Question 1

President Gerald Ford referred to inflation as

Accepted Answer

A) a blight on our nation's economy. 
B) a necessary evil to combat high unemployment. 
C) public enemy number one. 
D) a fly in the ointment. 
A) a blight on our nation's economy. 
B) a necessary evil to combat high unemployment. 
C) public enemy number one. 
D) a fly in the ointment.

Question 2

In 2008, the average American earned about $47,000 while the average Nigerian earned about $1,400. Which of the following statements is likely?

Accepted Answer

A) The average American purchases more televisions than the average Nigerian. 
B) The average American has better nutrition and healthcare than the average Nigerian. 
C) The average American has a longer life expectancy than the average Nigerian. 
D) All of the above are correct. 
A) The average American purchases more televisions than the average Nigerian. 
B) The average American has better nutrition and healthcare than the average Nigerian. 
C) The average American has a longer life expectancy than the average Nigerian. 
D) All of the above are correct.

Question 3

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A) command economy. 
B) centrally-planned economy. 
C) market economy. 
D) All of the above are correct. 
A) command economy. 
B) centrally-planned economy. 
C) market economy. 
D) All of the above are correct.

Question 4

Suppose after graduating from college you get a job working at a bank earning $30,000 per year. After two years of working at the bank earning the same salary, you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank. Which of the following should not be included in a calculation of your opportunity cost?

Accepted Answer

A) the cost of tuition and books to attend the graduate program 
B) the $30,000 salary that you could have earned if you retained your job at the bank 
C) the $45,000 salary that you will be able to earn after having completed your graduate program 
D) the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank 
A) the cost of tuition and books to attend the graduate program 
B) the $30,000 salary that you could have earned if you retained your job at the bank 
C) the $45,000 salary that you will be able to earn after having completed your graduate program 
D) the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank

Question 5

Trade makes costs

Accepted Answer

A) higher and reduces the variety of goods and services available. 
B) higher but raises the variety of goods and services available. 
C) lower but reduces the variety of goods and services available. 
D) lower and raises the variety of goods and services available. 
A) higher and reduces the variety of goods and services available. 
B) higher but raises the variety of goods and services available. 
C) lower but reduces the variety of goods and services available. 
D) lower and raises the variety of goods and services available.

Question 6

Making rational decisions "at the margin" means that people

Accepted Answer

A) make those decisions that do not impose a marginal cost. 
B) evaluate how easily a decision can be reversed if problems arise. 
C) compare the marginal costs and marginal benefits of each decision. 
D) always calculate the dollar costs for each decision. 
A) make those decisions that do not impose a marginal cost. 
B) evaluate how easily a decision can be reversed if problems arise. 
C) compare the marginal costs and marginal benefits of each decision. 
D) always calculate the dollar costs for each decision.

Question 7

Which of the following words and phrases best captures the notion of equality?

Accepted Answer

A) minimum waste 
B) maximum benefit 
C) sameness 
D) efficiency 
A) minimum waste 
B) maximum benefit 
C) sameness 
D) efficiency

Question 8

In a particular country in 1999, the average worker had to work 20 hours to produce 55 units of output. In that same country in 2009, the average worker needed to work 28 hours to produce 77 units of output. In that country, the productivity of the average worker

Accepted Answer

A) increased by 2 percent between 1999 and 2009. 
B) increased by 5 percent between 1999 and 2009. 
C) remained unchanged between 1999 and 2009. 
D) decreased by 3 percent between 1999 and 2009. 
A) increased by 2 percent between 1999 and 2009. 
B) increased by 5 percent between 1999 and 2009. 
C) remained unchanged between 1999 and 2009. 
D) decreased by 3 percent between 1999 and 2009.

Question 9

The self-interest of the participants in an economy is guided into promoting general economic self-interest by

Accepted Answer

A) the invisible hand. 
B) market power. 
C) government intervention. 
D) oikonomos. 
A) the invisible hand. 
B) market power. 
C) government intervention. 
D) oikonomos.

Question 10

Inflation is the primary determinant of a country's living standards.

Accepted Answer

A) True 
 B)False

Question 11

Prices direct economic activity in a market economy by

Accepted Answer

A) influencing the actions of buyers and sellers. 
B) reducing scarcity of the goods and services produced. 
C) eliminating the need for government intervention. 
D) allocating goods and services in the most equitable way. 
A) influencing the actions of buyers and sellers. 
B) reducing scarcity of the goods and services produced. 
C) eliminating the need for government intervention. 
D) allocating goods and services in the most equitable way.

