Question 1

When society requires that firms reduce pollution, there is

Accepted Answer

A)  a tradeoff because of reduced incomes to the firms' owners and workers. 
B)  a tradeoff only if some firms are forced to close. 
C)  no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. 
D)  no tradeoff, since everyone benefits from reduced pollution. 
A)  a tradeoff because of reduced incomes to the firms' owners and workers. 
B)  a tradeoff only if some firms are forced to close. 
C)  no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. 
D)  no tradeoff, since everyone benefits from reduced pollution.

Question 2

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

Accepted Answer

A)  1 percent per year 
B)  2 percent per year 
C)  3 percent per year 
D)  4 percent per year 
A)  1 percent per year 
B)  2 percent per year 
C)  3 percent per year 
D)  4 percent per year

Question 3

The irregular and largely unpredictable fluctuations in economic activity are called

Accepted Answer

A)  market failure. 
B)  business cycle. 
C)  inflation. 
D)  unemployment. 
A)  market failure. 
B)  business cycle. 
C)  inflation. 
D)  unemployment.

Question 4

Rick buys a 1966 Mustang for $3,000, planning to restore and sell the car. He goes on to spend $9,000 restoring the car. At this point he can sell the car for $10,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $13,000. Rick should

Accepted Answer

A)  complete the repairs and sell the car for $13,000. 
B)  sell the car now for $10,000. 
C)  never try such an expensive project again. 
D)  be indifferent between i) selling the car now and ii) replacing the engine and then selling it. 
A)  complete the repairs and sell the car for $13,000. 
B)  sell the car now for $10,000. 
C)  never try such an expensive project again. 
D)  be indifferent between i) selling the car now and ii) replacing the engine and then selling it.

Question 5

The business cycle is the

Accepted Answer

A)  relationship between unemployment and inflation. 
B)  irregular fluctuations in economic activity. 
C)  positive relationship between the quantity of money in an economy and inflation. 
D)  predictable changes in economic activity due to changes in government spending and taxes. 
A)  relationship between unemployment and inflation. 
B)  irregular fluctuations in economic activity. 
C)  positive relationship between the quantity of money in an economy and inflation. 
D)  predictable changes in economic activity due to changes in government spending and taxes.

Question 6

Which of the following statements exemplifies a principle of individual decisionmaking?

Accepted Answer

A)  Trade can make everyone better off. 
B)  Governments can sometimes improve market outcomes. 
C)  The cost of something is what you give up to get it. 
D)  All of the above are correct. 
A)  Trade can make everyone better off. 
B)  Governments can sometimes improve market outcomes. 
C)  The cost of something is what you give up to get it. 
D)  All of the above are correct.

Question 7

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Accepted Answer

A) True 
 B)False

Question 8

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

Accepted Answer

A)  This loss of jobs has been detrimental to our economy. 
B)  The government should provide subsidies to encourage more people to become farmers. 
C)  This reduction in the number of farmers explains the increase in the price of food. 
D)  This is progress because freed-up labor is used to produce other goods. 
A)  This loss of jobs has been detrimental to our economy. 
B)  The government should provide subsidies to encourage more people to become farmers. 
C)  This reduction in the number of farmers explains the increase in the price of food. 
D)  This is progress because freed-up labor is used to produce other goods.

Question 9

Which of the following statements best characterizes a basic difference between market economies and centrally- planned economies?

Accepted Answer

A)  Society relies more upon prices to allocate resources when the economy is centrally-planned than when it is market-based. 
B)  The self-interest of households is reflected more fully in the outcome of a centrally-planned economy than in the outcome of a market economy. 
C)  Government plays a larger role in the economic affairs of a market economy than in the economic affairs of a centrally-planned economy. 
D)  None of the above are correct. 
A)  Society relies more upon prices to allocate resources when the economy is centrally-planned than when it is market-based. 
B)  The self-interest of households is reflected more fully in the outcome of a centrally-planned economy than in the outcome of a market economy. 
C)  Government plays a larger role in the economic affairs of a market economy than in the economic affairs of a centrally-planned economy. 
D)  None of the above are correct.

