Question 1

The term used to describe a situation in which markets do not allocate resources efficiently is

Accepted Answer

A)  economic meltdown. 
B)  market failure. 
C)  equilibrium. 
D)  the effect of the invisible hand. 
A)  economic meltdown. 
B)  market failure. 
C)  equilibrium. 
D)  the effect of the invisible hand.

Question 2

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

Accepted Answer

A)  to promote efficiency 
B)  to promote equality 
C)  to enforce property rights 
D)  to protect an industry from foreign competition 
A)  to promote efficiency 
B)  to promote equality 
C)  to enforce property rights 
D)  to protect an industry from foreign competition

Question 3

Tuition is the single-largest cost of attending college for most students.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)  Ted purchases a dilapidated house and cleans up the yard and exterior of the house. 
B)  Tim purchases an iPhone and downloads new apps. 
C)  Terri purchases a new SUV and drives it to work every day. 
D)  Thomas purchases a suit and wears it on his interviews. 
A)  Ted purchases a dilapidated house and cleans up the yard and exterior of the house. 
B)  Tim purchases an iPhone and downloads new apps. 
C)  Terri purchases a new SUV and drives it to work every day. 
D)  Thomas purchases a suit and wears it on his interviews.

Question 5

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 6

When computing the opportunity cost of attending a basketball game you should include

Accepted Answer

A)  the price you pay for the ticket and the value of your time. 
B)  the price you pay for the ticket, but not the value of your time. 
C)  the value of your time, but not the price you pay for the ticket. 
D)  neither the price of the ticket nor the value of your time. 
A)  the price you pay for the ticket and the value of your time. 
B)  the price you pay for the ticket, but not the value of your time. 
C)  the value of your time, but not the price you pay for the ticket. 
D)  neither the price of the ticket nor the value of your time.

Question 7

The business cycle is measured by the

Accepted Answer

A)  production of goods and services. 
B)  number of people employed. 
C)  the interest rate. 
D)  Both a and b are correct. 
A)  production of goods and services. 
B)  number of people employed. 
C)  the interest rate. 
D)  Both a and b are correct.

Question 8

The tradeoff between inflation and unemployment

Accepted Answer

A)  implies that policies designed to reduce unemployment also reduce inflation. 
B)  was eliminated by improved economic policies in the 1900s. 
C)  is a long-run tradeoff, persisting for decades, according to most economists. 
D)  None of the above are correct. 
A)  implies that policies designed to reduce unemployment also reduce inflation. 
B)  was eliminated by improved economic policies in the 1900s. 
C)  is a long-run tradeoff, persisting for decades, according to most economists. 
D)  None of the above are correct.

Question 9

The word "economy" comes from the Greek word oikonomos, which means

Accepted Answer

A)  "environment." 
B)  "production." 
C)  "one who manages a household." 
D)  "one who makes decisions." 
A)  "environment." 
B)  "production." 
C)  "one who manages a household." 
D)  "one who makes decisions."

Question 10

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

Accepted Answer

A)  This loss of jobs has been detrimental to our economy. 
B)  The government should provide subsidies to encourage more people to become farmers. 
C)  This reduction in the number of farmers explains the increase in the price of food. 
D)  This is progress because freed-up labor is used to produce other goods. 
A)  This loss of jobs has been detrimental to our economy. 
B)  The government should provide subsidies to encourage more people to become farmers. 
C)  This reduction in the number of farmers explains the increase in the price of food. 
D)  This is progress because freed-up labor is used to produce other goods.

Question 11

A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company. This instance serves as an example of

Accepted Answer

A)  market power. 
B)  inefficient trade. 
C)  inadequate enforcement of property rights. 
D)  the invisible hand at work. 
A)  market power. 
B)  inefficient trade. 
C)  inadequate enforcement of property rights. 
D)  the invisible hand at work.

Question 12

In a particular country in 1998, the average worker needed to work 40 hours to produce 100 units of output. In that same country in 2008, the average worker needed to work 36 hours to produce 72 units of output. In that country, the productivity of the average worker

Accepted Answer

A)  decreased between 1998 and 2008, so we would expect the standard of living to have decreased accordingly. 
B)  increased between 1998 and 2008, so we would expect the standard of living to have increased accordingly. 
C)  decreased between 1998 and 2008, so we would expect inflation to have decreased accordingly. 
D)  increased between 1998 and 2008, so we would expect inflation to have increased accordingly. 
A)  decreased between 1998 and 2008, so we would expect the standard of living to have decreased accordingly. 
B)  increased between 1998 and 2008, so we would expect the standard of living to have increased accordingly. 
C)  decreased between 1998 and 2008, so we would expect inflation to have decreased accordingly. 
D)  increased between 1998 and 2008, so we would expect inflation to have increased accordingly.

