Question 1

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

Accepted Answer

To lower inflation,the government may ch

Question 2

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 3

Guns and butter are used to represent the classic societal tradeoff between spending on

Accepted Answer

A)  durable and nondurable goods. 
B)  imports and exports. 
C)  national defense and consumer goods. 
D)  law enforcement and agriculture. 
A)  durable and nondurable goods. 
B)  imports and exports. 
C)  national defense and consumer goods. 
D)  law enforcement and agriculture.

Question 4

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 5

Trade allows each person to specialize in the activities he or she does best,thus increasing each individual's productivity.

Accepted Answer

A) True 
 B)False

Question 6

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.

Question 7

After much consideration,you have chosen Cancun over Ft.Lauderdale as your Spring Break destination this year.However,Spring Break 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 Cancun increases. 
B)  The marginal cost of going to Cancun decreases. 
C)  The marginal benefit of going to Ft.Lauderdale decreases. 
D)  The marginal cost of going to Ft.Lauderdale decreases. 
A)  The marginal benefit of going to Cancun increases. 
B)  The marginal cost of going to Cancun decreases. 
C)  The marginal benefit of going to Ft.Lauderdale decreases. 
D)  The marginal cost of going to Ft.Lauderdale decreases.

Question 8

Approximately what percentage of the world's economies experience scarcity?

Accepted Answer

A)  25% 
B)  50% 
C)  75% 
D)  100% 
A)  25% 
B)  50% 
C)  75% 
D)  100%

Question 9

Russell spends an hour studying instead of playing tennis.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 playing tennis. 
C)  the enjoyment and exercise he would have received had he played tennis. 
D)  zero.Since Russell chose to study rather than to play tennis,the value of studying must have been greater than the value of playing tennis. 
A)  the improvement in his grades from studying for the hour. 
B)  the improvement in his grades from studying minus the enjoyment of playing tennis. 
C)  the enjoyment and exercise he would have received had he played tennis. 
D)  zero.Since Russell chose to study rather than to play tennis,the value of studying must have been greater than the value of playing tennis.

Question 10

If a paper factory does not bear the entire cost of the pollution it emits,it will

Accepted Answer

A)  not emit any pollution so as to avoid the entire cost of the pollution. 
B)  emit lower levels of pollution. 
C)  emit an acceptable level of pollution. 
D)  emit too much pollution. 
A)  not emit any pollution so as to avoid the entire cost of the pollution. 
B)  emit lower levels of pollution. 
C)  emit an acceptable level of pollution. 
D)  emit too much pollution.

Question 11

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 12

The opportunity cost of an item is

Accepted Answer

A)  the number of hours needed to earn money to buy the item. 
B)  what you give up to get that item. 
C)  usually less than the dollar value of the item. 
D)  the dollar value of the item. 
A)  the number of hours needed to earn money to buy the item. 
B)  what you give up to get that item. 
C)  usually less than the dollar value of the item. 
D)  the dollar value of the item.

Question 13

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 14

Samantha's college raises the cost of room and board per semester.This increase raises Samantha's opportunity cost of attending college

Accepted Answer

A)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount.An increase in opportunity cost reduces Samantha's incentive to attend college. 
B)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount.An increase in opportunity cost increases Samantha's incentive to attend college. 
C)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges.An increase in opportunity cost reduces Samantha's incentive to attend college. 
D)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges.An increase in opportunity cost increases Samantha's incentive to attend college. 
A)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount.An increase in opportunity cost reduces Samantha's incentive to attend college. 
B)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount.An increase in opportunity cost increases Samantha's incentive to attend college. 
C)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges.An increase in opportunity cost reduces Samantha's incentive to attend college. 
D)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges.An increase in opportunity cost increases Samantha's incentive to attend college.

Question 15

During the early 1920s in Germany,prices

Accepted Answer

A)  doubled annually. 
B)  doubled monthly. 
C)  tripled monthly. 
D)  tripled annually. 
A)  doubled annually. 
B)  doubled monthly. 
C)  tripled monthly. 
D)  tripled annually.

Question 16

Suppose the state of Massachusetts passes a law that bans smoking in restaurants.As a result,residents of Rhode Island who do not like breathing second-hand smoke begin driving across the border to Massachusetts to eat at restaurants there.Which of the following principles does this best illustrate?

Accepted Answer

A)  People respond to incentives 
B)  Rational people think at the margin 
C)  Trade can make everyone better off 
D)  Markets are usually a good way to organize economic activity 
A)  People respond to incentives 
B)  Rational people think at the margin 
C)  Trade can make everyone better off 
D)  Markets are usually a good way to organize economic activity

Question 17

When society requires that firms reduce pollution,there is

Accepted Answer

A)  a tradeoff because of reduced incomes to the firms' owners and workers. 
B)  a tradeoff only if some firms are forced to close. 
C)  no tradeoff,since the cost of reducing pollution falls only on the firms affected by the requirements. 
D)  no tradeoff,since everyone benefits from reduced pollution. 
A)  a tradeoff because of reduced incomes to the firms' owners and workers. 
B)  a tradeoff only if some firms are forced to close. 
C)  no tradeoff,since the cost of reducing pollution falls only on the firms affected by the requirements. 
D)  no tradeoff,since everyone benefits from reduced pollution.

Question 18

Adam Smith's book The Wealth of Nations was published in

Accepted Answer

A)  1692. 
B)  1776. 
C)  1816. 
D)  1936. 
A)  1692. 
B)  1776. 
C)  1816. 
D)  1936.

Question 19

For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%.Country B had inflation of 4% for many years,but very recently inflation unexpectedly rose to 9%.Other things the same,in which of the countries would the higher inflation rate be more likely to reduce unemployment?

Accepted Answer

A)  both country A and country B 
B)  neither country A nor country B 
C)  country A but not country B 
D)  country B but not country A 
A)  both country A and country B 
B)  neither country A nor country B 
C)  country A but not country B 
D)  country B but not country A

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

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

Guns and butter are used to represent the classic societal tradeoff between spending on

An example of a firm with market power is a

Trade allows each person to specialize in the activities he or she does best,thus increasing each individual's productivity.

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

After much consideration,you have chosen Cancun over Ft.Lauderdale as your Spring Break destination this year.However,Spring Break is still months away,and you may reverse this decision.Which of the following events would prompt you to reverse this decision?

Approximately what percentage of the world's economies experience scarcity?

Russell spends an hour studying instead of playing tennis.The opportunity cost to him of studying is

If a paper factory does not bear the entire cost of the pollution it emits,it will

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

The opportunity cost of an item is

A direct or positive relationship exists between a country's

Samantha's college raises the cost of room and board per semester.This increase raises Samantha's opportunity cost of attending college

During the early 1920s in Germany,prices

When society requires that firms reduce pollution,there is

Adam Smith's book The Wealth of Nations was published in

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

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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 Macroeconomics: Basic Concepts

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

Five Debates Over Macroeconomic Policy

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