Question 1

The term "invisible hand" was coined by

Accepted Answer

A)  Adam Smith. 
B)  David Ricardo. 
C)  Karl Marx. 
D)  Benjamin Franklin. 
A)  Adam Smith. 
B)  David Ricardo. 
C)  Karl Marx. 
D)  Benjamin Franklin.

Question 2

When the United States trades with Singapore,

Accepted Answer

A)  both countries are likely made better off. 
B)  only Singapore benefits since the United States can produce all goods at a higher level of quality than Singapore. 
C)  only the United States benefits since Singapore's low wages guarantee profitable firms in Singapore regardless of trade. 
D)  niether country will benefit since the United States is more efficient than Singapore at producing all goods. 
A)  both countries are likely made better off. 
B)  only Singapore benefits since the United States can produce all goods at a higher level of quality than Singapore. 
C)  only the United States benefits since Singapore's low wages guarantee profitable firms in Singapore regardless of trade. 
D)  niether country will benefit since the United States is more efficient than Singapore at producing all goods.

Question 3

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 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

In considering how to allocate its scarce resources among its various members,a household considers

Accepted Answer

A)  each member's abilities. 
B)  each member's efforts. 
C)  each member's desires. 
D)  all of the above 
A)  each member's abilities. 
B)  each member's efforts. 
C)  each member's desires. 
D)  all of the above

Question 6

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 7

The term used to describe a situation in which markets do not allocate resources efficiently is

Accepted Answer

A)  economic meltdown. 
B)  market failure. 
C)  equilibrium. 
D)  the effect of the invisible hand. 
A)  economic meltdown. 
B)  market failure. 
C)  equilibrium. 
D)  the effect of the invisible hand.

Question 8

To improve living standards,policymakers should

Accepted Answer

A)  impose restrictions on foreign competition. 
B)  formulate policies designed to increase productivity. 
C)  impose tougher immigration policies. 
D)  provide tax breaks for the middle class. 
A)  impose restrictions on foreign competition. 
B)  formulate policies designed to increase productivity. 
C)  impose tougher immigration policies. 
D)  provide tax breaks for the middle class.

Question 9

For which of the following problems can well-designed public policy enhance economic efficiency?

Accepted Answer

A)  both externalities and market power 
B)  externalities,but not market power 
C)  market power,but not externalities 
D)  neither externalities nor market power 
A)  both externalities and market power 
B)  externalities,but not market power 
C)  market power,but not externalities 
D)  neither externalities nor market power

Question 10

A rationale for government involvement in a market economy is as follows:

Accepted Answer

A)  Markets sometimes fail to produce a fair distribution of economic well-being. 
B)  Markets sometimes fail to produce an efficient allocation of resources. 
C)  Property rights have to be enforced. 
D)  All of the above are correct. 
A)  Markets sometimes fail to produce a fair distribution of economic well-being. 
B)  Markets sometimes fail to produce an efficient allocation of resources. 
C)  Property rights have to be enforced. 
D)  All of the above are correct.

Question 11

Which of the following statements does not apply to a market economy?

Accepted Answer

A)  Firms decide whom to hire and what to produce. 
B)  The "invisible hand" usually maximizes the well-being of society as a whole. 
C)  Households decide which firms to work for and what to buy with their incomes. 
D)  Government policies are the primary forces that guide the decisions of firms and households. 
A)  Firms decide whom to hire and what to produce. 
B)  The "invisible hand" usually maximizes the well-being of society as a whole. 
C)  Households decide which firms to work for and what to buy with their incomes. 
D)  Government policies are the primary forces that guide the decisions of firms and households.

Question 12

Inflation is defined as

Accepted Answer

A)  a period of rising productivity in the economy. 
B)  a period of rising income in the economy. 
C)  an increase in the overall level of output in the economy. 
D)  an increase in the overall level of prices in the economy. 
A)  a period of rising productivity in the economy. 
B)  a period of rising income in the economy. 
C)  an increase in the overall level of output in the economy. 
D)  an increase in the overall level of prices in the economy.

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

The overriding reason as to why households and societies face many decisions is that

Accepted Answer

A)  resources are scarce. 
B)  goods and services are not scarce. 
C)  incomes fluctuate with business cycles. 
D)  people,by nature,tend to disagree. 
A)  resources are scarce. 
B)  goods and services are not scarce. 
C)  incomes fluctuate with business cycles. 
D)  people,by nature,tend to disagree.

Question 15

Sarah buys and sells real estate.Two weeks ago,she paid $280,000 for a house on Pine Street,intending to spend $40,000 on repairs sell the house for $350,000.Last week,the city government announced a plan to build a new landfill on Pine Street just down the street from the house Sarah purchased.As a result of the city's announced plan,Sarah is weighing two alternatives: She can go ahead with the $40,000 in repairs and then sell the house for $270,000,or she can forgo the repairs and sell the house as it is for $240,000.Sarah should

Accepted Answer

A)  keep the house and live in it. 
B)  go ahead with the $40,000 in repairs and sell the house for $270,000. 
C)  forgo the repairs and sell the house as it is for $240,000. 
D)  move the house from Pine Street to a more desirable location,regardless of the cost of doing so. 
A)  keep the house and live in it. 
B)  go ahead with the $40,000 in repairs and sell the house for $270,000. 
C)  forgo the repairs and sell the house as it is for $240,000. 
D)  move the house from Pine Street to a more desirable location,regardless of the cost of doing so.

Question 16

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 17

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 18

In a particular country in 1997,the average worker had to work 18 hours to produce 45 units of output.In that same country in 2007,the average worker needed to work 24 hours to produce 60 units of output.In that country,the productivity of the average worker

Accepted Answer

A)  increased by 2 percent between 1997 and 2007. 
B)  increased by 5 percent between 1997 and 2007. 
C)  remained unchanged between 1997 and 2007. 
D)  decreased by 3 percent between 1997 and 2007. 
A)  increased by 2 percent between 1997 and 2007. 
B)  increased by 5 percent between 1997 and 2007. 
C)  remained unchanged between 1997 and 2007. 
D)  decreased by 3 percent between 1997 and 2007.

Question 19

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

Accepted Answer

A)  The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
B)  The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
C)  Only half of the cost of the parking permit is part of the opportunity cost of attending college. 
D)  The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances. 
A)  The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
B)  The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
C)  Only half of the cost of the parking permit is part of the opportunity cost of attending college. 
D)  The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances.

Question 20

If an externality is present in a market,economic efficiency may be enhanced by

Accepted Answer

A)  government intervention. 
B)  increased competition. 
C)  better informed market participants. 
D)  weaker property rights. 
A)  government intervention. 
B)  increased competition. 
C)  better informed market participants. 
D)  weaker property rights.

Exam 1: Ten Principles of Economics

The term "invisible hand" was coined by

When the United States trades with Singapore,

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?

In considering how to allocate its scarce resources among its various members,a household considers

Which of the following could reduce economic efficiency?

The term used to describe a situation in which markets do not allocate resources efficiently is

To improve living standards,policymakers should

For which of the following problems can well-designed public policy enhance economic efficiency?

A rationale for government involvement in a market economy is as follows:

Which of the following statements does not apply to a market economy?

Inflation is defined as

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

The overriding reason as to why households and societies face many decisions is that

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

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

In a particular country in 1997,the average worker had to work 18 hours to produce 45 units of output.In that same country in 2007,the average worker needed to work 24 hours to produce 60 units of output.In that country,the productivity of the average worker

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

If an externality is present in a market,economic efficiency may be enhanced 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

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