Question 1

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

Accepted Answer

A)  An athlete works out at a gym. 
B)  A secretary smokes a cigarette in a crowded break room. 
C)  A young mother pushes her baby in a stroller. 
D)  A construction worker eats a hotdog during his lunch break. 
A)  An athlete works out at a gym. 
B)  A secretary smokes a cigarette in a crowded break room. 
C)  A young mother pushes her baby in a stroller. 
D)  A construction worker eats a hotdog during his lunch break.

Question 2

The business cycle is measured by the

Accepted Answer

A)  production of goods and services. 
B)  number of people employed. 
C)  the interest rate. 
D)  both a and b 
A)  production of goods and services. 
B)  number of people employed. 
C)  the interest rate. 
D)  both a and b

Question 3

To increase living standards,public policy should

Accepted Answer

A)  ensure that workers are well educated and have the necessary tools and technology. 
B)  make unemployment benefits more generous. 
C)  move workers into jobs directly from high school. 
D)  ensure a greater degree of equality,taking all income-earners into account. 
A)  ensure that workers are well educated and have the necessary tools and technology. 
B)  make unemployment benefits more generous. 
C)  move workers into jobs directly from high school. 
D)  ensure a greater degree of equality,taking all income-earners into account.

Question 4

Equality refers to how the pie is divided,and efficiency refers to the size of the economic pie.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is an important cause of inflation in an economy?

Accepted Answer

A)  increases in productivity in the economy 
B)  the influence of positive externalities on the economy 
C)  lack of property rights in the economy 
D)  growth in the quantity of money in the economy 
A)  increases in productivity in the economy 
B)  the influence of positive externalities on the economy 
C)  lack of property rights in the economy 
D)  growth in the quantity of money in the economy

Question 6

Senator Smart,who understands economic principles,is trying to convince workers in her district that trade with other countries is beneficial.Senator Smart should argue that trade can be beneficial

Accepted Answer

A)  only if it allows us to obtain things that we couldn't make for ourselves. 
B)  because it allows specialization,which increases total output. 
C)  to us if we can gain and the others involved in the trade lose. 
D)  in only a limited number of circumstances because others are typically self-interested. 
A)  only if it allows us to obtain things that we couldn't make for ourselves. 
B)  because it allows specialization,which increases total output. 
C)  to us if we can gain and the others involved in the trade lose. 
D)  in only a limited number of circumstances because others are typically self-interested.

Question 7

The word that comes from the Greek word for "one who manages a household" is

Accepted Answer

A)  market. 
B)  consumer. 
C)  producer. 
D)  economy. 
A)  market. 
B)  consumer. 
C)  producer. 
D)  economy.

Question 8

The marginal benefit John gets from eating a fourth cheeseburger at a picnic is

Accepted Answer

A)  the total benefit John gets from eating four cheeseburgers minus the total benefit John gets from eating three cheeseburgers. 
B)  the same as the total benefit of eating four cheeseburgers. 
C)  less than the marginal cost of eating the fourth cheeseburger since he chose to eat the fourth cheeseburger. 
D)  the total benefit John gets from eating five cheeseburgers minus the total benefit John gets from eating four cheeseburgers. 
A)  the total benefit John gets from eating four cheeseburgers minus the total benefit John gets from eating three cheeseburgers. 
B)  the same as the total benefit of eating four cheeseburgers. 
C)  less than the marginal cost of eating the fourth cheeseburger since he chose to eat the fourth cheeseburger. 
D)  the total benefit John gets from eating five cheeseburgers minus the total benefit John gets from eating four cheeseburgers.

Question 9

When a society cannot produce all the goods and services people wish to have,it is said that the economy is experiencing

Accepted Answer

A)  scarcity. 
B)  surpluses. 
C)  inefficiencies. 
D)  inequalities. 
A)  scarcity. 
B)  surpluses. 
C)  inefficiencies. 
D)  inequalities.

Question 10

A construction company has built 50 houses so far this year at a total cost to the company of $8 million.If the company builds a 51st house,its total cost will increase to $8.18 million.Which of the following statements is correct?

Accepted Answer

A)  For the first 50 houses,the average cost per house was $160,000. 
B)  The marginal cost of the 51st house,if it is built,will be $180,000. 
C)  If the company can experience a marginal benefit of $190,000 by building the 51st house,then the company should build it. 
D)  All of the above are correct. 
A)  For the first 50 houses,the average cost per house was $160,000. 
B)  The marginal cost of the 51st house,if it is built,will be $180,000. 
C)  If the company can experience a marginal benefit of $190,000 by building the 51st house,then the company should build it. 
D)  All of the above are correct.

