Question 1

College-age athletes who drop out of college to play professional sports

Accepted Answer

A)  are not rational decision makers. 
B)  are well aware that their opportunity cost of attending college is very high. 
C)  are concerned more about present circumstances than their future. 
D)  underestimate the value of a college education. 
A)  are not rational decision makers. 
B)  are well aware that their opportunity cost of attending college is very high. 
C)  are concerned more about present circumstances than their future. 
D)  underestimate the value of a college education.

Question 2

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 3

Germany could have avoided the high inflation that it experienced in the 1920s by

Accepted Answer

A)  not directing so many of its resources toward preparation for World War II. 
B)  not increasing taxes so much on the German middle class. 
C)  not allowing the quantity of money to increase so rapidly. 
D)  using government policies to stimulate the economy more so than what was done. 
A)  not directing so many of its resources toward preparation for World War II. 
B)  not increasing taxes so much on the German middle class. 
C)  not allowing the quantity of money to increase so rapidly. 
D)  using government policies to stimulate the economy more so than what was done.

Question 4

The "broken window fallacy"

Accepted Answer

A)  explains why inflation is so high. 
B)  is a justification for the government to print more money. 
C)  is illustrated when a government program is justified not on its merits but on the number of jobs it will create. 
D)  has nothing to do with public policy. 
A)  explains why inflation is so high. 
B)  is a justification for the government to print more money. 
C)  is illustrated when a government program is justified not on its merits but on the number of jobs it will create. 
D)  has nothing to do with public policy.

Question 5

Inflation is defined as

Accepted Answer

A)  a period of rising productivity in the economy. 
B)  a period of rising income in the economy. 
C)  an increase in the overall level of output in the economy. 
D)  an increase in the overall level of prices in the economy. 
A)  a period of rising productivity in the economy. 
B)  a period of rising income in the economy. 
C)  an increase in the overall level of output in the economy. 
D)  an increase in the overall level of prices in the economy.

Question 6

A rational decision maker takes an action only if the

Accepted Answer

A)  marginal benefit is less than the marginal cost. 
B)  marginal benefit is greater than the marginal cost. 
C)  average benefit is greater than the average cost. 
D)  marginal benefit is greater than both the average cost and the marginal cost. 
A)  marginal benefit is less than the marginal cost. 
B)  marginal benefit is greater than the marginal cost. 
C)  average benefit is greater than the average cost. 
D)  marginal benefit is greater than both the average cost and the marginal cost.

Question 7

What you give up to obtain an item is called your

Accepted Answer

A)  opportunity cost. 
B)  explicit cost. 
C)  monetary cost. 
D)  direct cost. 
A)  opportunity cost. 
B)  explicit cost. 
C)  monetary cost. 
D)  direct cost.

Question 8

Which of the following is a subject that economists study?

Accepted Answer

A)  the growth in average income 
B)  the fraction of the population that cannot find work 
C)  the rate at which prices are rising 
D)  All of the above are correct. 
A)  the growth in average income 
B)  the fraction of the population that cannot find work 
C)  the rate at which prices are rising 
D)  All of the above are correct.

Question 9

Economists use the word equality to describe a situation in which

Accepted Answer

A)  each member of society has the same income. 
B)  each member of society has access to abundant quantities of goods and services, regardless of his or her income. 
C)  society is getting the maximum benefits from its scarce resources. 
D)  society's resources are used efficiently. 
A)  each member of society has the same income. 
B)  each member of society has access to abundant quantities of goods and services, regardless of his or her income. 
C)  society is getting the maximum benefits from its scarce resources. 
D)  society's resources are used efficiently.

Question 10

Economists use the term to refer to the ability of a single person or a small group) to have a substantial influence on market prices.

Accepted Answer

The answer of Economists use the term to refer to...

