Question 1

Which of the following is an example of something economists study?

Accepted Answer

A)  Mitch chooses to work overtime to earn extra income for his family. 
B)  Megan sells her physics textbook from last semester to her roommate for half the price of a new textbook. 
C)  The unemployment rate in the United States has fallen by two percentage points in the last few years. 
D)  All of the above are correct. 
A)  Mitch chooses to work overtime to earn extra income for his family. 
B)  Megan sells her physics textbook from last semester to her roommate for half the price of a new textbook. 
C)  The unemployment rate in the United States has fallen by two percentage points in the last few years. 
D)  All of the above are correct.

Question 2

US citizens have better nutrition, better healthcare, and a longer life expectancy than citizens of Ghana. Which of the following conclusions can be drawn from this statement?

Accepted Answer

A)  Average income in the US is higher than the average income in Ghana. 
B)  The US has a higher standard of living than Ghana. 
C)  Productivity in the US is higher than productivity in Ghana. 
D)  All of the above are correct. 
A)  Average income in the US is higher than the average income in Ghana. 
B)  The US has a higher standard of living than Ghana. 
C)  Productivity in the US is higher than productivity in Ghana. 
D)  All of the above are correct.

Question 3

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 4

For which of the following individuals would the opportunity cost of going to college be highest?

Accepted Answer

A)  a promising young mathematician who will command a high salary once she earns her college degree 
B)  a student with average grades who has never held a job 
C)  a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree 
D)  a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball 
A)  a promising young mathematician who will command a high salary once she earns her college degree 
B)  a student with average grades who has never held a job 
C)  a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree 
D)  a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball

Question 5

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor.

Accepted Answer

A)  Both senators' arguments are primarily about equality. 
B)  Both senators' arguments are primarily about efficiency. 
C)  Senator Jackson's argument is primarily about equality, while Senator Feldman's argument is primarily about efficiency. 
D)  Senator Jackson's argument is primarily about efficiency, while Senator Feldman's argument is primarily about equality. 
A)  Both senators' arguments are primarily about equality. 
B)  Both senators' arguments are primarily about efficiency. 
C)  Senator Jackson's argument is primarily about equality, while Senator Feldman's argument is primarily about efficiency. 
D)  Senator Jackson's argument is primarily about efficiency, while Senator Feldman's argument is primarily about equality.

Question 6

When society requires that firms reduce pollution, there is

Accepted Answer

A)  a tradeoff because of reduced incomes to the firms' owners and workers. 
B)  a tradeoff only if some firms are forced to close. 
C)  no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. 
D)  no tradeoff, since everyone benefits from reduced pollution. 
A)  a tradeoff because of reduced incomes to the firms' owners and workers. 
B)  a tradeoff only if some firms are forced to close. 
C)  no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. 
D)  no tradeoff, since everyone benefits from reduced pollution.

Question 7

Prices direct economic activity in a market economy by

Accepted Answer

A)  influencing the actions of buyers and sellers. 
B)  reducing scarcity of the goods and services produced. 
C)  eliminating the need for government intervention. 
D)  allocating goods and services in the most equitable way. 
A)  influencing the actions of buyers and sellers. 
B)  reducing scarcity of the goods and services produced. 
C)  eliminating the need for government intervention. 
D)  allocating goods and services in the most equitable way.

Question 8

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 9

In the long run the primary effect of increasing the quantity of money is higher prices.

Accepted Answer

A) True 
 B)False

Question 10

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

Whatever must be given up to obtain some

Question 11

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 12

Under what conditions might government intervention in a market economy improve the economy's performance?

Accepted Answer

If there is a market failure, such as an

Question 13

Suppose after graduating from college you get a job working at a bank earning $30,000 per year. After two years of working at the bank earning the same salary, you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank. Which of the following should not be included in a calculation of your opportunity cost?

Accepted Answer

A)  the cost of tuition and books to attend the graduate program 
B)  the $30,000 salary that you could have earned if you retained your job at the bank 
C)  the $45,000 salary that you will be able to earn after having completed your graduate program 
D)  the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank 
A)  the cost of tuition and books to attend the graduate program 
B)  the $30,000 salary that you could have earned if you retained your job at the bank 
C)  the $45,000 salary that you will be able to earn after having completed your graduate program 
D)  the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank

Question 14

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Accepted Answer

A) True 
 B)False

Question 15

Central planning refers to

Accepted Answer

A)  markets guiding economic activity. Today many countries that had this system have abandoned it. 
B)  markets guiding economic activity. Today many countries that did not have this system have implemented it. 
C)  government guiding economic activity. Today many countries that had this system have abandoned it. 
D)  government guiding economic activity. Today many countries that did not have this system have implemented it. 
A)  markets guiding economic activity. Today many countries that had this system have abandoned it. 
B)  markets guiding economic activity. Today many countries that did not have this system have implemented it. 
C)  government guiding economic activity. Today many countries that had this system have abandoned it. 
D)  government guiding economic activity. Today many countries that did not have this system have implemented it.

Question 16

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 17

The irregular and largely unpredictable fluctuations in economic activity are called

Accepted Answer

A)  market failure. 
B)  business cycle. 
C)  inflation. 
D)  unemployment. 
A)  market failure. 
B)  business cycle. 
C)  inflation. 
D)  unemployment.

Question 18

When calculating the cost of college, which of the following should you probably not include?

Accepted Answer

A)  The cost of tuition 
B)  The cost of books required for college classes 
C)  The income you would have earned had you not gone to college 
D)  The cost of rent for your off-campus apartment. 
A)  The cost of tuition 
B)  The cost of books required for college classes 
C)  The income you would have earned had you not gone to college 
D)  The cost of rent for your off-campus apartment.

Question 19

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

Accepted Answer

A)  automakers 
B)  pedestrians 
C)  drivers 
D)  owners of collision-repair shops 
A)  automakers 
B)  pedestrians 
C)  drivers 
D)  owners of collision-repair shops

Question 20

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Accepted Answer

In Germany. Almost all variati

Exam 1: Ten Principles of Economics

Which of the following is an example of something economists study?

US citizens have better nutrition, better healthcare, and a longer life expectancy than citizens of Ghana. Which of the following conclusions can be drawn from this statement?

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

For which of the following individuals would the opportunity cost of going to college be highest?

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor.

When society requires that firms reduce pollution, there is

Prices direct economic activity in a market economy by

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?

In the long run the primary effect of increasing the quantity of money is higher prices.

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

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

Under what conditions might government intervention in a market economy improve the economy's performance?

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Central planning refers to

The irregular and largely unpredictable fluctuations in economic activity are called

When calculating the cost of college, which of the following should you probably not include?

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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