Question 1

Which of the following products would be considered scarce?

Accepted Answer

A)  bread 
B)  baseballs autographed by Babe Ruth 
C)  motorcycles 
D)  All of the above are correct. 
A)  bread 
B)  baseballs autographed by Babe Ruth 
C)  motorcycles 
D)  All of the above are correct.

Question 2

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Accepted Answer

A)  only Dale is made better off by trade. 
B)  only Terrence is made better off by trade. 
C)  both Dale and Terrence are made better off by trade. 
D)  neither Dale nor Terrence are made better off by trade. 
A)  only Dale is made better off by trade. 
B)  only Terrence is made better off by trade. 
C)  both Dale and Terrence are made better off by trade. 
D)  neither Dale nor Terrence are made better off by trade.

Question 3

What term refers to the property that society has limited resources and therefore cannot produce all the goods and services people wish to have?

Accepted Answer

A)  inefficiency 
B)  inequality 
C)  scarcity 
D)  market failure 
A)  inefficiency 
B)  inequality 
C)  scarcity 
D)  market failure

Question 4

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

Accepted Answer

A)  trade can make everyone better off. 
B)  rational people think at the margin. 
C)  people face tradeoffs. 
D)  people respond to incentives. 
A)  trade can make everyone better off. 
B)  rational people think at the margin. 
C)  people face tradeoffs. 
D)  people respond to incentives.

Question 5

To improve living standards, policymakers should

Accepted Answer

A)  impose restrictions on foreign competition. 
B)  formulate policies designed to increase productivity. 
C)  impose tougher immigration policies. 
D)  provide tax breaks for the middle class. 
A)  impose restrictions on foreign competition. 
B)  formulate policies designed to increase productivity. 
C)  impose tougher immigration policies. 
D)  provide tax breaks for the middle class.

Question 6

In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

Accepted Answer

A)  3 percent per year 
B)  5 percent per year 
C)  7 percent per year 
D)  9 percent per year 
A)  3 percent per year 
B)  5 percent per year 
C)  7 percent per year 
D)  9 percent per year

Question 7

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 8

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 9

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 10

Incomes of U.S. households in the 1970s and 1980s

Accepted Answer

A)  grew rapidly, due to the widespread success of labor unions in pushing up wages during those decades. 
B)  grew rapidly, due to several increases in the minimum wage during those decades. 
C)  grew rapidly, due to government policies that discouraged the importation of foreign products during those decades. 
D)  grew slowly, due to slow growth of the output of goods and services per hour of U.S. workers' time during those decades. 
A)  grew rapidly, due to the widespread success of labor unions in pushing up wages during those decades. 
B)  grew rapidly, due to several increases in the minimum wage during those decades. 
C)  grew rapidly, due to government policies that discouraged the importation of foreign products during those decades. 
D)  grew slowly, due to slow growth of the output of goods and services per hour of U.S. workers' time during those decades.

Question 11

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Accepted Answer

A)  Yes, because cutting hair is profitable. 
B)  No, because he may not be able to sell more services. 
C)  It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D)  It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients. 
A)  Yes, because cutting hair is profitable. 
B)  No, because he may not be able to sell more services. 
C)  It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D)  It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

Question 12

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 13

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 14

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal

Accepted Answer

A)  cost of leaving was greater than the marginal benefit. 
B)  benefit of leaving was greater than the marginal cost. 
C)  benefit of teaching was greater than the marginal cost. 
D)  All of the above are correct. 
A)  cost of leaving was greater than the marginal benefit. 
B)  benefit of leaving was greater than the marginal cost. 
C)  benefit of teaching was greater than the marginal cost. 
D)  All of the above are correct.

Question 15

When government policies are enacted,

Accepted Answer

A)  equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality. 
B)  efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss. 
C)  it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished. 
D)  None of the above are correct. 
A)  equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality. 
B)  efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss. 
C)  it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished. 
D)  None of the above are correct.

Question 16

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

Accepted Answer

A)  productivity. 
B)  an externality. 
C)  market power. 
D)  property rights. 
A)  productivity. 
B)  an externality. 
C)  market power. 
D)  property rights.

Question 17

The tradeoff between inflation and unemployment

Accepted Answer

A)  implies that policies designed to reduce unemployment also reduce inflation. 
B)  was eliminated by improved economic policies in the 1900s. 
C)  is a long-run tradeoff, persisting for decades, according to most economists. 
D)  None of the above are correct. 
A)  implies that policies designed to reduce unemployment also reduce inflation. 
B)  was eliminated by improved economic policies in the 1900s. 
C)  is a long-run tradeoff, persisting for decades, according to most economists. 
D)  None of the above are correct.

Question 18

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

Question 19

In the short run, an increase in the money supply is likely to lead to

Accepted Answer

A)  lower unemployment and lower inflation. 
B)  lower unemployment and higher inflation. 
C)  higher unemployment and lower inflation. 
D)  higher unemployment and higher inflation. 
A)  lower unemployment and lower inflation. 
B)  lower unemployment and higher inflation. 
C)  higher unemployment and lower inflation. 
D)  higher unemployment and higher inflation.

Question 20

Scarcity means that there is less of a good or resource available than people wish to have.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Which of the following products would be considered scarce?

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

What term refers to the property that society has limited resources and therefore cannot produce all the goods and services people wish to have?

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

To improve living standards, policymakers should

In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

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

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?

A rationale for government involvement in a market economy is

Incomes of U.S. households in the 1970s and 1980s

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

The term "invisible hand" was coined by

To increase living standards, public policy should

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal

When government policies are enacted,

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

The tradeoff between inflation and unemployment

In the short run, an increase in the money supply is likely to lead to

Scarcity means that there is less of a good or resource available than people wish to have.

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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