Question 1

Which of the following is an important cause of inflation in an economy?

Accepted Answer

A)  increases in productivity in the economy 
B)  the influence of positive externalities on the economy 
C)  lack of property rights in the economy 
D)  growth in the quantity of money in the economy 
A)  increases in productivity in the economy 
B)  the influence of positive externalities on the economy 
C)  lack of property rights in the economy 
D)  growth in the quantity of money in the economy

Question 2

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

Accepted Answer

A)  An athlete works out at a gym. 
B)  A secretary smokes a cigarette in a crowded break room. 
C)  A young mother pushes her baby in a stroller. 
D)  A construction worker eats a hotdog during his lunch break. 
A)  An athlete works out at a gym. 
B)  A secretary smokes a cigarette in a crowded break room. 
C)  A young mother pushes her baby in a stroller. 
D)  A construction worker eats a hotdog during his lunch break.

Question 3

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 4

The phrase "no such thing as a free lunch" means

Accepted Answer

A)  people must face tradeoffs. 
B)  rational people think at the margin. 
C)  people respond to incentives. 
D)  trade can make everyone better off. 
A)  people must face tradeoffs. 
B)  rational people think at the margin. 
C)  people respond to incentives. 
D)  trade can make everyone better off.

Question 5

During the early 1920s in Germany, prices

Accepted Answer

A)  doubled annually. 
B)  doubled monthly. 
C)  tripled monthly. 
D)  tripled annually. 
A)  doubled annually. 
B)  doubled monthly. 
C)  tripled monthly. 
D)  tripled annually.

Question 6

The primary determinant of a country's standard of living is

Accepted Answer

A)  the country's ability to prevail over foreign competition. 
B)  the country's ability to produce goods and services. 
C)  the total supply of money in the economy. 
D)  the average age of the country's labor force. 
A)  the country's ability to prevail over foreign competition. 
B)  the country's ability to produce goods and services. 
C)  the total supply of money in the economy. 
D)  the average age of the country's labor force.

Question 7

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 8

Betty'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 Betty $2.00 to produce, and she prices loaves of bread at $3.50 per loaf. Suppose near the end of one day Betty still has 12 loaves of bread on hand. Which of the following is correct?

Accepted Answer

A)  Betty should only sell the remaining bread for $3.50 per loaf since that is the regular price. 
B)  Betty should only sell the remaining bread for $2.00 per loaf or more since that is what the bread costs to make. 
C)  Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something. 
D)  Betty should just throw the bread away and change the price of her bread starting tomorrow to make sure she sells all of her bread each day. 
A)  Betty should only sell the remaining bread for $3.50 per loaf since that is the regular price. 
B)  Betty should only sell the remaining bread for $2.00 per loaf or more since that is what the bread costs to make. 
C)  Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something. 
D)  Betty should just throw the bread away and change the price of her bread starting tomorrow to make sure she sells all of her bread each day.

Question 9

When the government attempts to improve equality in an economy the result is often

Accepted Answer

A)  an increase in overall output in the economy. 
B)  additional government revenue since overall income will increase. 
C)  a reduction in equality. 
D)  a reduction in efficiency. 
A)  an increase in overall output in the economy. 
B)  additional government revenue since overall income will increase. 
C)  a reduction in equality. 
D)  a reduction in efficiency.

Question 10

What are the two reasons for the government to intervene in a market?

Accepted Answer

To promote

Question 11

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

Accepted Answer

A)  more than $40, as the average benefit will exceed the marginal cost. 
B)  more than $40, as the marginal benefit will exceed the marginal cost. 
C)  more than $80, as the average benefit will exceed the marginal cost. 
D)  more than $80, as the marginal benefit will exceed the marginal cost. 
A)  more than $40, as the average benefit will exceed the marginal cost. 
B)  more than $40, as the marginal benefit will exceed the marginal cost. 
C)  more than $80, as the average benefit will exceed the marginal cost. 
D)  more than $80, as the marginal benefit will exceed the marginal cost.

Question 12

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

Accepted Answer

A)  the United Kingdom has a better education system than Turkey. 
B)  the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey. 
C)  workers in Turkey are more productive than workers in the United Kingdom. 
D)  there are more instances of market power in Turkey than in the United Kingdom. 
A)  the United Kingdom has a better education system than Turkey. 
B)  the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey. 
C)  workers in Turkey are more productive than workers in the United Kingdom. 
D)  there are more instances of market power in Turkey than in the United Kingdom.

Question 13

In the United States, incomes have historically grown

Accepted Answer

A)  about 0.5 percent per year. 
B)  about 2 percent per year. 
C)  about 4 percent per year. 
D)  about 6 percent per year. 
A)  about 0.5 percent per year. 
B)  about 2 percent per year. 
C)  about 4 percent per year. 
D)  about 6 percent per year.

Question 14

Slow growth in US incomes during the 1970s and 1980s was primarily due to

Accepted Answer

A)  slow productivity growth in the US. 
B)  increased competition from Japan. 
C)  increased competition from European countries. 
D)  a rapid decrease in the quantity of money in the economy. 
A)  slow productivity growth in the US. 
B)  increased competition from Japan. 
C)  increased competition from European countries. 
D)  a rapid decrease in the quantity of money in the economy.

Question 15

When the government redistributes income from the wealthy to the poor,

Accepted Answer

A)  efficiency is improved, but equality is not. 
B)  both wealthy people and poor people benefit directly. 
C)  people work less and produce fewer goods and services. 
D)  the government collects more revenue in total. 
A)  efficiency is improved, but equality is not. 
B)  both wealthy people and poor people benefit directly. 
C)  people work less and produce fewer goods and services. 
D)  the government collects more revenue in total.

Question 16

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Accepted Answer

A)  the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs. 
B)  the benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs. 
C)  the benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs. 
D)  the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs. 
A)  the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs. 
B)  the benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs. 
C)  the benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs. 
D)  the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs.

Question 17

In communism, central planners decide which of the following?

Accepted Answer

A)  what goods and services will be produced 
B)  how much will be produced 
C)  who produced and consumed the goods and services 
D)  All of the above are correct. 
A)  what goods and services will be produced 
B)  how much will be produced 
C)  who produced and consumed the goods and services 
D)  All of the above are correct.

Question 18

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Accepted Answer

A) True 
 B)False

Question 19

The adage, "There is no such thing as a free lunch," means

Accepted Answer

A)  even people on welfare have to pay for food. 
B)  the cost of living is always increasing. 
C)  people face tradeoffs. 
D)  all costs are included in the price of a product. 
A)  even people on welfare have to pay for food. 
B)  the cost of living is always increasing. 
C)  people face tradeoffs. 
D)  all costs are included in the price of a product.

Question 20

What are the two possible causes of market failure?

Accepted Answer

Externalit

Exam 1: Ten Principles of Economics

Which of the following is an important cause of inflation in an economy?

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

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

The phrase "no such thing as a free lunch" means

During the early 1920s in Germany, prices

The primary determinant of a country's standard of living is

The term "invisible hand" was coined by

When the government attempts to improve equality in an economy the result is often

What are the two reasons for the government to intervene in a market?

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

In the United States, incomes have historically grown

Slow growth in US incomes during the 1970s and 1980s was primarily due to

When the government redistributes income from the wealthy to the poor,

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

In communism, central planners decide which of the following?

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

The adage, "There is no such thing as a free lunch," means

What are the two possible causes of market failure?

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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