Question 1

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Accepted Answer

A) True 
 B)False

Question 2

Efficiency means that

Accepted Answer

A)  society is conserving resources in order to save them for the future. 
B)  society's goods and services are distributed equally among society's members. 
C)  society's goods and services are distributed fairly, though not necessarily equally, among society's members. 
D)  society is getting the maximum benefits from its scarce resources. 
A)  society is conserving resources in order to save them for the future. 
B)  society's goods and services are distributed equally among society's members. 
C)  society's goods and services are distributed fairly, though not necessarily equally, among society's members. 
D)  society is getting the maximum benefits from its scarce resources.

Question 3

Central planning refers to

Accepted Answer

A)  markets guiding economic activity. Today many countries that had this system have abandoned it. 
B)  markets guiding economic activity. Today many countries that did not have this system have implemented it. 
C)  government guiding economic activity. Today many countries that had this system have abandoned it. 
D)  government guiding economic activity. Today many countries that did not have this system have implemented it. 
A)  markets guiding economic activity. Today many countries that had this system have abandoned it. 
B)  markets guiding economic activity. Today many countries that did not have this system have implemented it. 
C)  government guiding economic activity. Today many countries that had this system have abandoned it. 
D)  government guiding economic activity. Today many countries that did not have this system have implemented it.

Question 4

A rationale for government involvement in a market economy is

Accepted Answer

A)  markets sometimes fail to produce a fair distribution of economic well-being. 
B)  markets sometimes fail to produce an efficient allocation of resources. 
C)  property rights have to be enforced. 
D)  All of the above are correct. 
A)  markets sometimes fail to produce a fair distribution of economic well-being. 
B)  markets sometimes fail to produce an efficient allocation of resources. 
C)  property rights have to be enforced. 
D)  All of the above are correct.

Question 5

The short-run tradeoff between inflation and unemployment implies that, in the short run,

Accepted Answer

A)  a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
B)  an increase in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
C)  policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate. 
D)  policymakers can influence the inflation rate, but not the unemployment rate. 
A)  a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
B)  an increase in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
C)  policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate. 
D)  policymakers can influence the inflation rate, but not the unemployment rate.

Question 6

Scenario 1-6
It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors.
-Refer to Scenario 1-6. What is the minimum price that would induce this company to produce the 601st heart rate monitor?

Accepted Answer

The answer of Scenario 1-6
It costs a company $30,000 to...

Question 7

The failure of communism in a large number of countries is at least partly explained by

Accepted Answer

A)  the fact that those countries relied absolutely on the invisible hand. 
B)  the fact that those countries did little or nothing to restrict trade with other countries. 
C)  the lack of information, on the part of central planners in those countries, about tastes and preferences in their economies. 
D)  the lack of information, on the part of central planners in those countries, about how much authority the government had in affecting economic outcomes. 
A)  the fact that those countries relied absolutely on the invisible hand. 
B)  the fact that those countries did little or nothing to restrict trade with other countries. 
C)  the lack of information, on the part of central planners in those countries, about tastes and preferences in their economies. 
D)  the lack of information, on the part of central planners in those countries, about how much authority the government had in affecting economic outcomes.

Question 8

Market failure is the ability of a single person to have a substantial influence on market prices.

Accepted Answer

A) True 
 B)False

Question 9

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Accepted Answer

A) True 
 B)False

Question 10

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Accepted Answer

A) True 
 B)False

Question 11

Stephen is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5,800. Stephen discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do?

Accepted Answer

A)  He should sell the car now for $3,800. 
B)  He should keep the car since it wouldn't be rational to spend $6,400 restoring a car and then sell it for only $5,800. 
C)  He should complete the additional work and sell the car for $5,800. 
D)  It does not matter which action he takes since the outcome will be the same either way. 
A)  He should sell the car now for $3,800. 
B)  He should keep the car since it wouldn't be rational to spend $6,400 restoring a car and then sell it for only $5,800. 
C)  He should complete the additional work and sell the car for $5,800. 
D)  It does not matter which action he takes since the outcome will be the same either way.

