Question 1

Which is the most accurate statement about trade?

Accepted Answer

A)  Trade can make every nation better off. 
B)  Trade makes some nations better off and others worse off. 
C)  Trading for a good can make a nation better off only if the nation cannot produce that good itself. 
D)  Trade helps rich nations and hurts poor nations. 
A)  Trade can make every nation better off. 
B)  Trade makes some nations better off and others worse off. 
C)  Trading for a good can make a nation better off only if the nation cannot produce that good itself. 
D)  Trade helps rich nations and hurts poor nations.

Question 2

Zack quits his job at a consulting firm, which pays $40,000 a year, to enroll in a two-year graduate program. His annual school expenses are $30,000 for tuition, $2,000 for books, and $600 for food. What is his opportunity cost of attending the two-year graduate program?

Accepted Answer

The answer of Zack quits his job at a consulting...

Question 3

The study of how society manages its scarce resources is most closely associated with which field of study?

Accepted Answer

A)  environmental studies 
B)  economics 
C)  management 
D)  accounting 
A)  environmental studies 
B)  economics 
C)  management 
D)  accounting

Question 4

Which of the following is an example of something economists study?

Accepted Answer

A)  Mitch chooses to work overtime to earn extra income for his family. 
B)  Megan sells her physics textbook from last semester to her roommate for half the price of a new textbook. 
C)  The unemployment rate in the United States has fallen by two percentage points in the last few years. 
D)  All of the above are correct. 
A)  Mitch chooses to work overtime to earn extra income for his family. 
B)  Megan sells her physics textbook from last semester to her roommate for half the price of a new textbook. 
C)  The unemployment rate in the United States has fallen by two percentage points in the last few years. 
D)  All of the above are correct.

Question 5

Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

Accepted Answer

A)  $0. 
B)  $15. 
C)  $305. 
D)  $315. 
A)  $0. 
B)  $15. 
C)  $305. 
D)  $315.

Question 6

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Accepted Answer

A)  is a basic principle regarding individual decisionmaking. 
B)  amounts to a denial of one of the basic principles regarding interactions among people. 
C)  supports the idea that the "invisible hand" should guide economic activity. 
D)  was promoted by the economist Adam Smith in a well-known 1776 book. 
A)  is a basic principle regarding individual decisionmaking. 
B)  amounts to a denial of one of the basic principles regarding interactions among people. 
C)  supports the idea that the "invisible hand" should guide economic activity. 
D)  was promoted by the economist Adam Smith in a well-known 1776 book.

Question 7

For most students, the largest single cost of a college education is

Accepted Answer

A)  the wages given up to attend school. 
B)  tuition, fees, and books. 
C)  room and board. 
D)  transportation, parking, and entertainment. 
A)  the wages given up to attend school. 
B)  tuition, fees, and books. 
C)  room and board. 
D)  transportation, parking, and entertainment.

Question 8

Katie is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $2,500 and replacing the roof will cost her $9,000. Katie expects the new carpeting to increase the value of her house by $3,000 and the new roof to increase the value of her house by $7,000.

Accepted Answer

A)  She should make both improvements to her house. 
B)  She should replace the carpeting but not replace the roof. 
C)  She should replace the roof but not replace the carpeting. 
D)  She should not make either improvement to her house. 
A)  She should make both improvements to her house. 
B)  She should replace the carpeting but not replace the roof. 
C)  She should replace the roof but not replace the carpeting. 
D)  She should not make either improvement to her house.

Question 9

Which of the following can policy do?

Accepted Answer

A)  alter incentives 
B)  alter trade-offs 
C)  change opportunity costs 
D)  All of the above are correct. 
A)  alter incentives 
B)  alter trade-offs 
C)  change opportunity costs 
D)  All of the above are correct.

Question 10

In a particular country in 1999, the average worker had to work 20 hours to produce 55 units of output. In that same country in 2009, the average worker needed to work 28 hours to produce 77 units of output. In that country, the productivity of the average worker

Accepted Answer

A)  increased by 2 percent between 1999 and 2009. 
B)  increased by 5 percent between 1999 and 2009. 
C)  remained unchanged between 1999 and 2009. 
D)  decreased by 3 percent between 1999 and 2009. 
A)  increased by 2 percent between 1999 and 2009. 
B)  increased by 5 percent between 1999 and 2009. 
C)  remained unchanged between 1999 and 2009. 
D)  decreased by 3 percent between 1999 and 2009.