Question 12

Which of the following is not an example of the opportunity cost of going to school?

Accepted Answer

A) The money a student could have earned by working if he had not gone to college. 
B) The nap a student could have enjoyed if he had not attended class. 
C) The party a student could have enjoyed if he had not stayed in to study for his exam. 
D) The money a student spends on rent for his apartment while attending school. 
A) The money a student could have earned by working if he had not gone to college. 
B) The nap a student could have enjoyed if he had not attended class. 
C) The party a student could have enjoyed if he had not stayed in to study for his exam. 
D) The money a student spends on rent for his apartment while attending school.

Question 13

The basic principles of economics suggest that

Accepted Answer

A) markets are seldom, if ever, a good way to organize economic activity. 
B) government should become involved in markets when trade between countries is involved. 
C) government should become involved in markets when those markets fail to produce efficient or fair outcomes. 
D) All of the above are correct. 
A) markets are seldom, if ever, a good way to organize economic activity. 
B) government should become involved in markets when trade between countries is involved. 
C) government should become involved in markets when those markets fail to produce efficient or fair outcomes. 
D) All of the above are correct.

Question 14

Trade

Accepted Answer

A) allows specialization, which increases costs. 
B) allows specialization, which reduces costs. 
C) reduces specialization, which increases costs. 
D) reduces specialization, which reduces costs. 
A) allows specialization, which increases costs. 
B) allows specialization, which reduces costs. 
C) reduces specialization, which increases costs. 
D) reduces specialization, which reduces costs.

Question 15

The historical rise in living standards of American workers is primarily a result of

Accepted Answer

A) the influence of labor unions in America. 
B) tariff protection imposed by the American government. 
C) the enactment of minimum-wage laws in America. 
D) the rise in American productivity. 
A) the influence of labor unions in America. 
B) tariff protection imposed by the American government. 
C) the enactment of minimum-wage laws in America. 
D) the rise in American productivity.

Question 16

According to Adam Smith, the success of decentralized market economies is primarily due to

Accepted Answer

A) the basic benevolence of society. 
B) society's legal system. 
C) individuals' pursuit of self-interest. 
D) partnerships that are forged between business and government. 
A) the basic benevolence of society. 
B) society's legal system. 
C) individuals' pursuit of self-interest. 
D) partnerships that are forged between business and government.

Question 17

Equality means distributing society's resources in the most efficient manner.

Accepted Answer

A) True 
 B)False

Question 18

An example of a firm with market power is a

Accepted Answer

A) delicatessen in New York. 
B) cable TV provider in St. Louis. 
C) clothing store in Los Angeles. 
D) family farm in Illinois. 
A) delicatessen in New York. 
B) cable TV provider in St. Louis. 
C) clothing store in Los Angeles. 
D) family farm in Illinois.

Question 19

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Accepted Answer

A) safety glass in all new cars. 
B) seat belts in all new cars. 
C) air bags in all new cars. 
D) stricter drunk driving laws in all states. 
A) safety glass in all new cars. 
B) seat belts in all new cars. 
C) air bags in all new cars. 
D) stricter drunk driving laws in all states.

Question 20

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit?

Accepted Answer

A) only the one with a low level of output per person. 
B) only the one with a high level of output per person. 
C) both 
D) neither 
A) only the one with a low level of output per person. 
B) only the one with a high level of output per person. 
C) both 
D) neither

Exam 1: Ten Principles of Economics

President Gerald Ford referred to inflation as

In 2008, the average American earned about $47,000 while the average Nigerian earned about $1,400. Which of the following statements is likely?

The decisions of firms and households are guided by prices and self-interest in a

Trade makes costs

Making rational decisions "at the margin" means that people

Which of the following words and phrases best captures the notion of equality?

In a particular country in 1999, the average worker had to work 20 hours to produce 55 units of output. In that same country in 2009, the average worker needed to work 28 hours to produce 77 units of output. In that country, the productivity of the average worker

The self-interest of the participants in an economy is guided into promoting general economic self-interest by

Inflation is the primary determinant of a country's living standards.

Prices direct economic activity in a market economy by

Which of the following is not an example of the opportunity cost of going to school?

The basic principles of economics suggest that

Trade

The historical rise in living standards of American workers is primarily a result of

According to Adam Smith, the success of decentralized market economies is primarily due to

Equality means distributing society's resources in the most efficient manner.

An example of a firm with market power is a

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit?

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