Question 1

Which of the following is true?

Accepted Answer

A)  Efficiency refers to the size of the economic pie;equality refers to how the pie is divided. 
B)  Government policies usually improve upon both equality and efficiency. 
C)  As long as the economic pie continually gets larger,no one will have to go hungry. 
D)  Efficiency and equality can both be achieved if the economic pie is cut into equal pieces. 
A)  Efficiency refers to the size of the economic pie;equality refers to how the pie is divided. 
B)  Government policies usually improve upon both equality and efficiency. 
C)  As long as the economic pie continually gets larger,no one will have to go hungry. 
D)  Efficiency and equality can both be achieved if the economic pie is cut into equal pieces.

Question 2

Trade between countries tends to

Accepted Answer

A)  reduce both competition and specialization. 
B)  reduce competition and increase specialization. 
C)  increase competition and reduce specialization. 
D)  increase both competition and specialization. 
A)  reduce both competition and specialization. 
B)  reduce competition and increase specialization. 
C)  increase competition and reduce specialization. 
D)  increase both competition and specialization.

Question 3

College-age athletes who drop out of college to play professional sports

Accepted Answer

A)  are not rational decision makers. 
B)  are well aware that their opportunity cost of attending college is very high. 
C)  are concerned more about present circumstances than their future. 
D)  underestimate the value of a college education. 
A)  are not rational decision makers. 
B)  are well aware that their opportunity cost of attending college is very high. 
C)  are concerned more about present circumstances than their future. 
D)  underestimate the value of a college education.

Question 4

Which of the following is a principle concerning how people interact?

Accepted Answer

A)  Markets are usually a good way to organize economic activity. 
B)  Rational people think at the margin. 
C)  People respond to incentives. 
D)  All of the above are correct. 
A)  Markets are usually a good way to organize economic activity. 
B)  Rational people think at the margin. 
C)  People respond to incentives. 
D)  All of the above are correct.

Question 5

The phenomenon of scarcity stems from the fact that

Accepted Answer

A)  most economies' production methods are not very good. 
B)  in most economies,wealthy people consume disproportionate quantities of goods and services. 
C)  governments restrict production of too many goods and services. 
D)  resources are limited. 
A)  most economies' production methods are not very good. 
B)  in most economies,wealthy people consume disproportionate quantities of goods and services. 
C)  governments restrict production of too many goods and services. 
D)  resources are limited.

Question 6

Resources are

Accepted Answer

A)  scarce for households but plentiful for economies. 
B)  plentiful for households but scarce for economies. 
C)  scarce for households and scarce for economies. 
D)  plentiful for households and plentiful for economies. 
A)  scarce for households but plentiful for economies. 
B)  plentiful for households but scarce for economies. 
C)  scarce for households and scarce for economies. 
D)  plentiful for households and plentiful for economies.

Question 7

Bill's Bakery bakes fresh bread every morning.Any bread not sold by the end of the day is thrown away.A loaf of bread costs Bill $1.50 to produce,and he prices loaves of bread at $4 per loaf.Suppose near the end of one day Bill still has 12 loaves of bread on hand.Which of the following is correct?

Accepted Answer

A)  Bill should only sell the remaining bread for $4 per loaf since that is the regular price. 
B)  Bill should only sell the remaining bread for $1.50 per loaf or more since that is what the bread costs to make. 
C)  Bill should be willing to sell the remaining bread for any price above $0 per loaf since he will have to throw it away if he does not sell it for something. 
D)  Bill should just throw the bread away and change the price of his bread starting tomorrow to make sure he sells all of his bread each day. 
A)  Bill should only sell the remaining bread for $4 per loaf since that is the regular price. 
B)  Bill should only sell the remaining bread for $1.50 per loaf or more since that is what the bread costs to make. 
C)  Bill should be willing to sell the remaining bread for any price above $0 per loaf since he will have to throw it away if he does not sell it for something. 
D)  Bill should just throw the bread away and change the price of his bread starting tomorrow to make sure he sells all of his bread each day.

Question 8

Which of the following statements exemplifies a principle of individual decisionmaking?

Accepted Answer

A)  Trade can make everyone better off. 
B)  Governments can sometimes improve market outcomes. 
C)  The cost of something is what you give up to get it. 
D)  All of the above are correct. 
A)  Trade can make everyone better off. 
B)  Governments can sometimes improve market outcomes. 
C)  The cost of something is what you give up to get it. 
D)  All of the above are correct.

Question 9

Which of the following products would be considered scarce?

Accepted Answer

A)  golf clubs 
B)  Picasso paintings 
C)  apples 
D)  All of the above are correct. 
A)  golf clubs 
B)  Picasso paintings 
C)  apples 
D)  All of the above are correct.