Question 11

The "invisible hand" directs economic activity through

Accepted Answer

A)  advertising. 
B)  prices. 
C)  central planning. 
D)  government regulations. 
A)  advertising. 
B)  prices. 
C)  central planning. 
D)  government regulations.

Question 12

Economics is the study of

Accepted Answer

A)  production methods. 
B)  how society manages its scarce resources. 
C)  how households decide who performs which tasks. 
D)  the interaction of business and government. 
A)  production methods. 
B)  how society manages its scarce resources. 
C)  how households decide who performs which tasks. 
D)  the interaction of business and government.

Question 13

The English word that comes from the Greek word for "one who manages a household" is

Accepted Answer

A)  market. 
B)  consumer. 
C)  producer. 
D)  economy. 
A)  market. 
B)  consumer. 
C)  producer. 
D)  economy.

Question 14

Invisible hand is a term used by the economist to describe how the decisions of households and firms lead to desirable market outcomes.

Accepted Answer

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

Question 15

An increase in the overall level of prices in an economy is referred to as

Accepted Answer

A)  the income effect. 
B)  inflation. 
C)  deflation. 
D)  the substitution effect. 
A)  the income effect. 
B)  inflation. 
C)  deflation. 
D)  the substitution effect.

Question 16

Consider Mandy's decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. Mandy's cost of going to college is

Accepted Answer

A)  $32,000. 
B)  $42,000. 
C)  $50,000. 
D)  $58,000. 
A)  $32,000. 
B)  $42,000. 
C)  $50,000. 
D)  $58,000.

Question 17

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

Accepted Answer

A)  the Federal Reserve is worried about inflation. 
B)  the Federal Reserve is worried about unemployment. 
C)  the Federal Reserve is hoping to reduce the demand for goods and services. 
D)  the Federal Reserve is worried that the economy is growing too quickly. 
A)  the Federal Reserve is worried about inflation. 
B)  the Federal Reserve is worried about unemployment. 
C)  the Federal Reserve is hoping to reduce the demand for goods and services. 
D)  the Federal Reserve is worried that the economy is growing too quickly.

Question 18

Prices usually reflect

Accepted Answer

A)  only the value of a good to society. 
B)  only the cost to society of making a good. 
C)  both the value of a good to society and the cost to society of making the good. 
D)  neither the value of a good to society nor the cost to society of making the good. 
A)  only the value of a good to society. 
B)  only the cost to society of making a good. 
C)  both the value of a good to society and the cost to society of making the good. 
D)  neither the value of a good to society nor the cost to society of making the good.

Question 19

In most societies, resources are allocated by

Accepted Answer

A)  a single central planner. 
B)  a small number of central planners. 
C)  those firms that use resources to provide goods and services. 
D)  the combined actions of millions of households and firms. 
A)  a single central planner. 
B)  a small number of central planners. 
C)  those firms that use resources to provide goods and services. 
D)  the combined actions of millions of households and firms.

Question 20

The tradeoff between inflation and unemployment

Accepted Answer

A)  implies that policies designed to reduce unemployment also reduce inflation. 
B)  was eliminated by improved economic policies in the 1900s. 
C)  is a long-run tradeoff, persisting for decades, according to most economists. 
D)  None of the above are correct. 
A)  implies that policies designed to reduce unemployment also reduce inflation. 
B)  was eliminated by improved economic policies in the 1900s. 
C)  is a long-run tradeoff, persisting for decades, according to most economists. 
D)  None of the above are correct.

Exam 1: Ten Principles of Economics

Which is the most accurate statement about trade?

Zack quits his job at a consulting firm, which pays $40,000 a year, to enroll in a two-year graduate program. His annual school expenses are $30,000 for tuition, $2,000 for books, and $600 for food. What is his opportunity cost of attending the two-year graduate program?

The study of how society manages its scarce resources is most closely associated with which field of study?

Which of the following is an example of something economists study?

Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

For most students, the largest single cost of a college education is

Which of the following can policy do?

In a particular country in 1999, the average worker had to work 20 hours to produce 55 units of output. In that same country in 2009, the average worker needed to work 28 hours to produce 77 units of output. In that country, the productivity of the average worker

The "invisible hand" directs economic activity through

Economics is the study of

The English word that comes from the Greek word for "one who manages a household" is

Invisible hand is a term used by the economist to describe how the decisions of households and firms lead to desirable market outcomes.

An increase in the overall level of prices in an economy is referred to as

Consider Mandy's decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. Mandy's cost of going to college is

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

Prices usually reflect

In most societies, resources are allocated by

The tradeoff between inflation and unemployment

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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