Question 1

The economics of trade depends on whether the trading partners live in the same country and share the same language and religion.

Accepted Answer

A) True 
 B)False

Question 2

Trade increases production partly by taking advantage of:

Accepted Answer

A)  economies of scale. 
B)  economies of scope. 
C)  realism. 
D)  pluralism. 
A)  economies of scale. 
B)  economies of scope. 
C)  realism. 
D)  pluralism.

Question 3

Which of the following statements reflects Adam Smith's important insight into marketplace behavior?

Accepted Answer

A)  Society benefits when people and firms pursue their own self-interests. 
B)  Markets are usually an inefficient way of organizing economic activity. 
C)  Greedy,self-interested behavior needs to be constrained to ensure strong economic growth. 
D)  Trade restrictions on imported goods increase domestic employment. 
A)  Society benefits when people and firms pursue their own self-interests. 
B)  Markets are usually an inefficient way of organizing economic activity. 
C)  Greedy,self-interested behavior needs to be constrained to ensure strong economic growth. 
D)  Trade restrictions on imported goods increase domestic employment.

Question 4

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 5

Define opportunity cost.What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Accepted Answer

Opportunity cost is that which you must

Question 6

One benefit of trade is that it:

Accepted Answer

A)  increases the division of knowledge because trade makes people more self-sufficient,producing more of what they consume. 
B)  allows for increased specialization and mass-production techniques that lower per unit costs of production. 
C)  lowers productivity,leading to greater domestic employment. 
D)  decreases economies of scale,making production more efficient. 
A)  increases the division of knowledge because trade makes people more self-sufficient,producing more of what they consume. 
B)  allows for increased specialization and mass-production techniques that lower per unit costs of production. 
C)  lowers productivity,leading to greater domestic employment. 
D)  decreases economies of scale,making production more efficient.

Question 7

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 8

Estimates suggest that tens of thousands of people have died because the FDA withheld beta-blockers from the market while testing to determine whether the drugs were safe and effective.This is an example of:

Accepted Answer

A)  drug lag. 
B)  drug loss. 
C)  bureaucratic incompetence. 
D)  market failure. 
A)  drug lag. 
B)  drug loss. 
C)  bureaucratic incompetence. 
D)  market failure.

Question 9

The idea that markets work efficiently:

Accepted Answer

A)  refers to the fact that self-interest can be aligned with social interest. 
B)  means that trade-offs can be reduced by channeling greed toward good ends. 
C)  suggests that there is never any need for government regulation,taxes,or subsidies. 
D)  has been known for many centuries. 
A)  refers to the fact that self-interest can be aligned with social interest. 
B)  means that trade-offs can be reduced by channeling greed toward good ends. 
C)  suggests that there is never any need for government regulation,taxes,or subsidies. 
D)  has been known for many centuries.

Question 10

What is thinking on the margin?

Accepted Answer

A)  Making decisions that are of noneconomic importance. 
B)  Making choices that are based on historical precedents. 
C)  Making choices that ignore the marginal benefits,but not the marginal costs,of some activity. 
D)  Making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity. 
A)  Making decisions that are of noneconomic importance. 
B)  Making choices that are based on historical precedents. 
C)  Making choices that ignore the marginal benefits,but not the marginal costs,of some activity. 
D)  Making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity.

Question 11

Self-sufficiency:

Accepted Answer

A)  is the key to prosperity. 
B)  is not a popular idea. 
C)  results in poverty and death. 
D)  means being able and willing to trade. 
A)  is the key to prosperity. 
B)  is not a popular idea. 
C)  results in poverty and death. 
D)  means being able and willing to trade.

Question 12

Which financing method for transporting prisoners from point A to B will result in the greatest number of prisoners surviving the trip? Assume there are 50 prisoners being transported.

Accepted Answer

A)  The ship's captain is paid $100 by the government for every live prisoner that is loaded on board at Point A. 
B)  The ship's captain is paid $100 by the government for every live prisoner that is unloaded at Point B. 
C)  The ship's captain is paid $400 by the government for every live prisoner that is loaded on board at Point A. 
D)  The ship's captain is paid a flat rate of $3,000 for the trip,rather than being paid per prisoner. 
A)  The ship's captain is paid $100 by the government for every live prisoner that is loaded on board at Point A. 
B)  The ship's captain is paid $100 by the government for every live prisoner that is unloaded at Point B. 
C)  The ship's captain is paid $400 by the government for every live prisoner that is loaded on board at Point A. 
D)  The ship's captain is paid a flat rate of $3,000 for the trip,rather than being paid per prisoner.

