Question 1

During a recession, we expect that the opportunity cost of attending college:

Accepted Answer

A)  rises. 
B)  falls. 
C)  remains the same. 
D)  cannot be determined from the information given. 
A)  rises. 
B)  falls. 
C)  remains the same. 
D)  cannot be determined from the information given.

Question 2

In the 1800s, the federal government paid railroad companies for each mile of track built. This payment scheme created incentives for railroad companies to lay track:

Accepted Answer

A)  between points A and B using the most direct route. 
B)  between points A and B using the most indirect route. 
C)  as slowly as possible. 
D)  using the best materials possible. 
A)  between points A and B using the most direct route. 
B)  between points A and B using the most indirect route. 
C)  as slowly as possible. 
D)  using the best materials possible.

Question 3

Inflation occurs largely as a result of:

Accepted Answer

A)  the government having a large debt. 
B)  a shortage in the supply of goods or services. 
C)  the government printing too much money. 
D)  a recession. 
A)  the government having a large debt. 
B)  a shortage in the supply of goods or services. 
C)  the government printing too much money. 
D)  a recession.

Question 4

Economists have discovered that economic booms and busts:

Accepted Answer

A)  are needless and can be eliminated. 
B)  should be encouraged because they help make people better off. 
C)  can be moderated but not eliminated. 
D)  cause people to specialize so they become more productive. 
A)  are needless and can be eliminated. 
B)  should be encouraged because they help make people better off. 
C)  can be moderated but not eliminated. 
D)  cause people to specialize so they become more productive.

Question 5

North Korea and South Korea were equally poor in 1950, but today South Korea is ______ than North Korea.

Accepted Answer

A)  10 times richer 
B)  two times richer 
C)  two times poorer 
D)  10 times poorer 
A)  10 times richer 
B)  two times richer 
C)  two times poorer 
D)  10 times poorer

Question 6

People in wealthier economies tend to lead richer and more fulfilled lives.

Accepted Answer

A) True 
 B)False

Question 7

The decisions made by the Federal Reserve Bank sometimes result in negative effects on the economy because:

Accepted Answer

A)  the economy is weakened when the Fed uses monetary policy. 
B)  the government uses money inefficiently when it comes to fiscal policy. 
C)  the Fed finds that forecasting economic conditions is easy but controlling the money supply is difficult. 
D)  too much money or too little money might induce inflation or unemployment due to bad timing of decisions. 
A)  the economy is weakened when the Fed uses monetary policy. 
B)  the government uses money inefficiently when it comes to fiscal policy. 
C)  the Fed finds that forecasting economic conditions is easy but controlling the money supply is difficult. 
D)  too much money or too little money might induce inflation or unemployment due to bad timing of decisions.

Question 8

While trade has many benefits, the division of knowledge is a negative outcome of trade.

Accepted Answer

A) True 
 B)False

Question 9

Economists believe people make decisions by:

Accepted Answer

A)  comparing marginal costs with marginal benefits. 
B)  thinking about costs but not benefits. 
C)  thinking about benefits but not costs. 
D)  comparing total costs with total benefits. 
A)  comparing marginal costs with marginal benefits. 
B)  thinking about costs but not benefits. 
C)  thinking about benefits but not costs. 
D)  comparing total costs with total benefits.

Question 10

If market incentives to produce are too strong, the market will end up producing:

Accepted Answer

A)  too much of the good. 
B)  too little of the good. 
C)  a quantity equal to the efficient outcome, as market incentives can never be considered too strong. 
D)  zero output. 
A)  too much of the good. 
B)  too little of the good. 
C)  a quantity equal to the efficient outcome, as market incentives can never be considered too strong. 
D)  zero output.

Question 11

One of the limitations of economics is that the principles only apply to the American economic system and not foreign economies.

Accepted Answer

A) True 
 B)False

Question 12

What is meant by the term "marginal revolution"?

Accepted Answer

A)  the public disdain at the institution of marginal tax rates 
B)  the transformation in economic thought that occurred with the discovery of marginal thinking 
C)  the institution of the death penalty for drug dealers 
D)  the effect of policies on crime 
A)  the public disdain at the institution of marginal tax rates 
B)  the transformation in economic thought that occurred with the discovery of marginal thinking 
C)  the institution of the death penalty for drug dealers 
D)  the effect of policies on crime

Question 13

Everyone can benefit from trade through increased specialization, division of knowledge, and productivity.