Question 10

In the United States,incomes historically have grown about 2 percent per year.At this rate,average income doubles every

Accepted Answer

A)  15 years. 
B)  25 years. 
C)  35 years. 
D)  45 years. 
A)  15 years. 
B)  25 years. 
C)  35 years. 
D)  45 years.

Question 11

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

Accepted Answer

A) True 
 B)False

Question 12

The principle that "people face tradeoffs" applies to

Accepted Answer

A)  individuals. 
B)  families. 
C)  societies. 
D)  All of the above are correct. 
A)  individuals. 
B)  families. 
C)  societies. 
D)  All of the above are correct.

Question 13

Evidence indicates that seat belt laws have led to

Accepted Answer

A)  fewer pedestrian deaths. 
B)  fewer automobile accidents. 
C)  fewer deaths per automobile accident. 
D)  All of the above are correct. 
A)  fewer pedestrian deaths. 
B)  fewer automobile accidents. 
C)  fewer deaths per automobile accident. 
D)  All of the above are correct.

Question 14

Suppose that in Chile total annual output is worth $600 million and people work 70 million hours.In Argentina total annual output is worth $450 million and people work 40 million hours.Productivity is higher

Accepted Answer

A)  in Chile.Most variation in the standard of living across countries is due to differences in productivity. 
B)  in Chile.Differences in productivity explain very little of the variation in the standard of living across countries. 
C)  in Argentina.Most variation in the standard of living across countries is due to differences in productivity. 
D)  in Argentina.Differences in productivity explain very little of the variation in the standard of living across countries. 
A)  in Chile.Most variation in the standard of living across countries is due to differences in productivity. 
B)  in Chile.Differences in productivity explain very little of the variation in the standard of living across countries. 
C)  in Argentina.Most variation in the standard of living across countries is due to differences in productivity. 
D)  in Argentina.Differences in productivity explain very little of the variation in the standard of living across countries.

Question 15

Prices usually reflect

Accepted Answer

A)  only the value of a good to society. 
B)  only the cost to society of making a good. 
C)  both the value of a good to society and the cost to society of making the good. 
D)  neither the value of a good to society nor the cost to society of making the good. 
A)  only the value of a good to society. 
B)  only the cost to society of making a good. 
C)  both the value of a good to society and the cost to society of making the good. 
D)  neither the value of a good to society nor the cost to society of making the good.

Question 16

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 marginal 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 marginal dollar costs for each decision.

Question 17

One reason we need government,even in a market economy,is that

Accepted Answer

A)  there is insufficient market power in the absence of government. 
B)  property rights are too strong in the absence of government. 
C)  the invisible hand is not perfect. 
D)  Both a and b are correct. 
A)  there is insufficient market power in the absence of government. 
B)  property rights are too strong in the absence of government. 
C)  the invisible hand is not perfect. 
D)  Both a and b are correct.

Question 18

Suppose the state of Iowa passes a law that increases the price of cigarettes by $1 per pack.As a result,residents in Iowa start purchasing their cigarettes in surrounding states.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 19

For most students,the largest single cost of a college education is

Accepted Answer

A)  the wages given up to attend school. 
B)  tuition,fees,and books. 
C)  room and board. 
D)  transportation,parking,and entertainment. 
A)  the wages given up to attend school. 
B)  tuition,fees,and books. 
C)  room and board. 
D)  transportation,parking,and entertainment.

Question 20

Inflation increases the value of money.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Which of the following is true?

Trade between countries tends to

College-age athletes who drop out of college to play professional sports

Which of the following is a principle concerning how people interact?

The phenomenon of scarcity stems from the fact that

Resources are

Bill's Bakery bakes fresh bread every morning.Any bread not sold by the end of the day is thrown away.A loaf of bread costs Bill $1.50 to produce,and he prices loaves of bread at $4 per loaf.Suppose near the end of one day Bill still has 12 loaves of bread on hand.Which of the following is correct?

Which of the following statements exemplifies a principle of individual decisionmaking?

Which of the following products would be considered scarce?

In the United States,incomes historically have grown about 2 percent per year.At this rate,average income doubles every

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

The principle that "people face tradeoffs" applies to

Evidence indicates that seat belt laws have led to

Suppose that in Chile total annual output is worth $600 million and people work 70 million hours.In Argentina total annual output is worth $450 million and people work 40 million hours.Productivity is higher

Prices usually reflect

Making rational decisions "at the margin" means that people

One reason we need government,even in a market economy,is that

Suppose the state of Iowa passes a law that increases the price of cigarettes by $1 per pack.As a result,residents in Iowa start purchasing their cigarettes in surrounding states.Which of the following principles does this best illustrate?

For most students,the largest single cost of a college education is

Inflation increases the value of money.

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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