Question 1

In several cities around the country,schools are paying cash awards to students who do well on English and Math tests.This practice highlights the idea of:

Accepted Answer

A)  pedagogical economics-the continuous assessment of student performance in an effort to maximize student efficiency. 
B)  hidden costs-the costs borne by taxpayers in the form of wasteful school spending. 
C)  incentives-the rewards and penalties that motivate behavior. 
D)  screening theory-the identification of individuals or groups based on various performance measures. 
A)  pedagogical economics-the continuous assessment of student performance in an effort to maximize student efficiency. 
B)  hidden costs-the costs borne by taxpayers in the form of wasteful school spending. 
C)  incentives-the rewards and penalties that motivate behavior. 
D)  screening theory-the identification of individuals or groups based on various performance measures.

Question 2

Without trade,we would all be able to produce:

Accepted Answer

A)  products we enjoy with trade. 
B)  somewhat less than we do now. 
C)  very little. 
D)  more than we do now. 
A)  products we enjoy with trade. 
B)  somewhat less than we do now. 
C)  very little. 
D)  more than we do now.

Question 3

Suppose that you study hard,master the principles of economics,and earn a good grade in your economics class.This is an example of a good institution because:

Accepted Answer

A)  your school is selective;not everyone can get in. 
B)  your self-interest in getting good grades aligns with the social interest of having people who understand economics. 
C)  everybody gets good grades. 
D)  sometimes the invisible hand is absent,not just invisible. 
A)  your school is selective;not everyone can get in. 
B)  your self-interest in getting good grades aligns with the social interest of having people who understand economics. 
C)  everybody gets good grades. 
D)  sometimes the invisible hand is absent,not just invisible.

Question 4

While economic growth does increase the quality of life,the trade-off is that life expectancy is now shorter than in the past.

Accepted Answer

A) True 
 B)False

Question 5

A person has a comparative advantage in activity X when that person's:

Accepted Answer

A)  opportunity cost of performing that activity is very high. 
B)  ability to perform that activity exceeds that of all other people. 
C)  government negotiates a favorable trade agreement. 
D)  opportunity cost is lower for him than for other trading partners. 
A)  opportunity cost of performing that activity is very high. 
B)  ability to perform that activity exceeds that of all other people. 
C)  government negotiates a favorable trade agreement. 
D)  opportunity cost is lower for him than for other trading partners.

Question 6

Which of the following statements is TRUE?

Accepted Answer

A)  The Great Depression,despite its name,was really a small economic downturn with very little unemployment. 
B)  The Great Depression refers to the severe economic downturn that occurred during the nineteenth century. 
C)  The Great Depression would have been less severe if the Federal Reserve had acted appropriately. 
D)  Well-functioning economies grow at a constant rate and do not experience booms and busts. 
A)  The Great Depression,despite its name,was really a small economic downturn with very little unemployment. 
B)  The Great Depression refers to the severe economic downturn that occurred during the nineteenth century. 
C)  The Great Depression would have been less severe if the Federal Reserve had acted appropriately. 
D)  Well-functioning economies grow at a constant rate and do not experience booms and busts.

Question 7

The study of economics increases your understanding of the distant past,present events,and future possibilities.

Accepted Answer

A) True 
 B)False

Question 8

A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts.So the first dozen is $6 and the second would be $3.A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is:

Accepted Answer

A)  greater than $3 
B)  greater than $6 
C)  greater than $9 
D)  less than $3 
A)  greater than $3 
B)  greater than $6 
C)  greater than $9 
D)  less than $3

Question 9

As the United States becomes more productive at manufacturing chemicals and pharmaceutical drugs,the opportunity cost of producing other items such as textiles ________,leading to _____ demand for foreign textiles.

Accepted Answer

A)  increases;increased 
B)  decreases;increased 
C)  increases;decreased 
D)  decreases;decreased 
A)  increases;increased 
B)  decreases;increased 
C)  increases;decreased 
D)  decreases;decreased

Question 10

Because of their low incomes,about a million people in the United States die from malaria each year.

Accepted Answer

A) True 
 B)False

Question 11

In the process of trading in free markets,firms and consumers benefit but workers do not.

Accepted Answer

A) True 
 B)False

Question 12

As the FDA uses ______ time and resources to ensure the safety of new drugs,_________.

