Question 1

In a centrally-planned economy, economic activity is guided by .

Accepted Answer

The answer of In a centrally-planned economy, economic activity is...

Question 2

President Gerald Ford referred to inflation as

Accepted Answer

A)  a blight on our nation's economy. 
B)  a necessary evil to combat high unemployment. 
C)  public enemy number one. 
D)  a fly in the ointment. 
A)  a blight on our nation's economy. 
B)  a necessary evil to combat high unemployment. 
C)  public enemy number one. 
D)  a fly in the ointment.

Question 3

Which of the following statements about market economies is correct?

Accepted Answer

A)  In a market economy, no one is looking out for the economic well-being of society as a whole. 
B)  Market economies are characterized by decentralized decision making and self-interested decision makers. 
C)  Market economies have proven remarkably successful in promoting overall economic well-being. 
D)  All of the above are correct. 
A)  In a market economy, no one is looking out for the economic well-being of society as a whole. 
B)  Market economies are characterized by decentralized decision making and self-interested decision makers. 
C)  Market economies have proven remarkably successful in promoting overall economic well-being. 
D)  All of the above are correct.

Question 4

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 5

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Accepted Answer

A)  For the first 24 houses, the average cost per house was $205,000. 
B)  The marginal cost of the 25th house, if it is built, will equal $250,000. 
C)  If the company can sell the 25th house for at least $202,000, then it should build it. 
D)  All of the above are correct. 
A)  For the first 24 houses, the average cost per house was $205,000. 
B)  The marginal cost of the 25th house, if it is built, will equal $250,000. 
C)  If the company can sell the 25th house for at least $202,000, then it should build it. 
D)  All of the above are correct.

Question 6

When Ukraine trades with Italy,

Accepted Answer

A)  both countries are likely made better off. 
B)  only Italy benefits since Ukraine can produce all goods at a higher level of quality than Italy. 
C)  only Ukraine benefits since Italy's low wages guarantee that Italian firms will be profitable regardless of trade. 
D)  neither country will benefit since Ukraine is more efficient than Italy in the production of all goods. 
A)  both countries are likely made better off. 
B)  only Italy benefits since Ukraine can produce all goods at a higher level of quality than Italy. 
C)  only Ukraine benefits since Italy's low wages guarantee that Italian firms will be profitable regardless of trade. 
D)  neither country will benefit since Ukraine is more efficient than Italy in the production of all goods.

Question 7

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

Accepted Answer

A) True 
 B)False

Question 8

Variations in the standard of living across countries are due almost entirely to differences in each nation's total output of goods and services.

Accepted Answer

A) True 
 B)False

Question 9

Air pollution from burning fossil fuels causes damages to crops and public health. 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 10

The economy of the former Soviet Union is best described as a

Accepted Answer

A)  primitive economy. 
B)  market economy. 
C)  hybrid economy. 
D)  centrally-planned economy. 
A)  primitive economy. 
B)  market economy. 
C)  hybrid economy. 
D)  centrally-planned economy.

Question 11

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 12

Which of the following is the most correct statement about the relationship between inflation and unemployment?

Accepted Answer

A)  In the short run, falling inflation is associated with falling unemployment. 
B)  In the short run, falling inflation is associated with rising unemployment. 
C)  In the long run, falling inflation is associated with falling unemployment. 
D)  In the long run, falling inflation is associated with rising unemployment. 
A)  In the short run, falling inflation is associated with falling unemployment. 
B)  In the short run, falling inflation is associated with rising unemployment. 
C)  In the long run, falling inflation is associated with falling unemployment. 
D)  In the long run, falling inflation is associated with rising unemployment.

Question 13

The "invisible hand" refers to

Accepted Answer

A)  how central planners made economic decisions. 
B)  how the decisions of households and firms lead to desirable market outcomes. 
C)  the control that large firms have over the economy. 
D)  government regulations without which the economy would be less efficient. 
A)  how central planners made economic decisions. 
B)  how the decisions of households and firms lead to desirable market outcomes. 
C)  the control that large firms have over the economy. 
D)  government regulations without which the economy would be less efficient.

Question 14

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

Accepted Answer

A)  $99,000. 
B)  $103,000. 
C)  $108,000. 
D)  $121,000. 
A)  $99,000. 
B)  $103,000. 
C)  $108,000. 
D)  $121,000.

Question 15

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 16

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

Accepted Answer

A) True 
 B)False

Question 17

Efficiency

Accepted Answer

A)  and equality both refer to how much a society can produce with its resources. 
B)  and equality both refer to how fairly the benefits from using resources are distributed between members of a society. 
C)  refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society. 
D)  refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources 
A)  and equality both refer to how much a society can produce with its resources. 
B)  and equality both refer to how fairly the benefits from using resources are distributed between members of a society. 
C)  refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society. 
D)  refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources

Question 18

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Accepted Answer

A)  The marginal benefit of going to Cancun increases. 
B)  The marginal cost of going to Cancun decreases. 
C)  The marginal benefit of going to Ft. Lauderdale decreases. 
D)  The marginal cost of going to Ft. Lauderdale decreases. 
A)  The marginal benefit of going to Cancun increases. 
B)  The marginal cost of going to Cancun decreases. 
C)  The marginal benefit of going to Ft. Lauderdale decreases. 
D)  The marginal cost of going to Ft. Lauderdale decreases.

Question 19

Economists study how people make decisions.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 1: Ten Principles of Economics

In a centrally-planned economy, economic activity is guided by .

President Gerald Ford referred to inflation as

Which of the following statements about market economies is correct?

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

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

When Ukraine trades with Italy,

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

Variations in the standard of living across countries are due almost entirely to differences in each nation's total output of goods and services.

Air pollution from burning fossil fuels causes damages to crops and public health. This is an example of

The economy of the former Soviet Union is best described as a

Which of the following is the most correct statement about the relationship between inflation and unemployment?

The "invisible hand" refers to

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

Large or persistent inflation is almost always caused by

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

Efficiency

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Economists study how people make decisions.

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

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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