Question 1

Market power and externalities are two possible causes of market failure.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. The airline should sell a ticket to a standby passenger only if the passenger is willing to pay

Accepted Answer

A)  more than $200. 
B)  more than $300. 
C)  more than $500. 
D)  This cannot be determined from the information given. 
A)  more than $200. 
B)  more than $300. 
C)  more than $500. 
D)  This cannot be determined from the information given.

Question 3

Invisible hand is a term used by the economist in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.

Accepted Answer

The answer of Invisible hand is a term used by...

Question 4

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

Accepted Answer

A)  the amount you value the first movie + $3 
B)  the amount you value the first movie + $9 
C)  $3 
D)  $9 
A)  the amount you value the first movie + $3 
B)  the amount you value the first movie + $9 
C)  $3 
D)  $9

Question 5

A marginal change is a

Accepted Answer

A)  change that involves little, if anything, that is important. 
B)  large, significant adjustment. 
C)  change for the worse, and so it is usually a short-term change. 
D)  small, incremental adjustment. 
A)  change that involves little, if anything, that is important. 
B)  large, significant adjustment. 
C)  change for the worse, and so it is usually a short-term change. 
D)  small, incremental adjustment.

Question 6

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Accepted Answer

A)  For the first 24 houses, the average cost per house was $205,000. 
B)  The marginal cost of the 25th house, if it is built, will equal $250,000. 
C)  If the company can sell the 25th house for at least $202,000, then it should build it. 
D)  All of the above are correct. 
A)  For the first 24 houses, the average cost per house was $205,000. 
B)  The marginal cost of the 25th house, if it is built, will equal $250,000. 
C)  If the company can sell the 25th house for at least $202,000, then it should build it. 
D)  All of the above are correct.

Question 7

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

Accepted Answer

They reduce the reward for wor

Question 8

Inflation is the primary determinant of a country's living standards.

Accepted Answer

A) True 
 B)False

Question 9

Scenario 1-4 You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $12.00 on a ticket and $4.75 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 15 points.
-Refer to Scenario 1-4. What is your opportunity cost of going to the movies?

Accepted Answer

$16.75 and

Question 10

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

Accepted Answer

A)  1960s. 
B)  1970s. 
C)  1980s. 
D)  1990s. 
A)  1960s. 
B)  1970s. 
C)  1980s. 
D)  1990s.

Question 11

A tradeoff exists between a clean environment and a higher level of income in that

Accepted Answer

A)  studies show that individuals with higher levels of income pollute less than low-income individuals. 
B)  efforts to reduce pollution typically are not completely successful. 
C)  laws that reduce pollution raise costs of production and reduce incomes. 
D)  employing individuals to clean up pollution causes increases in employment and income. 
A)  studies show that individuals with higher levels of income pollute less than low-income individuals. 
B)  efforts to reduce pollution typically are not completely successful. 
C)  laws that reduce pollution raise costs of production and reduce incomes. 
D)  employing individuals to clean up pollution causes increases in employment and income.

Question 12

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should

Accepted Answer

A)  rent the room because the marginal benefit exceeds the marginal cost. 
B)  rent the room because the marginal benefit exceeds the average cost. 
C)  not rent the room because the marginal benefit is less than the marginal cost. 
D)  not rent the room because the marginal benefit is less than the average cost. 
A)  rent the room because the marginal benefit exceeds the marginal cost. 
B)  rent the room because the marginal benefit exceeds the average cost. 
C)  not rent the room because the marginal benefit is less than the marginal cost. 
D)  not rent the room because the marginal benefit is less than the average cost.

Question 13

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Accepted Answer

A)  the unexpected repairs and the increase in the price of gas 
B)  the unexpected increase for repairs, but not the increase in the price of gas 
C)  the increase in the price of gas, but not the unexpected repairs 
D)  neither the unexpected increase in the price of gas nor the unexpected repairs 
A)  the unexpected repairs and the increase in the price of gas 
B)  the unexpected increase for repairs, but not the increase in the price of gas 
C)  the increase in the price of gas, but not the unexpected repairs 
D)  neither the unexpected increase in the price of gas nor the unexpected repairs

Question 14

If an electric power plant does not bear the entire cost of the pollution it emits, it will

Accepted Answer

A)  not emit any pollution so as to avoid the entire cost of the pollution. 
B)  emit lower levels of pollution. 
C)  emit an acceptable level of pollution. 
D)  emit too much pollution. 
A)  not emit any pollution so as to avoid the entire cost of the pollution. 
B)  emit lower levels of pollution. 
C)  emit an acceptable level of pollution. 
D)  emit too much pollution.

