Question 1

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 2

Causes of market failure include

Accepted Answer

A)  externalities and market power. 
B)  market power and incorrect forecasts of consumer demand. 
C)  externalities and foreign competition. 
D)  incorrect forecasts of consumer demand and foreign competition. 
A)  externalities and market power. 
B)  market power and incorrect forecasts of consumer demand. 
C)  externalities and foreign competition. 
D)  incorrect forecasts of consumer demand and foreign competition.

Question 3

The term refers to the size of the economic pie, and the term refers to how the pie is divided.

Accepted Answer

efficiency

Question 4

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Accepted Answer

Whatever must be given up to obtain some

Question 5

For most students, the earnings they give up to attend college are

Accepted Answer

A)  a minor cost when compared to the costs of tuition, room and board, and the like. 
B)  the single largest cost of their education. 
C)  about equal to the costs of room and board at college. 
D)  not considered true costs by an economist. 
A)  a minor cost when compared to the costs of tuition, room and board, and the like. 
B)  the single largest cost of their education. 
C)  about equal to the costs of room and board at college. 
D)  not considered true costs by an economist.

Question 6

Both The Wealth of Nations and the Declaration of Independence share the point of view that

Accepted Answer

A)  every person is entitled to life, liberty, and the pursuit of happiness. 
B)  individuals are best left to their own devices without the government guiding their actions. 
C)  the government plays a central role in organizing a market economy. 
D)  because of human nature a strong legal system is necessary for a market system to survive. 
A)  every person is entitled to life, liberty, and the pursuit of happiness. 
B)  individuals are best left to their own devices without the government guiding their actions. 
C)  the government plays a central role in organizing a market economy. 
D)  because of human nature a strong legal system is necessary for a market system to survive.

Question 7

An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.

Accepted Answer

A) True 
 B)False

Question 8

In a particular country in 1998, the average worker needed to work 40 hours to produce 100 units of output. In that same country in 2008, the average worker needed to work 36 hours to produce 72 units of output. In that country, the productivity of the average worker

Accepted Answer

A)  decreased between 1998 and 2008, so we would expect the standard of living to have decreased accordingly. 
B)  increased between 1998 and 2008, so we would expect the standard of living to have increased accordingly. 
C)  decreased between 1998 and 2008, so we would expect inflation to have decreased accordingly. 
D)  increased between 1998 and 2008, so we would expect inflation to have increased accordingly. 
A)  decreased between 1998 and 2008, so we would expect the standard of living to have decreased accordingly. 
B)  increased between 1998 and 2008, so we would expect the standard of living to have increased accordingly. 
C)  decreased between 1998 and 2008, so we would expect inflation to have decreased accordingly. 
D)  increased between 1998 and 2008, so we would expect inflation to have increased accordingly.

Question 9

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

Accepted Answer

A)  the pie gets larger, and there will be more pie overall. 
B)  the pie gets smaller, and there will be less pie overall. 
C)  it increases the reward for working hard, resulting in people producing more goods and services. 
D)  those who earn more income pay less in taxes. 
A)  the pie gets larger, and there will be more pie overall. 
B)  the pie gets smaller, and there will be less pie overall. 
C)  it increases the reward for working hard, resulting in people producing more goods and services. 
D)  those who earn more income pay less in taxes.

Question 10

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

Accepted Answer

A)  Betty plants flowers in her garden. 
B)  Bonnie gets a flu vaccine. 
C)  Bridget drives her car after having too much alcohol to drink. 
D)  Becky buys a new flat screen television. 
A)  Betty plants flowers in her garden. 
B)  Bonnie gets a flu vaccine. 
C)  Bridget drives her car after having too much alcohol to drink. 
D)  Becky buys a new flat screen television.

Question 11

If Switzerland chooses to engage in trade, it

Accepted Answer

A)  will only benefit if it trades with countries that produce goods Switzerland cannot produce. 
B)  cannot benefit if it trades with less developed countries. 
C)  should first attempt to produce the good itself. 
D)  can benefit by trading with any other country. 
A)  will only benefit if it trades with countries that produce goods Switzerland cannot produce. 
B)  cannot benefit if it trades with less developed countries. 
C)  should first attempt to produce the good itself. 
D)  can benefit by trading with any other country.

