Question 1

Slow growth in US incomes during the 1970s and 1980s was primarily due to

Accepted Answer

A)  slow productivity growth in the US. 
B)  increased competition from Japan. 
C)  increased competition from European countries. 
D)  a rapid decrease in the quantity of money in the economy. 
A)  slow productivity growth in the US. 
B)  increased competition from Japan. 
C)  increased competition from European countries. 
D)  a rapid decrease in the quantity of money in the economy.

Question 2

Which of the following phrases best captures the notion of efficiency?

Accepted Answer

A)  absolute fairness 
B)  equal distribution 
C)  minimum waste 
D)  equitable outcome 
A)  absolute fairness 
B)  equal distribution 
C)  minimum waste 
D)  equitable outcome

Question 3

Both the production of goods and services and the unemployment rate are used to measure

Accepted Answer

A)  the business cycle. 
B)  productivity. 
C)  the interest rate. 
D)  inflation. 
A)  the business cycle. 
B)  productivity. 
C)  the interest rate. 
D)  inflation.

Question 4

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

Accepted Answer

A)  guns and butter. 
B)  efficiency and equality. 
C)  inflation and unemployment. 
D)  work and leisure. 
A)  guns and butter. 
B)  efficiency and equality. 
C)  inflation and unemployment. 
D)  work and leisure.

Question 5

To increase living standards, public policy should

Accepted Answer

A)  ensure that workers are well educated and have the necessary tools and technology. 
B)  make unemployment benefits more generous. 
C)  move workers into jobs directly from high school. 
D)  ensure a greater degree of equality, taking all income-earners into account. 
A)  ensure that workers are well educated and have the necessary tools and technology. 
B)  make unemployment benefits more generous. 
C)  move workers into jobs directly from high school. 
D)  ensure a greater degree of equality, taking all income-earners into account.

Question 6

Scenario 1-6
It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors.
-Refer to Scenario 1-6. A customer is willing to pay $60 for the 601st heart rate monitor. Should the company produce and sell it? Explain.

Accepted Answer

No, because the marg

Question 7

Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda

Accepted Answer

A)  can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas. 
B)  determines Bridget's willingness to pay for the third soda. 
C)  is likely different from the marginal benefit provided to Bridget by the second soda. 
D)  All of the above are correct. 
A)  can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas. 
B)  determines Bridget's willingness to pay for the third soda. 
C)  is likely different from the marginal benefit provided to Bridget by the second soda. 
D)  All of the above are correct.

Question 8

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

Accepted Answer

A)  more than $200. 
B)  more than $300. 
C)  more than $500. 
D)  This cannot be determined from the information given. 
A)  more than $200. 
B)  more than $300. 
C)  more than $500. 
D)  This cannot be determined from the information given.

Question 9

Market power and externalities are two possible causes of market failure.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements about trade is false?

Accepted Answer

A)  Trade increases competition. 
B)  With trade, one country wins and one country loses. 
C)  Bulgaria can benefit, potentially, from trade with any other country. 
D)  Trade allows people to buy a greater variety of goods and services at lower cost. 
A)  Trade increases competition. 
B)  With trade, one country wins and one country loses. 
C)  Bulgaria can benefit, potentially, from trade with any other country. 
D)  Trade allows people to buy a greater variety of goods and services at lower cost.

Question 11

A rational decisionmaker

Accepted Answer

A)  ignores marginal changes and focuses instead on "the big picture." 
B)  ignores the likely effects of government policies when he or she makes choices. 
C)  takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. 
D)  takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions. 
A)  ignores marginal changes and focuses instead on "the big picture." 
B)  ignores the likely effects of government policies when he or she makes choices. 
C)  takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. 
D)  takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.

Question 12

The term refers to the size of the economic pie, and the term refers to how the pie is divided.

Accepted Answer

efficiency

Question 13

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 14

Water pollution from pulp and paper mills harms plants, animals, and humans. 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 15

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Accepted Answer

A)  enhance equality. 
B)  reduce efficiency. 
C)  reduce the reward for working hard. 
D)  All of the above are correct. 
A)  enhance equality. 
B)  reduce efficiency. 
C)  reduce the reward for working hard. 
D)  All of the above are correct.

Question 16

Over the past century, the average income in the United States has risen about

Accepted Answer

A)  twofold. 
B)  fivefold. 
C)  eightfold. 
D)  tenfold. 
A)  twofold. 
B)  fivefold. 
C)  eightfold. 
D)  tenfold.

Question 17

The term "invisible hand" was coined by

Accepted Answer

A)  Adam Smith. 
B)  David Ricardo. 
C)  Karl Marx. 
D)  Benjamin Franklin. 
A)  Adam Smith. 
B)  David Ricardo. 
C)  Karl Marx. 
D)  Benjamin Franklin.

Question 18

A rationale for government involvement in a market economy is

Accepted Answer

A)  markets sometimes fail to produce a fair distribution of economic well-being. 
B)  markets sometimes fail to produce an efficient allocation of resources. 
C)  property rights have to be enforced. 
D)  All of the above are correct. 
A)  markets sometimes fail to produce a fair distribution of economic well-being. 
B)  markets sometimes fail to produce an efficient allocation of resources. 
C)  property rights have to be enforced. 
D)  All of the above are correct.

Question 19

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that

Accepted Answer

A)  trade can make everyone better off. 
B)  people face trade-offs. 
C)  rational people think at the margin. 
D)  decisions made at the margin are not particularly important. 
A)  trade can make everyone better off. 
B)  people face trade-offs. 
C)  rational people think at the margin. 
D)  decisions made at the margin are not particularly important.

Question 20

Scenario 1-2
Suppose that you have a choice between going to the movies with a friend for two hours or working at your job. If you go to the movies, you will spend $7 on a ticket and $5 on popcorn. If you choose to work, you will earn $10 an hour.
-Refer to Scenario 1-2. What is your opportunity cost of working?

Accepted Answer

The enjoyment you wo

Exam 1: Ten Principles of Economics

Slow growth in US incomes during the 1970s and 1980s was primarily due to

Which of the following phrases best captures the notion of efficiency?

Both the production of goods and services and the unemployment rate are used to measure

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

To increase living standards, public policy should

Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda

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

Market power and externalities are two possible causes of market failure.

Which of the following statements about trade is false?

A rational decisionmaker

The term refers to the size of the economic pie, and the term refers to how the pie is divided.

The business cycle is measured by the

Water pollution from pulp and paper mills harms plants, animals, and humans. This is an example of

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Over the past century, the average income in the United States has risen about

The term "invisible hand" was coined by

A rationale for government involvement in a market economy is

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that

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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