Question 1

Which of the following can policy do?

Accepted Answer

A)  alter incentives 
B)  alter trade-offs 
C)  change opportunity costs 
D)  All of the above are correct. 
A)  alter incentives 
B)  alter trade-offs 
C)  change opportunity costs 
D)  All of the above are correct.

Question 2

Trade

Accepted Answer

A)  allows specialization, which increases costs. 
B)  allows specialization, which reduces costs. 
C)  reduces specialization, which increases costs. 
D)  reduces specialization, which reduces costs. 
A)  allows specialization, which increases costs. 
B)  allows specialization, which reduces costs. 
C)  reduces specialization, which increases costs. 
D)  reduces specialization, which reduces costs.

Question 3

Benefits from trade would not include

Accepted Answer

A)  the ability of people and nations to specialize. 
B)  a greater variety of goods and services becoming available. 
C)  less competition. 
D)  lower prices. 
A)  the ability of people and nations to specialize. 
B)  a greater variety of goods and services becoming available. 
C)  less competition. 
D)  lower prices.

Question 4

Large or persistent inflation is almost always caused by

Accepted Answer

A)  excessive government spending. 
B)  excessive growth in the quantity of money. 
C)  foreign competition. 
D)  higher-than-normal levels of productivity. 
A)  excessive government spending. 
B)  excessive growth in the quantity of money. 
C)  foreign competition. 
D)  higher-than-normal levels of productivity.

Question 5

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

A)  the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B)  the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C)  producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D)  water prices are held artificially low by governments, since water is necessary for life. 
A)  the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B)  the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C)  producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D)  water prices are held artificially low by governments, since water is necessary for life.

Question 6

For which of the following problems can well-designed public policy enhance economic efficiency?

Accepted Answer

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

Question 7

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

Accepted Answer

A)  intended to reduce unemployment. 
B)  may lead to excessive inflation over time. 
C)  resulted in higher taxes and an increased supply of money. 
D)  Both a and b are correct. 
A)  intended to reduce unemployment. 
B)  may lead to excessive inflation over time. 
C)  resulted in higher taxes and an increased supply of money. 
D)  Both a and b are correct.

Question 8

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Accepted Answer

A)  inflation 
B)  unemployment 
C)  both inflation and unemployment 
D)  neither inflation nor unemployment 
A)  inflation 
B)  unemployment 
C)  both inflation and unemployment 
D)  neither inflation nor unemployment

Question 9

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A)  command economy. 
B)  centrally-planned economy. 
C)  market economy. 
D)  All of the above are correct. 
A)  command economy. 
B)  centrally-planned economy. 
C)  market economy. 
D)  All of the above are correct.

Question 10

Water pollution from pulp and paper mills harms plants, animals, and humans. This is an example of

Accepted Answer

A)  a market failure caused by an externality. 
B)  a market failure caused by market power. 
C)  a market failure caused by equality. 
D)  There is no market failure in this case. 
A)  a market failure caused by an externality. 
B)  a market failure caused by market power. 
C)  a market failure caused by equality. 
D)  There is no market failure in this case.

Question 11

It costs a meat-processing company $50,000 to produce 5,000 pounds of steak. The company's cost will be $50,009 if it produces an additional pound of steak. If the company produces 5,001 pounds of steak then

Accepted Answer

A)  its average cost is greater than its marginal cost. 
B)  its average cost and its marginal cost are equal. 
C)  its average cost is less than its marginal cost. 
D)  there is insufficient information to compute average and marginal costs. 
A)  its average cost is greater than its marginal cost. 
B)  its average cost and its marginal cost are equal. 
C)  its average cost is less than its marginal cost. 
D)  there is insufficient information to compute average and marginal costs.

Question 12

A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Accepted Answer

A)  Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen. 
B)  Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen. 
C)  Throw the bagels away and produce 8 fewer dozen bagels tomorrow. 
D)  Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day. 
A)  Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen. 
B)  Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen. 
C)  Throw the bagels away and produce 8 fewer dozen bagels tomorrow. 
D)  Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day.

Question 13

What does the term "marginal change" mean?

