Question 1

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

Accepted Answer

A) True 
 B)False  False

Question 2

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

Accepted Answer

A)  equality is increased and efficiency is increased. 
B)  equality is increased and efficiency is decreased. 
C)  equality is decreased and efficiency is increased. 
D)  equality is decreased and efficiency is decreased. 
A)  equality is increased and efficiency is increased. 
B)  equality is increased and efficiency is decreased. 
C)  equality is decreased and efficiency is increased. 
D)  equality is decreased and efficiency is decreased. B

Question 3

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. A

Question 4

Consider Paul's decision to go to college. If he goes to college, he will spend $90,000 on tuition, $15,000 on room and board, and $7,000 on books. If he does not go to college, he will earn $22,000 working at a construction job and he will spend $11,000 on room and board. Paul's cost of going to college is

Accepted Answer

A)  $96,000. 
B)  $110,000. 
C)  $114,000. 
D)  $123,000. 
A)  $96,000. 
B)  $110,000. 
C)  $114,000. 
D)  $123,000.

Question 5

Both The Wealth of Nations and the Declaration of Independence share the point of view that

Accepted Answer

A)  every person is entitled to life, liberty, and the pursuit of happiness. 
B)  individuals are best left to their own devices without the government guiding their actions. 
C)  the government plays a central role in organizing a market economy. 
D)  because of human nature a strong legal system is necessary for a market system to survive. 
A)  every person is entitled to life, liberty, and the pursuit of happiness. 
B)  individuals are best left to their own devices without the government guiding their actions. 
C)  the government plays a central role in organizing a market economy. 
D)  because of human nature a strong legal system is necessary for a market system to survive.

Question 6

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 7

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

Accepted Answer

To lower inflation, the government may c

Question 8

What is the most important factor that explains differences in living standards among countries?

Accepted Answer

A)  labor unions 
B)  minimum wage laws 
C)  productivity 
D)  efficiency 
A)  labor unions 
B)  minimum wage laws 
C)  productivity 
D)  efficiency

Question 9

In a market economy, who makes the decisions that guide most economic activity?

Accepted Answer

A)  firms only 
B)  households only 
C)  firms and households 
D)  government 
A)  firms only 
B)  households only 
C)  firms and households 
D)  government

Question 10

Productivity is defined as the

Accepted Answer

A)  amount of goods and services produced from each unit of labor input. 
B)  number of workers required to produce a given amount of goods and services. 
C)  amount of labor that can be saved by replacing workers with machines. 
D)  actual amount of effort workers put into an hour of working time. 
A)  amount of goods and services produced from each unit of labor input. 
B)  number of workers required to produce a given amount of goods and services. 
C)  amount of labor that can be saved by replacing workers with machines. 
D)  actual amount of effort workers put into an hour of working time.

Question 11

For most students, the largest single cost of a college education is

Accepted Answer

A)  the wages given up to attend school. 
B)  tuition, fees, and books. 
C)  room and board. 
D)  transportation, parking, and entertainment. 
A)  the wages given up to attend school. 
B)  tuition, fees, and books. 
C)  room and board. 
D)  transportation, parking, and entertainment.

Question 12

Resources are

Accepted Answer

A)  scarce for households but plentiful for economies. 
B)  plentiful for households but scarce for economies. 
C)  scarce for households and scarce for economies. 
D)  plentiful for households and plentiful for economies. 
A)  scarce for households but plentiful for economies. 
B)  plentiful for households but scarce for economies. 
C)  scarce for households and scarce for economies. 
D)  plentiful for households and plentiful for economies.

Question 13

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Accepted Answer

A)  People face tradeoffs. 
B)  The cost of something is what you give up to get it. 
C)  Rational people think at the margin. 
D)  People respond to incentives. 
A)  People face tradeoffs. 
B)  The cost of something is what you give up to get it. 
C)  Rational people think at the margin. 
D)  People respond to incentives.

Question 14

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 15

In the context of decisionmaking, the word "marginal" is most closely associated with the word

Accepted Answer

A)  "unimportant." 
B)  "slow." 
C)  "edge." 
D)  "irrational." 
A)  "unimportant." 
B)  "slow." 
C)  "edge." 
D)  "irrational."

Question 16

The property of society getting the most it can from its scarce resources is called

Accepted Answer

A)  efficiency. 
B)  equality. 
C)  externality. 
D)  productivity. 
A)  efficiency. 
B)  equality. 
C)  externality. 
D)  productivity.

Question 17

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Accepted Answer

A) True 
 B)False

Question 18

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

Accepted Answer

A)  an increase in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
B)  an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. 
C)  a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
D)  a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. 
A)  an increase in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
B)  an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. 
C)  a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
D)  a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

Question 19

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

Accepted Answer

A)  we should agree with Senator Brown. 
B)  we should agree with Senator Johnson. 
C)  a good decision requires that we recognize both viewpoints. 
D)  there are no tradeoffs between equity and efficiency. 
A)  we should agree with Senator Brown. 
B)  we should agree with Senator Johnson. 
C)  a good decision requires that we recognize both viewpoints. 
D)  there are no tradeoffs between equity and efficiency.

Question 20

Economics is the study of how society allocates its unlimited resources.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

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

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

When Ukraine trades with Italy,

Both The Wealth of Nations and the Declaration of Independence share the point of view that

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?

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

What is the most important factor that explains differences in living standards among countries?

In a market economy, who makes the decisions that guide most economic activity?

Productivity is defined as the

For most students, the largest single cost of a college education is

Resources are

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

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

In the context of decisionmaking, the word "marginal" is most closely associated with the word

The property of society getting the most it can from its scarce resources is called

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

Economics is the study of how society allocates its unlimited resources.

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

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

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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