Accepted Answer

A)  more;more people will die from taking unsafe drugs 
B)  less;fewer people will die waiting for access to life-saving medicine 
C)  more;fewer people will die waiting for access to life-saving medicine 
D)  less;fewer people will die from taking unsafe drugs 
A)  more;more people will die from taking unsafe drugs 
B)  less;fewer people will die waiting for access to life-saving medicine 
C)  more;fewer people will die waiting for access to life-saving medicine 
D)  less;fewer people will die from taking unsafe drugs

Question 13

Most economists believe that an increase in the supply of money results in:

Accepted Answer

A)  an increase in the demand for goods and services. 
B)  higher unemployment in the short run. 
C)  higher inflation in the long run. 
D)  no change for the economy. 
A)  an increase in the demand for goods and services. 
B)  higher unemployment in the short run. 
C)  higher inflation in the long run. 
D)  no change for the economy.

Question 14

Adam Smith's "invisible hand" refers to:

Accepted Answer

A)  people's pursuit of their own self-interest. 
B)  people's pursuit of the social interest. 
C)  social justice. 
D)  government control. 
A)  people's pursuit of their own self-interest. 
B)  people's pursuit of the social interest. 
C)  social justice. 
D)  government control.

Question 15

Economists Jevons,Menger,and Walras are credited with:

Accepted Answer

A)  explaining the limitations of monetary policy. 
B)  formulating the theory of comparative advantage. 
C)  developing the concept of opportunity cost. 
D)  starting the "marginal revolution." 
A)  explaining the limitations of monetary policy. 
B)  formulating the theory of comparative advantage. 
C)  developing the concept of opportunity cost. 
D)  starting the "marginal revolution."

Question 16

Inflation is primarily caused by:

Accepted Answer

A)  businesses raising their prices in response to increasing energy prices. 
B)  the government printing too much money. 
C)  misguided fiscal policy. 
D)  economic downturns in GDP. 
A)  businesses raising their prices in response to increasing energy prices. 
B)  the government printing too much money. 
C)  misguided fiscal policy. 
D)  economic downturns in GDP.

Question 17

When people spend more money without an increase in the supply of goods,prices:

Accepted Answer

A)  must rise. 
B)  must fall. 
C)  may rise or fall. 
D)  must stay the same. 
A)  must rise. 
B)  must fall. 
C)  may rise or fall. 
D)  must stay the same.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Which statement explains why the Federal Reserve has a tough job?

Accepted Answer

A)  There are lags in the effects of monetary policy,and economic conditions continuously change. 
B)  Legally they are not allowed to change the supply of money,they can only make recommendations to the President. 
C)  It takes a long time for Congress to agree on a policy. 
D)  They can change the supply of money but that doesn't affect spending or the rate of unemployment. 
A)  There are lags in the effects of monetary policy,and economic conditions continuously change. 
B)  Legally they are not allowed to change the supply of money,they can only make recommendations to the President. 
C)  It takes a long time for Congress to agree on a policy. 
D)  They can change the supply of money but that doesn't affect spending or the rate of unemployment.

Question 20

An increase in the general price level is:

Accepted Answer

A)  depreciation. 
B)  appreciation. 
C)  deflation. 
D)  inflation. 
A)  depreciation. 
B)  appreciation. 
C)  deflation. 
D)  inflation.

Exam 1: The Big Ideas

In several cities around the country,schools are paying cash awards to students who do well on English and Math tests.This practice highlights the idea of:

Without trade,we would all be able to produce:

Suppose that you study hard,master the principles of economics,and earn a good grade in your economics class.This is an example of a good institution because:

While economic growth does increase the quality of life,the trade-off is that life expectancy is now shorter than in the past.

A person has a comparative advantage in activity X when that person's:

Which of the following statements is TRUE?

The study of economics increases your understanding of the distant past,present events,and future possibilities.

A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts.So the first dozen is $6 and the second would be $3.A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is:

As the United States becomes more productive at manufacturing chemicals and pharmaceutical drugs,the opportunity cost of producing other items such as textiles ________,leading to _____ demand for foreign textiles.

Because of their low incomes,about a million people in the United States die from malaria each year.

In the process of trading in free markets,firms and consumers benefit but workers do not.

As the FDA uses ______ time and resources to ensure the safety of new drugs,_________.

Most economists believe that an increase in the supply of money results in:

Adam Smith's "invisible hand" refers to:

Economists Jevons,Menger,and Walras are credited with:

Inflation is primarily caused by:

When people spend more money without an increase in the supply of goods,prices:

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

Which statement explains why the Federal Reserve has a tough job?

An increase in the general price level is:

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

Filters

As the United States becomes more productive at manufacturing chemicals and pharmaceutical drugs,the opportunity cost of producing other items such as textiles ____,leading to _ demand for foreign textiles.

As the FDA uses time and resources to ensure the safety of new drugs,___.