Question 1

Economics deals primarily with the concept of

Accepted Answer

A)  scarcity. 
B)  money. 
C)  poverty. 
D)  banking. 
A)  scarcity. 
B)  money. 
C)  poverty. 
D)  banking.

Question 2

The term "market failure"

Accepted Answer

A)  means the same thing as "market power." 
B)  refers to the dissolution of a market when firms decide to quit producing a certain product. 
C)  refers to the failure of a market to produce an efficient allocation of resources. 
D)  refers to government's failure to enforce the property rights of households or firms that participate in a certain market. 
A)  means the same thing as "market power." 
B)  refers to the dissolution of a market when firms decide to quit producing a certain product. 
C)  refers to the failure of a market to produce an efficient allocation of resources. 
D)  refers to government's failure to enforce the property rights of households or firms that participate in a certain market.

Question 3

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Accepted Answer

A)  Yes, because cutting hair is profitable. 
B)  No, because he may not be able to sell more services. 
C)  It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D)  It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients. 
A)  Yes, because cutting hair is profitable. 
B)  No, because he may not be able to sell more services. 
C)  It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D)  It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

Question 4

A rational decisionmaker

Accepted Answer

A)  ignores marginal changes and focuses instead on "the big picture." 
B)  ignores the likely effects of government policies when he or she makes choices. 
C)  takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. 
D)  takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions. 
A)  ignores marginal changes and focuses instead on "the big picture." 
B)  ignores the likely effects of government policies when he or she makes choices. 
C)  takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. 
D)  takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.

Question 5

Which of the following is the primary cause of inflation?

Accepted Answer

A)  an increase in the quantity of money 
B)  an increase in government spending 
C)  an increase in unemployment 
D)  an increase in productivity 
A)  an increase in the quantity of money 
B)  an increase in government spending 
C)  an increase in unemployment 
D)  an increase in productivity

Question 6

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal

Accepted Answer

A)  cost of leaving was greater than the marginal benefit. 
B)  benefit of leaving was greater than the marginal cost. 
C)  benefit of teaching was greater than the marginal cost. 
D)  All of the above are correct. 
A)  cost of leaving was greater than the marginal benefit. 
B)  benefit of leaving was greater than the marginal cost. 
C)  benefit of teaching was greater than the marginal cost. 
D)  All of the above are correct.

Question 7

In response to the deep economic downturn in the US in 2008 and 2009, the US

Accepted Answer

A)  reduced taxes. 
B)  increased government spending. 
C)  increased the supply of money. 
D)  All of the above are correct. 
A)  reduced taxes. 
B)  increased government spending. 
C)  increased the supply of money. 
D)  All of the above are correct.

Question 8

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Accepted Answer

A)  David Ricardo 
B)  Thorstein Veblen 
C)  John Maynard Keynes 
D)  Adam Smith 
A)  David Ricardo 
B)  Thorstein Veblen 
C)  John Maynard Keynes 
D)  Adam Smith

Question 9

To raise productivity, policymakers could

Accepted Answer

A)  increase spending on education. 
B)  provide tax credits to firms for capital improvements. 
C)  fund research and development. 
D)  All of the above are correct. 
A)  increase spending on education. 
B)  provide tax credits to firms for capital improvements. 
C)  fund research and development. 
D)  All of the above are correct.

Question 10

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

Accepted Answer

A)  equality is increased and efficiency is increased. 
B)  equality is increased and efficiency is decreased. 
C)  equality is decreased and efficiency is increased. 
D)  equality is decreased and efficiency is decreased. 
A)  equality is increased and efficiency is increased. 
B)  equality is increased and efficiency is decreased. 
C)  equality is decreased and efficiency is increased. 
D)  equality is decreased and efficiency is decreased.

Question 11

Irregular fluctuations in economic activity are known as the

Accepted Answer

A)  business cycle. 
B)  broken window fallacy. 
C)  tradeoff between inflation and unemployment. 
D)  ten principles of economics. 
A)  business cycle. 
B)  broken window fallacy. 
C)  tradeoff between inflation and unemployment. 
D)  ten principles of economics.

Question 12

DeShawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. DeShawn discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He can sell the boat as it is now for $400. What should he do?

Accepted Answer

A)  He should sell the boat as it is now for $400. 
B)  He should keep the boat since it would not be rational to spend $1,000 on repairs and then sell the boat for $900. 
C)  He should complete the repairs and sell the boat for $900. 
D)  It does not matter which action he takes; the outcome is the same either way. 
A)  He should sell the boat as it is now for $400. 
B)  He should keep the boat since it would not be rational to spend $1,000 on repairs and then sell the boat for $900. 
C)  He should complete the repairs and sell the boat for $900. 
D)  It does not matter which action he takes; the outcome is the same either way.