Accepted Answer

A small incremental

Question 14

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Accepted Answer

A)  only Dale is made better off by trade. 
B)  only Terrence is made better off by trade. 
C)  both Dale and Terrence are made better off by trade. 
D)  neither Dale nor Terrence are made better off by trade. 
A)  only Dale is made better off by trade. 
B)  only Terrence is made better off by trade. 
C)  both Dale and Terrence are made better off by trade. 
D)  neither Dale nor Terrence are made better off by trade.

Question 15

The marginal benefit Susie gets from purchasing a third pair of gloves is

Accepted Answer

A)  the same as the total benefit she gets from purchasing three pairs of gloves. 
B)  more than the marginal cost of purchasing the third pair of gloves. 
C)  the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two pairs of gloves. 
D)  the total benefit she gets from purchasing four pairs of gloves minus the total benefit she gets from purchasing three pairs of gloves. 
A)  the same as the total benefit she gets from purchasing three pairs of gloves. 
B)  more than the marginal cost of purchasing the third pair of gloves. 
C)  the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two pairs of gloves. 
D)  the total benefit she gets from purchasing four pairs of gloves minus the total benefit she gets from purchasing three pairs of gloves.

Question 16

The principle that "people face tradeoffs" applies to

Accepted Answer

A)  individuals. 
B)  families. 
C)  societies. 
D)  All of the above are correct. 
A)  individuals. 
B)  families. 
C)  societies. 
D)  All of the above are correct.

Question 17

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

Accepted Answer

A)  in Brazil. Most variation in the standard of living across countries is due to differences in productivity. 
B)  in Brazil. Differences in productivity explain very little of the variation in the standard of living across countries. 
C)  in Peru. Most variation in the standard of living across countries is due to differences in productivity. 
D)  in Peru. Differences in productivity explain very little of the variation in the standard of living across countries. 
A)  in Brazil. Most variation in the standard of living across countries is due to differences in productivity. 
B)  in Brazil. Differences in productivity explain very little of the variation in the standard of living across countries. 
C)  in Peru. Most variation in the standard of living across countries is due to differences in productivity. 
D)  in Peru. Differences in productivity explain very little of the variation in the standard of living across countries.

Question 18

If Switzerland chooses to engage in trade, it

Accepted Answer

A)  will only benefit if it trades with countries that produce goods Switzerland cannot produce. 
B)  cannot benefit if it trades with less developed countries. 
C)  should first attempt to produce the good itself. 
D)  can benefit by trading with any other country. 
A)  will only benefit if it trades with countries that produce goods Switzerland cannot produce. 
B)  cannot benefit if it trades with less developed countries. 
C)  should first attempt to produce the good itself. 
D)  can benefit by trading with any other country.

Question 19

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 20

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Accepted Answer

A)  the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs. 
B)  the benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs. 
C)  the benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs. 
D)  the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs. 
A)  the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs. 
B)  the benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs. 
C)  the benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs. 
D)  the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs.

Which of the following can policy do?

Trade

Benefits from trade would not include

Large or persistent inflation is almost always caused by

People are willing to pay more for a diamond than for a bottle of water because

For which of the following problems can well-designed public policy enhance economic efficiency?

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

The decisions of firms and households are guided by prices and self-interest in a

Water pollution from pulp and paper mills harms plants, animals, and humans. This is an example of

It costs a meat-processing company $50,000 to produce 5,000 pounds of steak. The company's cost will be $50,009 if it produces an additional pound of steak. If the company produces 5,001 pounds of steak then

What does the term "marginal change" mean?

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

The marginal benefit Susie gets from purchasing a third pair of gloves is

The principle that "people face tradeoffs" applies to

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

If Switzerland chooses to engage in trade, it

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

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 1: Ten Principles of Economics

Which of the following can policy do?

Trade

Benefits from trade would not include

Large or persistent inflation is almost always caused by

People are willing to pay more for a diamond than for a bottle of water because

For which of the following problems can well-designed public policy enhance economic efficiency?

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

The decisions of firms and households are guided by prices and self-interest in a

Water pollution from pulp and paper mills harms plants, animals, and humans. This is an example of

It costs a meat-processing company $50,000 to produce 5,000 pounds of steak. The company's cost will be $50,009 if it produces an additional pound of steak. If the company produces 5,001 pounds of steak then

What does the term "marginal change" mean?

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

The marginal benefit Susie gets from purchasing a third pair of gloves is

The principle that "people face tradeoffs" applies to

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

If Switzerland chooses to engage in trade, it

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

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters