Question 1

Economics is the study of how society manages its

Accepted Answer

A)  limited wants and unlimited resources. 
B)  unlimited wants and unlimited resources. 
C)  limited wants and limited resources. 
D)  unlimited wants and limited resources. 
A)  limited wants and unlimited resources. 
B)  unlimited wants and unlimited resources. 
C)  limited wants and limited resources. 
D)  unlimited wants and limited resources.

Question 2

To promote good economic outcomes, policymakers should strive to enact policies that

Accepted Answer

A)  enhance productivity. 
B)  enhance individuals' market power. 
C)  result in a rapidly-growing quantity of money. 
D)  All of the above are correct. 
A)  enhance productivity. 
B)  enhance individuals' market power. 
C)  result in a rapidly-growing quantity of money. 
D)  All of the above are correct.

Question 3

When a government program is justified not on its merits but on the number of jobs it will create,

Accepted Answer

A)  the program is an efficient use of taxpayer dollars. 
B)  it should be approved only if the unemployment rate is low. 
C)  taxes should be raised to fund the program. 
D)  it is known as the "broken window fallacy." 
A)  the program is an efficient use of taxpayer dollars. 
B)  it should be approved only if the unemployment rate is low. 
C)  taxes should be raised to fund the program. 
D)  it is known as the "broken window fallacy."

Question 4

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Accepted Answer

A)  safety glass in all new cars. 
B)  seat belts in all new cars. 
C)  air bags in all new cars. 
D)  stricter drunk driving laws in all states. 
A)  safety glass in all new cars. 
B)  seat belts in all new cars. 
C)  air bags in all new cars. 
D)  stricter drunk driving laws in all states.

Question 5

Incomes of U.S. households in the 1970s and 1980s

Accepted Answer

A)  grew rapidly, due to the widespread success of labor unions in pushing up wages during those decades. 
B)  grew rapidly, due to several increases in the minimum wage during those decades. 
C)  grew rapidly, due to government policies that discouraged the importation of foreign products during those decades. 
D)  grew slowly, due to slow growth of the output of goods and services per hour of U.S. workers' time during those decades. 
A)  grew rapidly, due to the widespread success of labor unions in pushing up wages during those decades. 
B)  grew rapidly, due to several increases in the minimum wage during those decades. 
C)  grew rapidly, due to government policies that discouraged the importation of foreign products during those decades. 
D)  grew slowly, due to slow growth of the output of goods and services per hour of U.S. workers' time during those decades.

Question 6

The marginal benefit Kyra gets from eating a second sandwich is

Accepted Answer

A)  the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich. 
B)  the same as the total benefit she gets from eating two sandwiches. 
C)  less than the marginal cost of eating the second sandwich since she chose to eat the second sandwich. 
D)  the total benefit Kyra gets from eating three sandwiches minus the total benefit she gets from eating two sandwiches. 
A)  the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich. 
B)  the same as the total benefit she gets from eating two sandwiches. 
C)  less than the marginal cost of eating the second sandwich since she chose to eat the second sandwich. 
D)  the total benefit Kyra gets from eating three sandwiches minus the total benefit she gets from eating two sandwiches.

Question 7

Scenario 1-1
You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $8.00 on a ticket and $4.50 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 10 points.
-Refer to Scenario 1-1. What is your opportunity cost of going to the movies?

Accepted Answer

$12.50 and

Question 8

In the 1990s, inflation in the United States was

Accepted Answer

A)  very close to zero. 
B)  about 3 percent per year. 
C)  about 6 percent per year. 
D)  commonly referred to as "public enemy number one." 
A)  very close to zero. 
B)  about 3 percent per year. 
C)  about 6 percent per year. 
D)  commonly referred to as "public enemy number one."

Question 9

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 10

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 11

Annie is an excellent baker and Sam has a plentiful farm. If Sam trades eggs and butter to Annie for some of Annie's bread and pastries,

Accepted Answer

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

Question 12

Which of the following is correct?

Accepted Answer

A)  The word economy comes from the Greek word for "rational thinker." 
B)  Economists study the management of scarce resources. 
C)  Because economists believe that people pursue their best interests, they are not interested in how people interact. 
D)  All of the above are correct. 
A)  The word economy comes from the Greek word for "rational thinker." 
B)  Economists study the management of scarce resources. 
C)  Because economists believe that people pursue their best interests, they are not interested in how people interact. 
D)  All of the above are correct.

Question 13

Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.

Accepted Answer

A) True 
 B)False

Question 14

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

Accepted Answer

A)  more than $40, as the average benefit will exceed the marginal cost. 
B)  more than $40, as the marginal benefit will exceed the marginal cost. 
C)  more than $80, as the average benefit will exceed the marginal cost. 
D)  more than $80, as the marginal benefit will exceed the marginal cost. 
A)  more than $40, as the average benefit will exceed the marginal cost. 
B)  more than $40, as the marginal benefit will exceed the marginal cost. 
C)  more than $80, as the average benefit will exceed the marginal cost. 
D)  more than $80, as the marginal benefit will exceed the marginal cost.

Question 15

Guns and butter are used to represent the classic societal tradeoff between spending on

Accepted Answer

A)  durable and nondurable goods. 
B)  imports and exports. 
C)  national defense and consumer goods. 
D)  law enforcement and agriculture. 
A)  durable and nondurable goods. 
B)  imports and exports. 
C)  national defense and consumer goods. 
D)  law enforcement and agriculture.

Question 16

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 17

Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by

Accepted Answer

A)  a market economy. 
B)  a strong reliance on prices and individuals' self­interests. 
C)  a system of large privately-owned firms. 
D)  the actions of government central planners. 
A)  a market economy. 
B)  a strong reliance on prices and individuals' self­interests. 
C)  a system of large privately-owned firms. 
D)  the actions of government central planners.

Question 18

When a single person or small group) has the ability to influence market prices, there is

Accepted Answer

A)  competition. 
B)  market power. 
C)  an externality. 
D)  a lack of property rights. 
A)  competition. 
B)  market power. 
C)  an externality. 
D)  a lack of property rights.

Question 19

In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy?

Accepted Answer

A)  1 percent per year 
B)  2 percent per year 
C)  3 percent per year 
D)  4 percent per year 
A)  1 percent per year 
B)  2 percent per year 
C)  3 percent per year 
D)  4 percent per year

Question 20

Economists are particularly adept at understanding that people respond to

Accepted Answer

A)  laws. 
B)  incentives. 
C)  punishments more than rewards. 
D)  rewards more than punishments. 
A)  laws. 
B)  incentives. 
C)  punishments more than rewards. 
D)  rewards more than punishments.

Exam 1: Ten Principles of Economics

Economics is the study of how society manages its

To promote good economic outcomes, policymakers should strive to enact policies that

When a government program is justified not on its merits but on the number of jobs it will create,

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Incomes of U.S. households in the 1970s and 1980s

The marginal benefit Kyra gets from eating a second sandwich is

In the 1990s, inflation in the United States was

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

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

Annie is an excellent baker and Sam has a plentiful farm. If Sam trades eggs and butter to Annie for some of Annie's bread and pastries,

Which of the following is correct?

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

Guns and butter are used to represent the classic societal tradeoff between spending on

Trade

Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by

When a single person or small group) has the ability to influence market prices, there is

In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy?

Economists are particularly adept at understanding that people respond to

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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