Question 1

In a market economy, economic activity is guided by

Accepted Answer

A)  the government. 
B)  central planners. 
C)  large businesses. 
D)  prices and self-interest. 
A)  the government. 
B)  central planners. 
C)  large businesses. 
D)  prices and self-interest.

Question 2

A marginal change is a small incremental adjustment to an existing plan of action.

Accepted Answer

A) True 
 B)False

Question 3

Explain how trade with other countries is beneficial.

Accepted Answer

Trade allows countri

Question 4

Which of the following claims is consistent with the views of mainstream economists?

Accepted Answer

A)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall. 
B)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily rise. 
C)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently fall. 
D)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently rise. 
A)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall. 
B)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily rise. 
C)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently fall. 
D)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently rise.

Question 5

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A)  There is no such thing as a free lunch. 
B)  People buy more when prices are low than when prices are high. 
C)  No matter how much people earn, they tend to spend more than they earn. 
D)  Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes. 
A)  There is no such thing as a free lunch. 
B)  People buy more when prices are low than when prices are high. 
C)  No matter how much people earn, they tend to spend more than they earn. 
D)  Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Question 6

In communism, central planners decide which of the following?

Accepted Answer

A)  what goods and services will be produced 
B)  how much will be produced 
C)  who produced and consumed the goods and services 
D)  All of the above are correct. 
A)  what goods and services will be produced 
B)  how much will be produced 
C)  who produced and consumed the goods and services 
D)  All of the above are correct.

Question 7

Which of these activities will most likely impose an external cost?

Accepted Answer

A)  An athlete works out at a gym. 
B)  A secretary smokes a cigarette in a crowded break room. 
C)  A young mother pushes her baby in a stroller. 
D)  A construction worker eats a hotdog during his lunch break. 
A)  An athlete works out at a gym. 
B)  A secretary smokes a cigarette in a crowded break room. 
C)  A young mother pushes her baby in a stroller. 
D)  A construction worker eats a hotdog during his lunch break.

Question 8

Which of the following is not an example of scarcity?

Accepted Answer

A)  Only some people can afford to buy a BMW automobile. 
B)  Every individual in society cannot attain the highest standard of living to which he or she might aspire. 
C)  Miranda has an unlimited supply of oranges in her orchard. 
D)  Each member of a household cannot get everything he or she wants. 
A)  Only some people can afford to buy a BMW automobile. 
B)  Every individual in society cannot attain the highest standard of living to which he or she might aspire. 
C)  Miranda has an unlimited supply of oranges in her orchard. 
D)  Each member of a household cannot get everything he or she wants.

Question 9

Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person. Which country can benefit?

Accepted Answer

A)  only the one with a low level of output per person. 
B)  only the one with a high level of output per person. 
C)  both 
D)  neither 
A)  only the one with a low level of output per person. 
B)  only the one with a high level of output per person. 
C)  both 
D)  neither

Question 10

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

Accepted Answer

A)  is $40. 
B)  is $80. 
C)  is $120. 
D)  cannot be determined from the information given. 
A)  is $40. 
B)  is $80. 
C)  is $120. 
D)  cannot be determined from the information given.

Question 11

One of the 20th century's worst episodes of inflation occurred in

Accepted Answer

A)  the United States in the 1960s. 
B)  Italy in the 1950s. 
C)  Russia in the 1930s. 
D)  Germany in the 1920s. 
A)  the United States in the 1960s. 
B)  Italy in the 1950s. 
C)  Russia in the 1930s. 
D)  Germany in the 1920s.

Question 12

When the government attempts to improve equality in an economy the result is often

Accepted Answer

A)  an increase in overall output in the economy. 
B)  additional government revenue since overall income will increase. 
C)  a reduction in equality. 
D)  a reduction in efficiency. 
A)  an increase in overall output in the economy. 
B)  additional government revenue since overall income will increase. 
C)  a reduction in equality. 
D)  a reduction in efficiency.

Question 13

In an economy in which decisions are guided by prices and individual self-interest, there is

Accepted Answer

A)  the potential to achieve efficiency in production. 
B)  a strong need for government intervention in the market. 
C)  less efficiency than would be observed in a centrally-planned economy. 
D)  more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy. 
A)  the potential to achieve efficiency in production. 
B)  a strong need for government intervention in the market. 
C)  less efficiency than would be observed in a centrally-planned economy. 
D)  more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.

Question 14

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

Accepted Answer

A)  Melissa needs to pay her rent and her electric bill. 
B)  Kevin must choose between buying a new flat screen television and buying his textbooks for this semester. 
C)  Robert must decide between studying for his psychology exam and working at his part-time job. 
D)  Lisa can spend her money on a new smart phone or on a weekend trip. 
A)  Melissa needs to pay her rent and her electric bill. 
B)  Kevin must choose between buying a new flat screen television and buying his textbooks for this semester. 
C)  Robert must decide between studying for his psychology exam and working at his part-time job. 
D)  Lisa can spend her money on a new smart phone or on a weekend trip.

Question 15

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred?

Accepted Answer

A)  An individual's probability of surviving an auto accident rose. 
B)  There was an increase in pedestrian deaths. 
C)  There was an increase in automobile accidents. 
D)  All of the above are correct. 
A)  An individual's probability of surviving an auto accident rose. 
B)  There was an increase in pedestrian deaths. 
C)  There was an increase in automobile accidents. 
D)  All of the above are correct.

Question 16

Economics is the study of how evenly goods and services are distributed within society.

Accepted Answer

A) True 
 B)False

Question 17

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Accepted Answer

A)  is more efficient and more equal for society. 
B)  is more efficient but less equal for society. 
C)  is more equal but less efficient for society. 
D)  is less equal and less efficient for society. 
A)  is more efficient and more equal for society. 
B)  is more efficient but less equal for society. 
C)  is more equal but less efficient for society. 
D)  is less equal and less efficient for society.

Question 18

When computing the opportunity cost of attending a basketball game you should include

Accepted Answer

A)  the price you pay for the ticket and the value of your time. 
B)  the price you pay for the ticket, but not the value of your time. 
C)  the value of your time, but not the price you pay for the ticket. 
D)  neither the price of the ticket nor the value of your time. 
A)  the price you pay for the ticket and the value of your time. 
B)  the price you pay for the ticket, but not the value of your time. 
C)  the value of your time, but not the price you pay for the ticket. 
D)  neither the price of the ticket nor the value of your time.

Question 19

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

Accepted Answer

A)  Your full room-and-board expenses should always be included. 
B)  None of your room-and-board expenses should ever be included. 
C)  You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college. 
D)  You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college. 
A)  Your full room-and-board expenses should always be included. 
B)  None of your room-and-board expenses should ever be included. 
C)  You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college. 
D)  You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college.

Question 20

One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

Accepted Answer

Efficiency is the property of society ge

Exam 1: Ten Principles of Economics

In a market economy, economic activity is guided by

A marginal change is a small incremental adjustment to an existing plan of action.

Explain how trade with other countries is beneficial.

Which of the following claims is consistent with the views of mainstream economists?

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

In communism, central planners decide which of the following?

Which of these activities will most likely impose an external cost?

Which of the following is not an example of scarcity?

Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person. Which country can benefit?

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

One of the 20th century's worst episodes of inflation occurred in

When the government attempts to improve equality in an economy the result is often

In an economy in which decisions are guided by prices and individual self-interest, there is

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred?

Economics is the study of how evenly goods and services are distributed within society.

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

When computing the opportunity cost of attending a basketball game you should include

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

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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