Question 13

Which of the following is not an example of the opportunity cost of going to school?

Accepted Answer

A)  The money a student could have earned by working if he had not gone to college. 
B)  The nap a student could have enjoyed if he had not attended class. 
C)  The party a student could have enjoyed if he had not stayed in to study for his exam. 
D)  The money a student spends on rent for his apartment while attending school. 
A)  The money a student could have earned by working if he had not gone to college. 
B)  The nap a student could have enjoyed if he had not attended class. 
C)  The party a student could have enjoyed if he had not stayed in to study for his exam. 
D)  The money a student spends on rent for his apartment while attending school.

Question 14

Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the principle that

Accepted Answer

A)  trade can make everyone better off. 
B)  people face trade-offs. 
C)  rational people think at the margin. 
D)  people respond to incentives. 
A)  trade can make everyone better off. 
B)  people face trade-offs. 
C)  rational people think at the margin. 
D)  people respond to incentives.

Question 15

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is

Accepted Answer

A)  the improvement in his grades from studying for the hour. 
B)  the improvement in his grades from studying minus the enjoyment of watching TV. 
C)  the enjoyment he would have received if he had watched TV with his friends. 
D)  zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV. 
A)  the improvement in his grades from studying for the hour. 
B)  the improvement in his grades from studying minus the enjoyment of watching TV. 
C)  the enjoyment he would have received if he had watched TV with his friends. 
D)  zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV.

Question 16

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 17

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

Accepted Answer

A)  sell the ticket because the marginal benefit exceeds the marginal cost. 
B)  sell the ticket because the marginal benefit exceeds the average cost. 
C)  not sell the ticket because the marginal benefit is less than the marginal cost. 
D)  not sell the ticket because the marginal benefit is less than the average cost. 
A)  sell the ticket because the marginal benefit exceeds the marginal cost. 
B)  sell the ticket because the marginal benefit exceeds the average cost. 
C)  not sell the ticket because the marginal benefit is less than the marginal cost. 
D)  not sell the ticket because the marginal benefit is less than the average cost.

Question 18

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

Accepted Answer

A)  people respond to incentives. 
B)  rational people think at the margin. 
C)  people face tradeoffs. 
D)  improvements in efficiency sometimes come at the expense of equality. 
A)  people respond to incentives. 
B)  rational people think at the margin. 
C)  people face tradeoffs. 
D)  improvements in efficiency sometimes come at the expense of equality.

Question 19

The property of society getting the most it can from its scarce resources is called

Accepted Answer

A)  efficiency. 
B)  equality. 
C)  externality. 
D)  productivity. 
A)  efficiency. 
B)  equality. 
C)  externality. 
D)  productivity.

Question 20

In the short run, an increase in the money supply is likely to lead to

Accepted Answer

A)  lower unemployment and lower inflation. 
B)  lower unemployment and higher inflation. 
C)  higher unemployment and lower inflation. 
D)  higher unemployment and higher inflation. 
A)  lower unemployment and lower inflation. 
B)  lower unemployment and higher inflation. 
C)  higher unemployment and lower inflation. 
D)  higher unemployment and higher inflation.

The term used to describe a situation in which markets do not allocate resources efficiently is

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

Tuition is the single-largest cost of attending college for most students.

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

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?

When computing the opportunity cost of attending a basketball game you should include

The business cycle is measured by the

The tradeoff between inflation and unemployment

The word "economy" comes from the Greek word oikonomos, which means

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company. This instance serves as an example of

In a particular country in 1998, the average worker needed to work 40 hours to produce 100 units of output. In that same country in 2008, the average worker needed to work 36 hours to produce 72 units of output. In that country, the productivity of the average worker

Which of the following is not an example of the opportunity cost of going to school?

Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the principle that

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is

Market power refers to the

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

The property of society getting the most it can from its scarce resources is called

In the short run, an increase in the money supply is likely to lead to

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

The term used to describe a situation in which markets do not allocate resources efficiently is

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

Tuition is the single-largest cost of attending college for most students.

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

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?

When computing the opportunity cost of attending a basketball game you should include

The business cycle is measured by the

The tradeoff between inflation and unemployment

The word "economy" comes from the Greek word oikonomos, which means

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company. This instance serves as an example of

In a particular country in 1998, the average worker needed to work 40 hours to produce 100 units of output. In that same country in 2008, the average worker needed to work 36 hours to produce 72 units of output. In that country, the productivity of the average worker

Which of the following is not an example of the opportunity cost of going to school?

Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the principle that

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is

Market power refers to the

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

The property of society getting the most it can from its scarce resources is called

In the short run, an increase in the money supply is likely to lead to

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