Question 11

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.

Question 12

The average cost per seat on the 50-passenger Floating-On-Air Bus company's trip from Kansas City to St.Louis,on which no refreshments are served,is $45.In advance of a particular trip,three seats remain unsold.The bus company could increase its profit only if it

Accepted Answer

A)  charged any ticket price above $0 for the three remaining seats. 
B)  charged at least $15 for each of the three remaining seats. 
C)  charged at least $45 for each of the three remaining seats. 
D)  paid three people to occupy the three remaining seats. 
A)  charged any ticket price above $0 for the three remaining seats. 
B)  charged at least $15 for each of the three remaining seats. 
C)  charged at least $45 for each of the three remaining seats. 
D)  paid three people to occupy the three remaining seats.

Question 13

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 14

When the government attempts to improve equality in an economy the result is often

Accepted Answer

A)  an increase in overall output in the economy. 
B)  additional government revenue since overall income will increase. 
C)  a reduction in equality. 
D)  a reduction in efficiency. 
A)  an increase in overall output in the economy. 
B)  additional government revenue since overall income will increase. 
C)  a reduction in equality. 
D)  a reduction in efficiency.

Question 15

Senator Smith argues that replacing the income tax with a national sales tax would increase the level of output.Senator Wells objects that this policy would benefit the rich at the expense of the poor.

Accepted Answer

A)  Both Senators' arguments are primarily about equality. 
B)  Both Senators' arguments are primarily about efficiency. 
C)  Senator Smith's argument is primarily about equality,while Senator Well's argument is primarily about efficiency. 
D)  Senator Smith's argument is primarily about efficiency,while Senator Well's argument is primarily about equality. 
A)  Both Senators' arguments are primarily about equality. 
B)  Both Senators' arguments are primarily about efficiency. 
C)  Senator Smith's argument is primarily about equality,while Senator Well's argument is primarily about efficiency. 
D)  Senator Smith's argument is primarily about efficiency,while Senator Well's argument is primarily about equality.

Question 16

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Accepted Answer

A) True 
 B)False

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 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 19

Which of the following statements about trade is false?

Accepted Answer

A)  Trade increases competition. 
B)  With trade,one country wins and one country loses. 
C)  Bulgaria can benefit,potentially,from trade with any other country. 
D)  Trade allows people to buy a greater variety of goods and services at lower cost. 
A)  Trade increases competition. 
B)  With trade,one country wins and one country loses. 
C)  Bulgaria can benefit,potentially,from trade with any other country. 
D)  Trade allows people to buy a greater variety of goods and services at lower cost.

Question 20

In most societies,resources are allocated by

Accepted Answer

A)  a single central planner. 
B)  a small number of central planners. 
C)  those firms that use resources to provide goods and services. 
D)  the combined actions of millions of households and firms. 
A)  a single central planner. 
B)  a small number of central planners. 
C)  those firms that use resources to provide goods and services. 
D)  the combined actions of millions of households and firms.

Exam 1: Ten Principles of Economics

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

The business cycle is measured by the

To increase living standards,public policy should

Equality refers to how the pie is divided,and efficiency refers to the size of the economic pie.

Which of the following is an important cause of inflation in an economy?

Senator Smart,who understands economic principles,is trying to convince workers in her district that trade with other countries is beneficial.Senator Smart should argue that trade can be beneficial

The word that comes from the Greek word for "one who manages a household" is

The marginal benefit John gets from eating a fourth cheeseburger at a picnic is

When a society cannot produce all the goods and services people wish to have,it is said that the economy is experiencing

A construction company has built 50 houses so far this year at a total cost to the company of $8 million.If the company builds a 51st house,its total cost will increase to $8.18 million.Which of the following statements is correct?

Which of the following is correct concerning opportunity cost?

The average cost per seat on the 50-passenger Floating-On-Air Bus company's trip from Kansas City to St.Louis,on which no refreshments are served,is $45.In advance of a particular trip,three seats remain unsold.The bus company could increase its profit only if it

Prices direct economic activity in a market economy by

When the government attempts to improve equality in an economy the result is often

Senator Smith argues that replacing the income tax with a national sales tax would increase the level of output.Senator Wells objects that this policy would benefit the rich at the expense of the poor.

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

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

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

Which of the following statements about trade is false?

In most societies,resources are allocated by

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

Filters

A construction company has built 50 houses so far this year at a total cost to the company of $8 million.If the company builds a 51^st house,its total cost will increase to $8.18 million.Which of the following statements is correct?