Question 11

When the government prevents prices from adjusting naturally to supply and demand,

Accepted Answer

A)  it equates the amount buyers want to buy with the amount sellers want to sell. 
B)  it adversely affects the allocation of resources. 
C)  it improves equality and efficiency. 
D)  it improves efficiency but reduces equality. 
A)  it equates the amount buyers want to buy with the amount sellers want to sell. 
B)  it adversely affects the allocation of resources. 
C)  it improves equality and efficiency. 
D)  it improves efficiency but reduces equality.

Question 12

The primary determinant of a country's standard of living is

Accepted Answer

A)  the country's ability to prevail over foreign competition. 
B)  the country's ability to produce goods and services. 
C)  the total supply of money in the economy. 
D)  the average age of the country's labor force. 
A)  the country's ability to prevail over foreign competition. 
B)  the country's ability to produce goods and services. 
C)  the total supply of money in the economy. 
D)  the average age of the country's labor force.

Question 13

Which of the following words and phrases best captures the notion of equality?

Accepted Answer

A)  minimum waste 
B)  maximum benefit 
C)  sameness 
D)  efficiency 
A)  minimum waste 
B)  maximum benefit 
C)  sameness 
D)  efficiency

Question 14

Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?

Accepted Answer

A)  People respond to incentives 
B)  Rational people think at the margin 
C)  Trade can make everyone better off 
D)  Markets are usually a good way to organize economic activity 
A)  People respond to incentives 
B)  Rational people think at the margin 
C)  Trade can make everyone better off 
D)  Markets are usually a good way to organize economic activity

Question 15

Almost all variation in living standards is attributable to differences in countries'

Accepted Answer

A)  population growth rates. 
B)  productivity. 
C)  systems of public education. 
D)  taxes. 
A)  population growth rates. 
B)  productivity. 
C)  systems of public education. 
D)  taxes.

Question 16

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Accepted Answer

A) True 
 B)False

Question 17

U.S. laws requiring that drivers wear seat belts have resulted in

Accepted Answer

A)  a reduction in both driver deaths and pedestrian deaths. 
B)  fewer accidents and fewer deaths per accident. 
C)  fewer driver deaths, fewer accidents and fewer pedestrian deaths. 
D)  little change in the number of driver deaths, but more accidents and more pedestrian deaths. 
A)  a reduction in both driver deaths and pedestrian deaths. 
B)  fewer accidents and fewer deaths per accident. 
C)  fewer driver deaths, fewer accidents and fewer pedestrian deaths. 
D)  little change in the number of driver deaths, but more accidents and more pedestrian deaths.

Question 18

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 19

The mainstream view among economists is that

Accepted Answer

A)  society faces a tradeoff between unemployment and inflation, but only in the short run. 
B)  society faces a tradeoff between unemployment and inflation, but only in the long run. 
C)  society faces a tradeoff between unemployment and inflation, both in the short run and in the long run. 
D)  no tradeoff exists between unemployment and inflation, either in the short run or in the long run. 
A)  society faces a tradeoff between unemployment and inflation, but only in the short run. 
B)  society faces a tradeoff between unemployment and inflation, but only in the long run. 
C)  society faces a tradeoff between unemployment and inflation, both in the short run and in the long run. 
D)  no tradeoff exists between unemployment and inflation, either in the short run or in the long run.

Question 20

The term refers to a small incremental adjustment to an existing plan of action.

Accepted Answer

The answer of The term refers to a small incremental...

Exam 1: Ten Principles of Economics

College-age athletes who drop out of college to play professional sports

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Germany could have avoided the high inflation that it experienced in the 1920s by

The "broken window fallacy"

Inflation is defined as

A rational decision maker takes an action only if the

What you give up to obtain an item is called your

Which of the following is a subject that economists study?

Economists use the word equality to describe a situation in which

Economists use the term to refer to the ability of a single person or a small group) to have a substantial influence on market prices.

When the government prevents prices from adjusting naturally to supply and demand,

The primary determinant of a country's standard of living is

Which of the following words and phrases best captures the notion of equality?

Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?

Almost all variation in living standards is attributable to differences in countries'

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

U.S. laws requiring that drivers wear seat belts have resulted in

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

The mainstream view among economists is that

The term refers to a small incremental adjustment to an existing plan of action.

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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