Question 1

An example of a firm with market power is a

Accepted Answer

A) delicatessen in New York. 
B) cable TV provider in Tulsa. 
C) clothing store in Chicago. 
D) family farm in Kansas. 
A) delicatessen in New York. 
B) cable TV provider in Tulsa. 
C) clothing store in Chicago. 
D) family farm in Kansas.

Question 2

Suppose Country A has a high average wage level and a high level of output per person,while Country B has a low average wage level and a low level of output per person.Which country can benefit from trade?

Accepted Answer

A) Only Country A can benefit. 
B) Only Country B can benefit. 
C) Both Country A and Country B can benefit. 
D) Neither Country A nor Country B can benefit. 
A) Only Country A can benefit. 
B) Only Country B can benefit. 
C) Both Country A and Country B can benefit. 
D) Neither Country A nor Country B can benefit.

Question 3

A friend of yours asks you why market prices are better than government-determined prices.Because you understand economic principles,you say that market-determined prices are better because they generally reflect

Accepted Answer

A) the value of a good to society,but not the cost of making it. 
B) the cost of making a good to society,but not its value. 
C) both the value of a good to society and the cost of making it. 
D) neither the value of a good to society nor the cost of making it. 
A) the value of a good to society,but not the cost of making it. 
B) the cost of making a good to society,but not its value. 
C) both the value of a good to society and the cost of making it. 
D) neither the value of a good to society nor the cost of making it.

Question 4

The government enforces property rights by

Accepted Answer

A) requiring property owners to pay property taxes. 
B) providing police and courts. 
C) forcing people to own property. 
D) providing public parks and recreation facilities. 
A) requiring property owners to pay property taxes. 
B) providing police and courts. 
C) forcing people to own property. 
D) providing public parks and recreation facilities.

Question 5

The "invisible hand" refers to

Accepted Answer

A) the government. 
B) the free market. 
C) central planners. 
D) large businesses. 
A) the government. 
B) the free market. 
C) central planners. 
D) large businesses.

Question 6

Communist countries worked under the premise that

Accepted Answer

A) people,when left on their own without government intervention,will find the best use of available resources 
B) central planners were in the best position to determine the allocation of scarce resources in the economy. 
C) households and firms,guided by an "invisible hand," could achieve the most efficient allocation of scarce resources. 
D) allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources. 
A) people,when left on their own without government intervention,will find the best use of available resources 
B) central planners were in the best position to determine the allocation of scarce resources in the economy. 
C) households and firms,guided by an "invisible hand," could achieve the most efficient allocation of scarce resources. 
D) allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources.

Question 7

Which of the following statements about markets is most accurate?

Accepted Answer

A) Markets are usually a good way to organize economic activity. 
B) Markets are usually inferior to central planning as a way to organize economic activity. 
C) Markets fail and are therefore not an acceptable way to organize economic activity. 
D) Markets are a good way to organize economic activity in developed nations,but not in less developed nations. 
A) Markets are usually a good way to organize economic activity. 
B) Markets are usually inferior to central planning as a way to organize economic activity. 
C) Markets fail and are therefore not an acceptable way to organize economic activity. 
D) Markets are a good way to organize economic activity in developed nations,but not in less developed nations.

Question 8

Which of the following statements about trade is false?

Accepted Answer

A) Trade increases competition. 
B) With trade,one country wins and one country loses. 
C) Bulgaria can benefit,potentially,from trade with any other country. 
D) Trade allows people to buy a greater variety of goods and services at lower cost. 
A) Trade increases competition. 
B) With trade,one country wins and one country loses. 
C) Bulgaria can benefit,potentially,from trade with any other country. 
D) Trade allows people to buy a greater variety of goods and services at lower cost.

Question 9

In a market economy,who makes the decisions that guide most economic activity?

Accepted Answer

A) firms only 
B) households only 
C) firms and households 
D) government 
A) firms only 
B) households only 
C) firms and households 
D) government

Question 10

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 11

Market power refers to the

Accepted Answer

A) power of a single person or small group to influence market prices. 
B) ability of a person or small group to successfully market new products. 
C) power of the government to regulate a market. 
D) importance of a certain market in relation to the overall economy. 
A) power of a single person or small group to influence market prices. 
B) ability of a person or small group to successfully market new products. 
C) power of the government to regulate a market. 
D) importance of a certain market in relation to the overall economy.