Question 15

Government policies designed to equalize the distribution of economic well-being include (i) the welfare system
(ii) unemployment insurance
(iii) progressive income tax

Accepted Answer

A)  (i) only 
B)  (ii) only 
C)  (i) and (ii) only 
D)  (i), (ii), and (iii) 
A)  (i) only 
B)  (ii) only 
C)  (i) and (ii) only 
D)  (i), (ii), and (iii)

Question 16

When Ukraine trades with Italy,

Accepted Answer

A)  both countries are likely made better off. 
B)  only Italy benefits since Ukraine can produce all goods at a higher level of quality than Italy. 
C)  only Ukraine benefits since Italy's low wages guarantee that Italian firms will be profitable regardless of trade. 
D)  neither country will benefit since Ukraine is more efficient than Italy in the production of all goods. 
A)  both countries are likely made better off. 
B)  only Italy benefits since Ukraine can produce all goods at a higher level of quality than Italy. 
C)  only Ukraine benefits since Italy's low wages guarantee that Italian firms will be profitable regardless of trade. 
D)  neither country will benefit since Ukraine is more efficient than Italy in the production of all goods.

Question 17

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. A customer is willing to pay $60 for the 601st heart rate monitor. Should the company produce and sell it? Explain.

Accepted Answer

No, because the marg

Question 18

In the long run the primary effect of increasing the quantity of money is higher prices.

Accepted Answer

A) True 
 B)False

Question 19

The broken window fallacy states that when a window breaks and someone spends money to repair it, they have created new economic activity that would not have otherwise taken place.

Accepted Answer

A) True 
 B)False

Question 20

The overriding reason why households and societies face many decisions is that

Accepted Answer

A)  resources are scarce. 
B)  goods and services are not scarce. 
C)  incomes fluctuate with business cycles. 
D)  people, by nature, tend to disagree. 
A)  resources are scarce. 
B)  goods and services are not scarce. 
C)  incomes fluctuate with business cycles. 
D)  people, by nature, tend to disagree.

Market power and externalities are two possible causes of market failure.

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. The airline should sell a ticket to a standby passenger only if the passenger is willing to pay

Invisible hand is a term used by the economist in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.

A marginal change is a

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

Inflation is the primary determinant of a country's living standards.

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

A tradeoff exists between a clean environment and a higher level of income in that

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

If an electric power plant does not bear the entire cost of the pollution it emits, it will

Government policies designed to equalize the distribution of economic well-being include (i) the welfare system (ii) unemployment insurance (iii) progressive income tax

When Ukraine trades with Italy,

In the long run the primary effect of increasing the quantity of money is higher prices.

The broken window fallacy states that when a window breaks and someone spends money to repair it, they have created new economic activity that would not have otherwise taken place.

The overriding reason why households and societies face many decisions is 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

Filters

Exam 1: Ten Principles of Economics

Market power and externalities are two possible causes of market failure.

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. The airline should sell a ticket to a standby passenger only if the passenger is willing to pay

Invisible hand is a term used by the economist in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.

A marginal change is a

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

Inflation is the primary determinant of a country's living standards.

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

A tradeoff exists between a clean environment and a higher level of income in that

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

If an electric power plant does not bear the entire cost of the pollution it emits, it will

Government policies designed to equalize the distribution of economic well-being include (i) the welfare system (ii) unemployment insurance (iii) progressive income tax

When Ukraine trades with Italy,

In the long run the primary effect of increasing the quantity of money is higher prices.

The broken window fallacy states that when a window breaks and someone spends money to repair it, they have created new economic activity that would not have otherwise taken place.

The overriding reason why households and societies face many decisions is 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

Filters