Accepted Answer

A) True 
 B)False

Question 14

Institutions that promote economic growth include:

Accepted Answer

A)  policies that provide incentives for people to produce and trade. 
B)  the extent of government control in markets. 
C)  income redistribution from the rich to the poor. 
D)  the amount of goods and services that are provided citizens by their government. 
A)  policies that provide incentives for people to produce and trade. 
B)  the extent of government control in markets. 
C)  income redistribution from the rich to the poor. 
D)  the amount of goods and services that are provided citizens by their government.

Question 15

When the opportunity cost of a choice increases:

Accepted Answer

A)  individuals are more likely to choose that same option. 
B)  individuals are less likely to choose that same option. 
C)  the marginal benefits of that choice increase, as well. 
D)  the marginal benefits of that choice decrease. 
A)  individuals are more likely to choose that same option. 
B)  individuals are less likely to choose that same option. 
C)  the marginal benefits of that choice increase, as well. 
D)  the marginal benefits of that choice decrease.

Question 16

During the Great Depression, the United States unemployment rate exceeded ______ percent.

Accepted Answer

A)  35 
B)  30 
C)  25 
D)  20 
A)  35 
B)  30 
C)  25 
D)  20

Question 17

It takes approximately _______ years and _______ to bring a new drug to the market.

Accepted Answer

A)  12; $1 billion 
B)  2; $100,000 
C)  4; $5 million 
D)  6; $20 billion 
A)  12; $1 billion 
B)  2; $100,000 
C)  4; $5 million 
D)  6; $20 billion

Question 18

If North Korea and South Korea were both equally poor in 1950, why has South Korea developed so much faster since then?

Accepted Answer

A)  The two countries have different language, cultural, and historical backgrounds. 
B)  North Korea has an economic system that develops incentives. 
C)  South Korea has maintained a more market-based economic system. 
D)  South Korea began with a higher per capita GDP. 
A)  The two countries have different language, cultural, and historical backgrounds. 
B)  North Korea has an economic system that develops incentives. 
C)  South Korea has maintained a more market-based economic system. 
D)  South Korea began with a higher per capita GDP.

Question 19

Self-interest can be aligned with the social interest by:

Accepted Answer

A)  the enactment of government policies that increase incentives to work and trade. 
B)  increasing international trade. 
C)  promoting benevolence. 
D)  banning free markets by the government. 
A)  the enactment of government policies that increase incentives to work and trade. 
B)  increasing international trade. 
C)  promoting benevolence. 
D)  banning free markets by the government.

Question 20

Based on the ideas of Adam Smith, it is ______ dentists clean and repair teeth, but ______.

Accepted Answer

A)  not out of benevolence that; from their regard for their own self-interest 
B)  out of benevolence that; sometimes from their regard for their own self-interest 
C)  not out of self-interest that; out of their benevolence 
D)  from charity and good will that; only if they can charge high prices 
A)  not out of benevolence that; from their regard for their own self-interest 
B)  out of benevolence that; sometimes from their regard for their own self-interest 
C)  not out of self-interest that; out of their benevolence 
D)  from charity and good will that; only if they can charge high prices

Exam 1: The Big Ideas

During a recession, we expect that the opportunity cost of attending college:

In the 1800s, the federal government paid railroad companies for each mile of track built. This payment scheme created incentives for railroad companies to lay track:

Inflation occurs largely as a result of:

Economists have discovered that economic booms and busts:

North Korea and South Korea were equally poor in 1950, but today South Korea is ______ than North Korea.

People in wealthier economies tend to lead richer and more fulfilled lives.

The decisions made by the Federal Reserve Bank sometimes result in negative effects on the economy because:

While trade has many benefits, the division of knowledge is a negative outcome of trade.

Economists believe people make decisions by:

If market incentives to produce are too strong, the market will end up producing:

One of the limitations of economics is that the principles only apply to the American economic system and not foreign economies.

What is meant by the term "marginal revolution"?

Everyone can benefit from trade through increased specialization, division of knowledge, and productivity.

Institutions that promote economic growth include:

When the opportunity cost of a choice increases:

During the Great Depression, the United States unemployment rate exceeded ______ percent.

It takes approximately _______ years and _______ to bring a new drug to the market.

If North Korea and South Korea were both equally poor in 1950, why has South Korea developed so much faster since then?

Self-interest can be aligned with the social interest by:

Based on the ideas of Adam Smith, it is ______ dentists clean and repair teeth, but ______.

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

It takes approximately _ years and _ to bring a new drug to the market.

Based on the ideas of Adam Smith, it is dentists clean and repair teeth, but .