Question 1

Adam Smith's book The Wealth of Nations was published in

Accepted Answer

A) 1692. 
B) 1776. 
C) 1816. 
D) 1936. 
A) 1692. 
B) 1776. 
C) 1816. 
D) 1936.

Question 2

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 3

Which of the following is an example of an externality?

Accepted Answer

A) Annie purchases a new dress. 
B) Antonio's dog barks loudly during the night,waking his neighbors. 
C) Harold sells a book to Cathy,who reads the book and then gives it to James as a gift. 
D) Gloria watches a scary movie. 
A) Annie purchases a new dress. 
B) Antonio's dog barks loudly during the night,waking his neighbors. 
C) Harold sells a book to Cathy,who reads the book and then gives it to James as a gift. 
D) Gloria watches a scary movie.

Question 4

Which of the following could reduce economic efficiency?

Accepted Answer

A) laws that encourage lawsuits 
B) policies that redistribute income 
C) policies that impose significant restrictions on international trade 
D) All of the above are correct 
A) laws that encourage lawsuits 
B) policies that redistribute income 
C) policies that impose significant restrictions on international trade 
D) All of the above are correct

Question 5

If an externality is present in a market,economic efficiency may be enhanced by

Accepted Answer

A) government intervention. 
B) a decrease in foreign competition. 
C) fewer market participants. 
D) weaker property rights. 
A) government intervention. 
B) a decrease in foreign competition. 
C) fewer market participants. 
D) weaker property rights.

Question 6

Prices direct economic activity in a market economy by

Accepted Answer

A) influencing the actions of buyers and sellers. 
B) reducing scarcity of the goods and services produced. 
C) reducing opportunity cost of goods and services produced. 
D) allocating goods and services in the most equitable way. 
A) influencing the actions of buyers and sellers. 
B) reducing scarcity of the goods and services produced. 
C) reducing opportunity cost of goods and services produced. 
D) allocating goods and services in the most equitable way.

Question 7

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 8

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 9

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 10

Which of the following can lead to market failure?

Accepted Answer

A) externalities and market power 
B) externalities but not market power 
C) market power but not externalities 
D) neither externalities nor market power 
A) externalities and market power 
B) externalities but not market power 
C) market power but not externalities 
D) neither externalities nor market power

Question 11

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 12

Prior to the collapse of communism,communist countries worked on the premise that economic well-being could be best attained by

Accepted Answer

A) a market economy. 
B) a strong reliance on prices and individuals' self-interests. 
C) a system of large privately-owned firms. 
D) the actions of government central planners. 
A) a market economy. 
B) a strong reliance on prices and individuals' self-interests. 
C) a system of large privately-owned firms. 
D) the actions of government central planners.

Question 13

Public policies

Accepted Answer

A) may be able to improve either economic efficiency or equality. 
B) may be able to improve economic efficiency but cannot improve equality. 
C) may be able to improve equality but cannot improve economic efficiency. 
D) cannot improve either equality or economic efficiency. 
A) may be able to improve either economic efficiency or equality. 
B) may be able to improve economic efficiency but cannot improve equality. 
C) may be able to improve equality but cannot improve economic efficiency. 
D) cannot improve either equality or economic efficiency.

Question 14

In a market economy,

Accepted Answer

A) households decide which firms to work for and what to buy with their incomes. 
B) firms decide whom to hire and what to make. 
C) a central planner makes decisions about production and consumption. 
D) Both a and b are correct. 
A) households decide which firms to work for and what to buy with their incomes. 
B) firms decide whom to hire and what to make. 
C) a central planner makes decisions about production and consumption. 
D) Both a and b are correct.

Question 15

Which of the following statements about market economies is correct?

Accepted Answer

A) In a market economy,no one is looking out for the economic well-being of society as a whole. 
B) Market economies are characterized by decentralized decision making and self-interested decision makers. 
C) Market economies have proven remarkably successful in promoting overall economic well-being. 
D) All of the above are correct. 
A) In a market economy,no one is looking out for the economic well-being of society as a whole. 
B) Market economies are characterized by decentralized decision making and self-interested decision makers. 
C) Market economies have proven remarkably successful in promoting overall economic well-being. 
D) All of the above are correct.

Question 16

Trade between countries tends to

Accepted Answer

A) reduce both competition and specialization. 
B) reduce competition and increase specialization. 
C) increase competition and reduce specialization. 
D) increase both competition and specialization. 
A) reduce both competition and specialization. 
B) reduce competition and increase specialization. 
C) increase competition and reduce specialization. 
D) increase both competition and specialization.

Question 17

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 18

Which of these activities will most likely result in an external benefit?

Accepted Answer

A) A college student buys a deck of cards to play solitaire in her dorm room. 
B) An elderly woman plants a flower garden on the vacant lot next to her house. 
C) An executive purchases a book to read on a business trip. 
D) A ten-year-old uses his allowance to buy new Nike shoes. 
A) A college student buys a deck of cards to play solitaire in her dorm room. 
B) An elderly woman plants a flower garden on the vacant lot next to her house. 
C) An executive purchases a book to read on a business trip. 
D) A ten-year-old uses his allowance to buy new Nike shoes.

Question 19

To say that government intervenes in the economy to promote efficiency is to say that government is attempting to

Accepted Answer

A) create a more fair distribution of income. 
B) change the way in which the economic pie is divided. 
C) enlarge the economic pie. 
D) All of the above are correct. 
A) create a more fair distribution of income. 
B) change the way in which the economic pie is divided. 
C) enlarge the economic pie. 
D) All of the above are correct.

Question 20

The basic principles of economics suggest that

Accepted Answer

A) markets are seldom,if ever,a good way to organize economic activity. 
B) government should become involved in markets when trade between countries is involved. 
C) government should become involved in markets when those markets fail to produce efficient or fair outcomes. 
D) All of the above are correct. 
A) markets are seldom,if ever,a good way to organize economic activity. 
B) government should become involved in markets when trade between countries is involved. 
C) government should become involved in markets when those markets fail to produce efficient or fair outcomes. 
D) All of the above are correct.

Exam 1: Ten Principles of Economics: How People Interact

Adam Smith's book The Wealth of Nations was published in

The term "invisible hand" was coined by

Which of the following is an example of an externality?

Which of the following could reduce economic efficiency?

If an externality is present in a market,economic efficiency may be enhanced by

Prices direct economic activity in a market economy by

When Ukraine trades with Italy,

The "invisible hand" directs economic activity through

Prices usually reflect

Which of the following can lead to market failure?

Central planning refers to

Prior to the collapse of communism,communist countries worked on the premise that economic well-being could be best attained by

Public policies

In a market economy,

Which of the following statements about market economies is correct?

Trade between countries tends to

A rationale for government involvement in a market economy is

Which of these activities will most likely result in an external benefit?

To say that government intervenes in the economy to promote efficiency is to say that government is attempting to

The basic principles of economics suggest that

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A