Question 1

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort.This law is likely to

Accepted Answer

A)  increase efficiency and increase equality. 
B)  increase efficiency but decrease equality. 
C)  decrease efficiency but increase equality. 
D)  decrease efficiency and decrease equality. 
A)  increase efficiency and increase equality. 
B)  increase efficiency but decrease equality. 
C)  decrease efficiency but increase equality. 
D)  decrease efficiency and decrease equality.

Question 2

Teresa eats three oranges during a particular day.The marginal benefit she enjoys from eating the third orange

Accepted Answer

A)  can be thought of as the total benefit Teresa enjoys by eating three oranges minus the total benefit she would have enjoyed by eating just the first two oranges. 
B)  determines Teresa's willingness to pay for the first,second,and third oranges. 
C)  does not depend on how many oranges Teresa has already eaten. 
D)  All of the above are correct. 
A)  can be thought of as the total benefit Teresa enjoys by eating three oranges minus the total benefit she would have enjoyed by eating just the first two oranges. 
B)  determines Teresa's willingness to pay for the first,second,and third oranges. 
C)  does not depend on how many oranges Teresa has already eaten. 
D)  All of the above are correct.

Question 3

One tradeoff society faces is between efficiency and equality.Define each term.If the U.S.government redistributes income from the rich to the poor,explain how this action affects equality as well as efficiency in the economy.

Accepted Answer

Efficiency is the property of society ge

Question 4

Benefits from trade would not include

Accepted Answer

A)  the ability of people and nations to specialize. 
B)  a greater variety of goods and services becoming available. 
C)  less competition. 
D)  lower prices. 
A)  the ability of people and nations to specialize. 
B)  a greater variety of goods and services becoming available. 
C)  less competition. 
D)  lower prices.

Question 5

The business cycle is the

Accepted Answer

A)  relationship between unemployment and inflation. 
B)  irregular fluctuations in economic activity. 
C)  positive relationship between the quantity of money in an economy and inflation. 
D)  predictable changes in economic activity due to changes in government spending and taxes. 
A)  relationship between unemployment and inflation. 
B)  irregular fluctuations in economic activity. 
C)  positive relationship between the quantity of money in an economy and inflation. 
D)  predictable changes in economic activity due to changes in government spending and taxes.

Question 6

Traci is planning to sell her house,and she is considering making two upgrades to the house before listing it for sale.Replacing the carpeting will cost her $3,000 and replacing the roof will cost her $6,000.Traci expects the new carpeting to increase the value of her house by $2,500 and the new roof to increase the value of her house by $7,500.

Accepted Answer

A)  Traci should make both improvements to her house. 
B)  Traci should replace the carpeting but not replace the roof. 
C)  Traci should replace the roof but not replace the carpeting. 
D)  Traci should not make either improvement to her house. 
A)  Traci should make both improvements to her house. 
B)  Traci should replace the carpeting but not replace the roof. 
C)  Traci should replace the roof but not replace the carpeting. 
D)  Traci should not make either improvement to her house.

Question 7

The slow growth of U.S.incomes during the 1970s and 1980s can best be explained by

Accepted Answer

A)  unstable economic conditions in Eastern Europe. 
B)  increased competition from abroad. 
C)  a decline in the rate of increase in U.S.productivity. 
D)  a strong U.S.dollar abroad,hurting U.S.exports. 
A)  unstable economic conditions in Eastern Europe. 
B)  increased competition from abroad. 
C)  a decline in the rate of increase in U.S.productivity. 
D)  a strong U.S.dollar abroad,hurting U.S.exports.

Question 8

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

Question 9

Senator Smith wants to increase taxes on people with high incomes and use the money to help the poor.Senator Jones argues that such a tax will discourage successful people from working and will therefore make society worse off.An economist would say that

Accepted Answer

A)  we should agree with Senator Smith. 
B)  we should agree with Senator Jones. 
C)  a good decision requires that we recognize both viewpoints. 
D)  there are no tradeoffs between equity and efficiency. 
A)  we should agree with Senator Smith. 
B)  we should agree with Senator Jones. 
C)  a good decision requires that we recognize both viewpoints. 
D)  there are no tradeoffs between equity and efficiency.

Question 10

The government can potentially improve market outcomes if market inequalities or market failure exists.

Accepted Answer

A) True 
 B)False

Question 11

The government enforces property rights by

Accepted Answer

A)  requiring property owners to pay property taxes. 
B)  providing police and courts. 
C)  forcing people to own property. 
D)  providing public parks and recreation facilities. 
A)  requiring property owners to pay property taxes. 
B)  providing police and courts. 
C)  forcing people to own property. 
D)  providing public parks and recreation facilities.