Question 12

Adam Smith's insight was that prices adjust to guide individual buyers and sellers to reach outcomes where,in many cases,

Accepted Answer

A) opportunity cost is minimized for buyers. 
B) scarcity is reduced for society. 
C) well-being of society is maximized. 
D) opportunity cost of production is maximized. 
A) opportunity cost is minimized for buyers. 
B) scarcity is reduced for society. 
C) well-being of society is maximized. 
D) opportunity cost of production is maximized.

Question 13

Which of these activities will most likely impose an external cost?

Accepted Answer

A) An athlete works out at a gym. 
B) A secretary smokes a cigarette in a crowded break room. 
C) A young mother pushes her baby in a stroller. 
D) A construction worker eats a hotdog during his lunch break. 
A) An athlete works out at a gym. 
B) A secretary smokes a cigarette in a crowded break room. 
C) A young mother pushes her baby in a stroller. 
D) A construction worker eats a hotdog during his lunch break.

Question 14

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

Accepted Answer

A) an electric company 
B) a farmer 
C) a grocery store 
D) a local electronics retailer 
A) an electric company 
B) a farmer 
C) a grocery store 
D) a local electronics retailer

Question 15

The self-interest of the participants in an economy is guided into promoting general economic self-interest by

Accepted Answer

A) the invisible hand. 
B) market power. 
C) government intervention. 
D) oikonomos. 
A) the invisible hand. 
B) market power. 
C) government intervention. 
D) oikonomos.

Question 16

When a single person (or small group)has the ability to influence market prices,there is

Accepted Answer

A) competition. 
B) market power. 
C) an externality. 
D) a lack of property rights. 
A) competition. 
B) market power. 
C) an externality. 
D) a lack of property rights.

Question 17

The "invisible hand" refers to

Accepted Answer

A) how central planners made economic decisions. 
B) how the decisions of households and firms lead to desirable market outcomes. 
C) the control that large firms have over the economy. 
D) government regulations without which the economy would be less efficient. 
A) how central planners made economic decisions. 
B) how the decisions of households and firms lead to desirable market outcomes. 
C) the control that large firms have over the economy. 
D) government regulations without which the economy would be less efficient.

Question 18

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 19

Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself.Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper.This scenario is an example of which principle of economics?

Accepted Answer

A) Trade can make everyone better off. 
B) Markets are usually a good way to organize economic activity. 
C) Governments can sometimes improve market outcomes. 
D) Prices rise when the government prints too much money. 
A) Trade can make everyone better off. 
B) Markets are usually a good way to organize economic activity. 
C) Governments can sometimes improve market outcomes. 
D) Prices rise when the government prints too much money.

Question 20

If the government were to intervene and set the price of a dozen eggs above the market price,then we would expect,relative to the market outcome,

Accepted Answer

A) an increase in the number of eggs people want to buy and an increase in the number of eggs farmers want to sell. 
B) an increase in the number of eggs people want to buy and a decrease in the number of eggs farmers want to sell. 
C) a decrease in the number of eggs people want to buy and an increase in the number of eggs farmers want to sell. 
D) a decrease in the number of eggs people want to buy and a decrease in the number of eggs farmers want to sell. 
A) an increase in the number of eggs people want to buy and an increase in the number of eggs farmers want to sell. 
B) an increase in the number of eggs people want to buy and a decrease in the number of eggs farmers want to sell. 
C) a decrease in the number of eggs people want to buy and an increase in the number of eggs farmers want to sell. 
D) a decrease in the number of eggs people want to buy and a decrease in the number of eggs farmers want to sell.

Exam 1: Ten Principles of Economics: How People Interact

An example of a firm with market power is a

Suppose Country A has a high average wage level and a high level of output per person,while Country B has a low average wage level and a low level of output per person.Which country can benefit from trade?

A friend of yours asks you why market prices are better than government-determined prices.Because you understand economic principles,you say that market-determined prices are better because they generally reflect

The government enforces property rights by

The "invisible hand" refers to

Communist countries worked under the premise that

Which of the following statements about markets is most accurate?

Which of the following statements about trade is false?

In a market economy,who makes the decisions that guide most economic activity?

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

Market power refers to the

Adam Smith's insight was that prices adjust to guide individual buyers and sellers to reach outcomes where,in many cases,

Which of these activities will most likely impose an external cost?

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

The self-interest of the participants in an economy is guided into promoting general economic self-interest by

When a single person (or small group)has the ability to influence market prices,there is

The "invisible hand" refers to

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

If the government were to intervene and set the price of a dozen eggs above the market price,then we would expect,relative to the market outcome,

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

Application International Trade: Part B