight-year presidency of William Jefferson Clinton during the 1990s. 
A) slow growth of U.S. productivity during the 1990s. 
B) slow growth of the quantity of money in the U.S. in the 1990s. 
C) low levels of government spending in the U.S. in the 1980s and 1990s. 
D) the eight-year presidency of William Jefferson Clinton during the 1990s.

Question 18

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 19

The economy of the former Soviet Union is best described as a

Accepted Answer

A) primitive economy. 
B) market economy. 
C) hybrid economy. 
D) centrally-planned economy. 
A) primitive economy. 
B) market economy. 
C) hybrid economy. 
D) centrally-planned economy.

Question 20

One reason we need government, even in a market economy, is that

Accepted Answer

A) there is insufficient market power in the absence of government. 
B) property rights are too strong in the absence of government. 
C) the invisible hand is not perfect. 
D) Both a and b are correct. 
A) there is insufficient market power in the absence of government. 
B) property rights are too strong in the absence of government. 
C) the invisible hand is not perfect. 
D) Both a and b are correct.

Exam 1: Ten Principles of Economics

Ed spends an hour studying instead of watching tv with his friends. The opportunity cost to him of studying is

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

In a market economy, who makes the decisions that guide most economic activity?

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

Efficiency

Which of these activities will most likely impose an external cost?

Which of the following could reduce economic efficiency?

Market power refers to the

When a government program is justified not on its merits but on the number of jobs it will create,

In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy?

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

In the United States, the overall level of prices more than doubled during the

Scarcity means that there is less of a good or resource available than people wish to have.

Efficiency means that

Trade between countries tends to

How does the study of economics depend upon the phenomenon of scarcity?

The relatively low inflation experienced in the United States in the 1990s is attributable to

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

The economy of the former Soviet Union is best described as a

One reason we need government, even in a market economy, is that

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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