Question 13

It costs a company $35,000 to produce 500 graphing calculators. The company's cost will be $35,080 if it produces an additional graphing calculator. If the company produces 501 graphing calculators then

Accepted Answer

A)  its average cost is greater than its marginal cost. 
B)  its average cost and its marginal cost are equal. 
C)  its average cost is less than its marginal cost. 
D)  This cannot be determined from the information given. 
A)  its average cost is greater than its marginal cost. 
B)  its average cost and its marginal cost are equal. 
C)  its average cost is less than its marginal cost. 
D)  This cannot be determined from the information given.

Question 14

When a government program is justified not on its merits but on the number of jobs it will create,

Accepted Answer

A)  the program is an efficient use of taxpayer dollars. 
B)  it should be approved only if the unemployment rate is low. 
C)  taxes should be raised to fund the program. 
D)  it is known as the "broken window fallacy." 
A)  the program is an efficient use of taxpayer dollars. 
B)  it should be approved only if the unemployment rate is low. 
C)  taxes should be raised to fund the program. 
D)  it is known as the "broken window fallacy."

Question 15

Both the production of goods and services and the unemployment rate are used to measure

Accepted Answer

A)  the business cycle. 
B)  productivity. 
C)  the interest rate. 
D)  inflation. 
A)  the business cycle. 
B)  productivity. 
C)  the interest rate. 
D)  inflation.

Question 16

Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?

Accepted Answer

A)  Michelle can attend the concert only if she takes her sister with her. 
B)  Michael is hungry and homeless. 
C)  Andrea must repair the tire on her bike before she can ride it to class. 
D)  Dani must decide between going to Florida or Brazil for spring break. 
A)  Michelle can attend the concert only if she takes her sister with her. 
B)  Michael is hungry and homeless. 
C)  Andrea must repair the tire on her bike before she can ride it to class. 
D)  Dani must decide between going to Florida or Brazil for spring break.

Question 18

With careful planning, we can usually get something that we like without having to give up something else that we like.

Accepted Answer

A) True 
 B)False

Question 19

The historical rise in living standards of American workers is primarily a result of

Accepted Answer

A)  the influence of labor unions in America. 
B)  tariff protection imposed by the American government. 
C)  the enactment of minimum-wage laws in America. 
D)  the rise in American productivity. 
A)  the influence of labor unions in America. 
B)  tariff protection imposed by the American government. 
C)  the enactment of minimum-wage laws in America. 
D)  the rise in American productivity.

Question 20

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

Accepted Answer

A)  people respond to incentives. 
B)  rational people think at the margin. 
C)  people face tradeoffs. 
D)  improvements in efficiency sometimes come at the expense of equality. 
A)  people respond to incentives. 
B)  rational people think at the margin. 
C)  people face tradeoffs. 
D)  improvements in efficiency sometimes come at the expense of equality.

Economics deals primarily with the concept of

The term "market failure"

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

A rational decisionmaker

Which of the following is the primary cause of inflation?

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal

In response to the deep economic downturn in the US in 2008 and 2009, the US

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

To raise productivity, policymakers could

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

Irregular fluctuations in economic activity are known as the

It costs a company $35,000 to produce 500 graphing calculators. The company's cost will be $35,080 if it produces an additional graphing calculator. If the company produces 501 graphing calculators then

When a government program is justified not on its merits but on the number of jobs it will create,

Both the production of goods and services and the unemployment rate are used to measure

Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time.

Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?

With careful planning, we can usually get something that we like without having to give up something else that we like.

The historical rise in living standards of American workers is primarily a result of

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

Filters

Exam 1: Ten Principles of Economics

Economics deals primarily with the concept of

The term "market failure"

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

A rational decisionmaker

Which of the following is the primary cause of inflation?

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal

In response to the deep economic downturn in the US in 2008 and 2009, the US

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

To raise productivity, policymakers could

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

Irregular fluctuations in economic activity are known as the

It costs a company $35,000 to produce 500 graphing calculators. The company's cost will be $35,080 if it produces an additional graphing calculator. If the company produces 501 graphing calculators then

When a government program is justified not on its merits but on the number of jobs it will create,

Both the production of goods and services and the unemployment rate are used to measure

Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time.

Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?

With careful planning, we can usually get something that we like without having to give up something else that we like.

The historical rise in living standards of American workers is primarily a result of

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

Filters