Question 13

Monetary and fiscal policies:

Accepted Answer

A)  can reduce the severity of economic busts. 
B)  have been proven to be ineffective and are no longer used during recessions. 
C)  only work during times of rapid inflation. 
D)  are tools used during economic booms but not economic busts. 
A)  can reduce the severity of economic busts. 
B)  have been proven to be ineffective and are no longer used during recessions. 
C)  only work during times of rapid inflation. 
D)  are tools used during economic booms but not economic busts.

Question 14

South Korea became much richer than North Korea as a result of:

Accepted Answer

A)  foreign aid from the United States. 
B)  a different cultural background. 
C)  a different language. 
D)  its economic systems and incentives. 
A)  foreign aid from the United States. 
B)  a different cultural background. 
C)  a different language. 
D)  its economic systems and incentives.

Question 15

When deciding whether or not to undertake an activity,economists compare:

Accepted Answer

A)  the total cost of the activity against the total benefit received. 
B)  the total benefit of the activity against the total cost of production. 
C)  the additional cost of the activity against the additional benefits received. 
D)  the average cost of the activity versus the total benefits received. 
A)  the total cost of the activity against the total benefit received. 
B)  the total benefit of the activity against the total cost of production. 
C)  the additional cost of the activity against the additional benefits received. 
D)  the average cost of the activity versus the total benefits received.

Question 16

Susan quits her administrative job,which pays $40,000 a year,to finish her four-year college degree.Her annual college expenses are $8,000 for tuition,$900 for books,and $2,500 for food.The opportunity cost of attending college for the year is:

Accepted Answer

A)  $11,400. 
B)  $8,900. 
C)  $48,900. 
D)  $51,400. 
A)  $11,400. 
B)  $8,900. 
C)  $48,900. 
D)  $51,400.

Question 17

The average starting salary of economics majors is just behind that of:

Accepted Answer

A)  political science majors. 
B)  marketing majors. 
C)  chemical and nuclear engineering majors. 
D)  education majors. 
A)  political science majors. 
B)  marketing majors. 
C)  chemical and nuclear engineering majors. 
D)  education majors.

Question 18

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 19

The basic postulate of economics indicates that changes in incentives influence the:

Accepted Answer

A)  actions of producers but not consumers. 
B)  actions of consumers but not producers. 
C)  choices of individuals only when they buy and sell goods in the marketplace. 
D)  choices of individuals with regard to a wide range of activities,including those generally perceived as social or political. 
A)  actions of producers but not consumers. 
B)  actions of consumers but not producers. 
C)  choices of individuals only when they buy and sell goods in the marketplace. 
D)  choices of individuals with regard to a wide range of activities,including those generally perceived as social or political.

Question 20

Dropping out of college to devote time to a promising business start-up is most directly an application of the principle of:

Accepted Answer

A)  gains from trade. 
B)  returns from specialization. 
C)  marginal thinking. 
D)  opportunity cost. 
A)  gains from trade. 
B)  returns from specialization. 
C)  marginal thinking. 
D)  opportunity cost.

Exam 1: The Big Ideas

The economics of trade depends on whether the trading partners live in the same country and share the same language and religion.

Trade increases production partly by taking advantage of:

Which of the following statements reflects Adam Smith's important insight into marketplace behavior?

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

Define opportunity cost.What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

One benefit of trade is that it:

Economists believe people make decisions by:

Estimates suggest that tens of thousands of people have died because the FDA withheld beta-blockers from the market while testing to determine whether the drugs were safe and effective.This is an example of:

The idea that markets work efficiently:

What is thinking on the margin?

Self-sufficiency:

Which financing method for transporting prisoners from point A to B will result in the greatest number of prisoners surviving the trip? Assume there are 50 prisoners being transported.

Monetary and fiscal policies:

South Korea became much richer than North Korea as a result of:

When deciding whether or not to undertake an activity,economists compare:

Susan quits her administrative job,which pays $40,000 a year,to finish her four-year college degree.Her annual college expenses are $8,000 for tuition,$900 for books,and $2,500 for food.The opportunity cost of attending college for the year is:

The average starting salary of economics majors is just behind that of:

Economists have discovered that economic booms and busts:

The basic postulate of economics indicates that changes in incentives influence the:

Dropping out of college to devote time to a promising business start-up is most directly an application of the principle of:

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

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