Question 12

Trade with any nation can be mutually beneficial.

Accepted Answer

A) True 
 B)False

Question 13

In the United States, the overall level of prices more than doubled during the

Accepted Answer

A)  1950s. 
B)  1960s. 
C)  1970s. 
D)  1980s. 
A)  1950s. 
B)  1960s. 
C)  1970s. 
D)  1980s.

Question 14

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A)  command economy. 
B)  centrally-planned economy. 
C)  market economy. 
D)  All of the above are correct. 
A)  command economy. 
B)  centrally-planned economy. 
C)  market economy. 
D)  All of the above are correct.

Question 15

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 16

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

Accepted Answer

A)  worker productivity in Bangladesh is higher than in India. 
B)  the standard of living will likely be higher in India than in Bangladesh. 
C)  productivity is 4 units per hour for the worker in Bangladesh and 3 units per hour for the worker in India. 
D)  there will be no difference between the standard of living in India and Bangladesh. 
A)  worker productivity in Bangladesh is higher than in India. 
B)  the standard of living will likely be higher in India than in Bangladesh. 
C)  productivity is 4 units per hour for the worker in Bangladesh and 3 units per hour for the worker in India. 
D)  there will be no difference between the standard of living in India and Bangladesh.

Question 17

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

Accepted Answer

A)  a grocery store in a metropolitan area 
B)  a convenience store in a suburb 
C)  a pub in a college town 
D)  the only gasoline station in a rural area 
A)  a grocery store in a metropolitan area 
B)  a convenience store in a suburb 
C)  a pub in a college town 
D)  the only gasoline station in a rural area

Question 18

For a very long time the country of Zeeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

Accepted Answer

A)  could be due to slower money supply growth. We would expect unemployment to be higher. 
B)  could be due to slower money supply growth. We would expect unemployment to be lower. 
C)  could be due to higher money supply growth. We would expect unemployment to be higher. 
D)  could be due to higher money supply growth. We would expect unemployment to be lower. 
A)  could be due to slower money supply growth. We would expect unemployment to be higher. 
B)  could be due to slower money supply growth. We would expect unemployment to be lower. 
C)  could be due to higher money supply growth. We would expect unemployment to be higher. 
D)  could be due to higher money supply growth. We would expect unemployment to be lower.

Question 19

One advantage market economies have over centrally-planned economies is that market economies

Accepted Answer

A)  provide an equal distribution of goods and services to households. 
B)  establish a significant role for government in the allocation of resources. 
C)  solve the problem of scarcity. 
D)  are more efficient. 
A)  provide an equal distribution of goods and services to households. 
B)  establish a significant role for government in the allocation of resources. 
C)  solve the problem of scarcity. 
D)  are more efficient.

Question 20

Economics is the study of how evenly goods and services are distributed within society.

Accepted Answer

A) True 
 B)False

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Efficiency means that

Central planning refers to

A rationale for government involvement in a market economy is

The short-run tradeoff between inflation and unemployment implies that, in the short run,

The failure of communism in a large number of countries is at least partly explained by

Market failure is the ability of a single person to have a substantial influence on market prices.

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Trade with any nation can be mutually beneficial.

In the United States, the overall level of prices more than doubled during the

The decisions of firms and households are guided by prices and self-interest in a

Which of the following is true?

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

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

For a very long time the country of Zeeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

One advantage market economies have over centrally-planned economies is that market economies

Economics is the study of how evenly goods and services are distributed within society.

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

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Efficiency means that

Central planning refers to

A rationale for government involvement in a market economy is

The short-run tradeoff between inflation and unemployment implies that, in the short run,

The failure of communism in a large number of countries is at least partly explained by

Market failure is the ability of a single person to have a substantial influence on market prices.

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Trade with any nation can be mutually beneficial.

In the United States, the overall level of prices more than doubled during the

The decisions of firms and households are guided by prices and self-interest in a

Which of the following is true?

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

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

For a very long time the country of Zeeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

One advantage market economies have over centrally-planned economies is that market economies

Economics is the study of how evenly goods and services are distributed within society.

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