Question 12

A rational decision maker takes an action only if the

Accepted Answer

A)  marginal benefit is less than the marginal cost. 
B)  marginal benefit is greater than the marginal cost. 
C)  average benefit is greater than the average cost. 
D)  marginal benefit is greater than both the average cost and the marginal cost. 
A)  marginal benefit is less than the marginal cost. 
B)  marginal benefit is greater than the marginal cost. 
C)  average benefit is greater than the average cost. 
D)  marginal benefit is greater than both the average cost and the marginal cost.

Question 13

When government policies are enacted,

Accepted Answer

A)  equality can usually be enhanced without an efficiency loss,but efficiency can never be enhanced without a reduction in equality. 
B)  efficiency can usually be enhanced without a reduction in equality,but equality can never be enhanced without an efficiency loss. 
C)  it is always the case that either efficiency and equality are both enhanced,or efficiency and equality are both diminished. 
D)  None of the above are correct. 
A)  equality can usually be enhanced without an efficiency loss,but efficiency can never be enhanced without a reduction in equality. 
B)  efficiency can usually be enhanced without a reduction in equality,but equality can never be enhanced without an efficiency loss. 
C)  it is always the case that either efficiency and equality are both enhanced,or efficiency and equality are both diminished. 
D)  None of the above are correct.

Question 14

Productivity is defined as the

Accepted Answer

A)  amount of goods and services produced from each unit of labor input. 
B)  number of workers required to produce a given amount of goods and services. 
C)  amount of labor that can be saved by replacing workers with machines. 
D)  actual amount of effort workers put into an hour of working time. 
A)  amount of goods and services produced from each unit of labor input. 
B)  number of workers required to produce a given amount of goods and services. 
C)  amount of labor that can be saved by replacing workers with machines. 
D)  actual amount of effort workers put into an hour of working time.

Question 15

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Accepted Answer

A)  it is easier to cut the pie,and therefore the economy can produce a larger pie. 
B)  those who earn more income pay less in taxes. 
C)  the pie gets smaller,and there will be less pie overall. 
D)  government will spend too much time cutting and it causes the economy to lose the ability to produce enough pie for everyone. 
A)  it is easier to cut the pie,and therefore the economy can produce a larger pie. 
B)  those who earn more income pay less in taxes. 
C)  the pie gets smaller,and there will be less pie overall. 
D)  government will spend too much time cutting and it causes the economy to lose the ability to produce enough pie for everyone.

Question 16

Which is the most accurate statement about trade?

Accepted Answer

A)  Trade can make every nation better off. 
B)  Trade makes some nations better off and others worse off. 
C)  Trading for a good can make a nation better off only if the nation cannot produce that good itself. 
D)  Trade helps rich nations and hurts poor nations. 
A)  Trade can make every nation better off. 
B)  Trade makes some nations better off and others worse off. 
C)  Trading for a good can make a nation better off only if the nation cannot produce that good itself. 
D)  Trade helps rich nations and hurts poor nations.

Question 17

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Accepted Answer

A)  is a basic principle regarding individual decisionmaking. 
B)  amounts to a denial of one of the basic principles regarding interactions among people. 
C)  supports the idea that the "invisible hand" should guide economic activity. 
D)  was promoted by the economist Adam Smith in a well-known 1776 book. 
A)  is a basic principle regarding individual decisionmaking. 
B)  amounts to a denial of one of the basic principles regarding interactions among people. 
C)  supports the idea that the "invisible hand" should guide economic activity. 
D)  was promoted by the economist Adam Smith in a well-known 1776 book.

Question 18

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 19

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 20

In economics,the cost of something is

Accepted Answer

A)  the dollar amount of obtaining it. 
B)  always measured in units of time given up to get it. 
C)  what you give up to get it. 
D)  often impossible to quantify,even in principle. 
A)  the dollar amount of obtaining it. 
B)  always measured in units of time given up to get it. 
C)  what you give up to get it. 
D)  often impossible to quantify,even in principle.

Exam 1: Ten Principles of Economics

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort.This law is likely to

Teresa eats three oranges during a particular day.The marginal benefit she enjoys from eating the third orange

One tradeoff society faces is between efficiency and equality.Define each term.If the U.S.government redistributes income from the rich to the poor,explain how this action affects equality as well as efficiency in the economy.

Benefits from trade would not include

The business cycle is the

The slow growth of U.S.incomes during the 1970s and 1980s can best be explained by

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?

Senator Smith wants to increase taxes on people with high incomes and use the money to help the poor.Senator Jones argues that such a tax will discourage successful people from working and will therefore make society worse off.An economist would say that

The government can potentially improve market outcomes if market inequalities or market failure exists.

The government enforces property rights by

A rational decision maker takes an action only if the

When government policies are enacted,

Productivity is defined as the

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Which is the most accurate statement about trade?

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

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

In a market economy,economic activity is guided by

In economics,the cost of something is

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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