Question 10

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

Accepted Answer

A)  cost of teaching increased. 
B)  benefit of teaching increased. 
C)  cost of a corporate job increased. 
D)  benefit of a corporate job decreased. 
A)  cost of teaching increased. 
B)  benefit of teaching increased. 
C)  cost of a corporate job increased. 
D)  benefit of a corporate job decreased.

Question 11

Which of the following is correct?

Accepted Answer

A)  The word economy comes from the Greek word for "rational thinker." 
B)  Economists study the management of scarce resources. 
C)  Because economists believe that people pursue their best interests, they are not interested in how people interact. 
D)  All of the above are correct. 
A)  The word economy comes from the Greek word for "rational thinker." 
B)  Economists study the management of scarce resources. 
C)  Because economists believe that people pursue their best interests, they are not interested in how people interact. 
D)  All of the above are correct.

Question 12

Which of the following is the primary cause of inflation?

Accepted Answer

A)  an increase in the quantity of money 
B)  an increase in government spending 
C)  an increase in unemployment 
D)  an increase in productivity 
A)  an increase in the quantity of money 
B)  an increase in government spending 
C)  an increase in unemployment 
D)  an increase in productivity

Question 13

The primary determinant of a country's standard of living is

Accepted Answer

A)  the country's ability to prevail over foreign competition. 
B)  the country's ability to produce goods and services. 
C)  the total supply of money in the economy. 
D)  the average age of the country's labor force. 
A)  the country's ability to prevail over foreign competition. 
B)  the country's ability to produce goods and services. 
C)  the total supply of money in the economy. 
D)  the average age of the country's labor force.

Question 14

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

Accepted Answer

A)  to promote efficiency 
B)  to promote equality 
C)  to enforce property rights 
D)  to protect an industry from foreign competition 
A)  to promote efficiency 
B)  to promote equality 
C)  to enforce property rights 
D)  to protect an industry from foreign competition

Question 15

Which of these activities will most likely result in an external benefit?

Accepted Answer

A)  Ted purchases a dilapidated house and cleans up the yard and exterior of the house. 
B)  Tim purchases an iPhone and downloads new apps. 
C)  Terri purchases a new SUV and drives it to work every day. 
D)  Thomas purchases a suit and wears it on his interviews. 
A)  Ted purchases a dilapidated house and cleans up the yard and exterior of the house. 
B)  Tim purchases an iPhone and downloads new apps. 
C)  Terri purchases a new SUV and drives it to work every day. 
D)  Thomas purchases a suit and wears it on his interviews.

Question 16

Market failure refers to a situation in which the market does not allocate resources efficiently.

Accepted Answer

A) True 
 B)False

Question 17

Equality means distributing society's resources in the most efficient manner.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

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

Question 19

In the 1990s, inflation in the United States was

Accepted Answer

A)  very close to zero. 
B)  about 3 percent per year. 
C)  about 6 percent per year. 
D)  commonly referred to as "public enemy number one." 
A)  very close to zero. 
B)  about 3 percent per year. 
C)  about 6 percent per year. 
D)  commonly referred to as "public enemy number one."

Question 20

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

When society requires that firms reduce pollution, there is

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

The irregular and largely unpredictable fluctuations in economic activity are called

The business cycle is the

Which of the following statements exemplifies a principle of individual decisionmaking?

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

Which of the following statements best characterizes a basic difference between market economies and centrally- planned economies?

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

Which of the following is correct?

Which of the following is the primary cause of inflation?

The primary determinant of a country's standard of living is

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

Which of these activities will most likely result in an external benefit?

Market failure refers to a situation in which the market does not allocate resources efficiently.

Equality means distributing society's resources in the most efficient manner.

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

In the 1990s, inflation in the United States was

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

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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