Question 12

Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright 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 13

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

Accepted Answer

A)  cost of teaching increased. 
B)  benefit of teaching increased. 
C)  cost of a corporate job increased. 
D)  benefit of a corporate job decreased. 
A)  cost of teaching increased. 
B)  benefit of teaching increased. 
C)  cost of a corporate job increased. 
D)  benefit of a corporate job decreased.

Question 14

Which of these activities will most likely result in an external benefit?

Accepted Answer

A)  A college student buys a deck of cards to play solitaire in her dorm room. 
B)  An elderly woman plants a flower garden on the vacant lot next to her house. 
C)  An executive purchases a book to read on a business trip. 
D)  A ten-year-old uses his allowance to buy new Nike shoes. 
A)  A college student buys a deck of cards to play solitaire in her dorm room. 
B)  An elderly woman plants a flower garden on the vacant lot next to her house. 
C)  An executive purchases a book to read on a business trip. 
D)  A ten-year-old uses his allowance to buy new Nike shoes.

Question 15

A direct or positive relationship exists between a country's

Accepted Answer

A)  productivity and its standard of living. 
B)  amount of government spending and its productivity. 
C)  total population and its average citizen's income. 
D)  rate of population growth and the extent of its trade with other countries. 
A)  productivity and its standard of living. 
B)  amount of government spending and its productivity. 
C)  total population and its average citizen's income. 
D)  rate of population growth and the extent of its trade with other countries.

Question 16

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Accepted Answer

A)  enhance equality. 
B)  enhance efficiency. 
C)  increase the reward for working hard. 
D)  All of the above are correct. 
A)  enhance equality. 
B)  enhance efficiency. 
C)  increase the reward for working hard. 
D)  All of the above are correct.

Question 17

Economists use the term to refer to fluctuations in economic activity, such as employment and production.

Accepted Answer

The answer of Economists use the term to refer to...

Question 18

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

A)  the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B)  the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C)  producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D)  water prices are held artificially low by governments, since water is necessary for life. 
A)  the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B)  the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C)  producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D)  water prices are held artificially low by governments, since water is necessary for life.

Question 19

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A)  There is no such thing as a free lunch. 
B)  People buy more when prices are low than when prices are high. 
C)  No matter how much people earn, they tend to spend more than they earn. 
D)  Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes. 
A)  There is no such thing as a free lunch. 
B)  People buy more when prices are low than when prices are high. 
C)  No matter how much people earn, they tend to spend more than they earn. 
D)  Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Question 20

Public policies

Accepted Answer

A)  may be able to improve either economic efficiency or equality. 
B)  may be able to improve economic efficiency but cannot improve equality. 
C)  may be able to improve equality but cannot improve economic efficiency. 
D)  cannot improve either equality or economic efficiency. 
A)  may be able to improve either economic efficiency or equality. 
B)  may be able to improve economic efficiency but cannot improve equality. 
C)  may be able to improve equality but cannot improve economic efficiency. 
D)  cannot improve either equality or economic efficiency.

Exam 1: Ten Principles of Economics

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

Causes of market failure include

The term refers to the size of the economic pie, and the term refers to how the pie is divided.

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

For most students, the earnings they give up to attend college are

Both The Wealth of Nations and the Declaration of Independence share the point of view that

An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.

In a particular country in 1998, the average worker needed to work 40 hours to produce 100 units of output. In that same country in 2008, the average worker needed to work 36 hours to produce 72 units of output. In that country, the productivity of the average worker

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

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

If Switzerland chooses to engage in trade, it

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

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

Which of these activities will most likely result in an external benefit?

A direct or positive relationship exists between a country's

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Economists use the term to refer to fluctuations in economic activity, such as employment and production.

People are willing to pay more for a diamond than for a bottle of water because

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Public policies

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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