Question 1

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 2

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 3

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Accepted Answer

A)  is more efficient and more equal for society. 
B)  is more efficient but less equal for society. 
C)  is more equal but less efficient for society. 
D)  is less equal and less efficient for society. 
A)  is more efficient and more equal for society. 
B)  is more efficient but less equal for society. 
C)  is more equal but less efficient for society. 
D)  is less equal and less efficient for society.

Question 4

One of the 20th century's worst episodes of inflation occurred in

Accepted Answer

A)  the United States in the 1960s. 
B)  Italy in the 1950s. 
C)  Russia in the 1930s. 
D)  Germany in the 1920s. 
A)  the United States in the 1960s. 
B)  Italy in the 1950s. 
C)  Russia in the 1930s. 
D)  Germany in the 1920s.

Question 5

The principle that "trade can make everyone better off" applies to interactions and trade between

Accepted Answer

A)  families. 
B)  states within the United States. 
C)  nations. 
D)  All of the above are correct. 
A)  families. 
B)  states within the United States. 
C)  nations. 
D)  All of the above are correct.

Question 6

Which of the following is not an example of the opportunity cost of going to school?

Accepted Answer

A)  The money a student could have earned by working if he had not gone to college. 
B)  The nap a student could have enjoyed if he had not attended class. 
C)  The party a student could have enjoyed if he had not stayed in to study for his exam. 
D)  The money a student spends on rent for his apartment while attending school. 
A)  The money a student could have earned by working if he had not gone to college. 
B)  The nap a student could have enjoyed if he had not attended class. 
C)  The party a student could have enjoyed if he had not stayed in to study for his exam. 
D)  The money a student spends on rent for his apartment while attending school.

Question 7

When calculating the cost of college, which of the following should you probably include?

Accepted Answer

A)  The cost of your meal plan for the cafeteria. 
B)  The cost of books required for college classes 
C)  The income you earn at your part-time joc. 
D)  The cost of living in the dormitory. 
A)  The cost of your meal plan for the cafeteria. 
B)  The cost of books required for college classes 
C)  The income you earn at your part-time joc. 
D)  The cost of living in the dormitory.

Question 8

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 9

Which of the following firms is likely to have the greatest market power?

Accepted Answer

A)  an electric company 
B)  a farmer 
C)  a grocery store 
D)  a local electronics retailer 
A)  an electric company 
B)  a farmer 
C)  a grocery store 
D)  a local electronics retailer

Question 10

Explain the concept of market failure.

Accepted Answer

Market failure is a situation

Question 11

Which of the following statements about market economies is correct?

Accepted Answer

A)  In a market economy, no one is looking out for the economic well-being of society as a whole. 
B)  Market economies are characterized by decentralized decision making and self-interested decision makers. 
C)  Market economies have proven remarkably successful in promoting overall economic well-being. 
D)  All of the above are correct. 
A)  In a market economy, no one is looking out for the economic well-being of society as a whole. 
B)  Market economies are characterized by decentralized decision making and self-interested decision makers. 
C)  Market economies have proven remarkably successful in promoting overall economic well-being. 
D)  All of the above are correct.

Question 12

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 c

Question 13

Hamid spends an hour studying instead of watching TV with his friends. 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 watching TV. 
C)  the enjoyment he would have received if he had watched TV with his friends. 
D)  zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV. 
A)  the improvement in his grades from studying for the hour. 
B)  the improvement in his grades from studying minus the enjoyment of watching TV. 
C)  the enjoyment he would have received if he had watched TV with his friends. 
D)  zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV.

Question 14

Variations in the standard of living across countries are due almost entirely to differences in each nation's total output of goods and services.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Most economists believe that an increase in the quantity of money results in

Accepted Answer

A)  an increase in the demand for goods and services. 
B)  lower unemployment in the short run. 
C)  higher inflation in the long run. 
D)  All of the above are correct. 
A)  an increase in the demand for goods and services. 
B)  lower unemployment in the short run. 
C)  higher inflation in the long run. 
D)  All of the above are correct.

Question 17

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

Accepted Answer

A)  Melissa needs to pay her rent and her electric bill. 
B)  Kevin must choose between buying a new flat screen television and buying his textbooks for this semester. 
C)  Robert must decide between studying for his psychology exam and working at his part-time joc. 
D)  Lisa can spend her money on a new smart phone or on a weekend trip. 
A)  Melissa needs to pay her rent and her electric bill. 
B)  Kevin must choose between buying a new flat screen television and buying his textbooks for this semester. 
C)  Robert must decide between studying for his psychology exam and working at his part-time joc. 
D)  Lisa can spend her money on a new smart phone or on a weekend trip.

Question 18

The invisible hand ensures that economic prosperity is distributed equally.

Accepted Answer

A) True 
 B)False

Question 19

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

Accepted Answer

A)  goods are scarce. 
B)  people face tradeoffs. 
C)  income must be earned. 
D)  households face many decisions. 
A)  goods are scarce. 
B)  people face tradeoffs. 
C)  income must be earned. 
D)  households face many decisions.

Question 20

Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

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

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

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

One of the 20th century's worst episodes of inflation occurred in

The principle that "trade can make everyone better off" applies to interactions and trade between

Which of the following is not an example of the opportunity cost of going to school?

When calculating the cost of college, which of the following should you probably include?

Trade between countries tends to

Which of the following firms is likely to have the greatest market power?

Explain the concept of market failure.

Which of the following statements about market economies is correct?

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

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is

Variations in the standard of living across countries are due almost entirely to differences in each nation's total output of goods and services.

The business cycle is the

Most economists believe that an increase in the quantity of money results in

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

The invisible hand ensures that economic prosperity is distributed equally.

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

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

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