Question 1

For markets to work well, there must be

Accepted Answer

A)  market power. 
B)  a central planner. 
C)  property rights. 
D)  abundant, not scarce, resources. 
A)  market power. 
B)  a central planner. 
C)  property rights. 
D)  abundant, not scarce, resources.

Question 2

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

Question 3

Making rational decisions "at the margin" means that people

Accepted Answer

A)  make those decisions that do not impose a marginal cost. 
B)  evaluate how easily a decision can be reversed if problems arise. 
C)  compare the marginal costs and marginal benefits of each decision. 
D)  always calculate the dollar costs for each decision. 
A)  make those decisions that do not impose a marginal cost. 
B)  evaluate how easily a decision can be reversed if problems arise. 
C)  compare the marginal costs and marginal benefits of each decision. 
D)  always calculate the dollar costs for each decision.

Question 4

In most societies, resources are allocated by

Accepted Answer

A)  a single central planner. 
B)  a small number of central planners. 
C)  those firms that use resources to provide goods and services. 
D)  the combined actions of millions of households and firms. 
A)  a single central planner. 
B)  a small number of central planners. 
C)  those firms that use resources to provide goods and services. 
D)  the combined actions of millions of households and firms.

Question 5

When society gets the most it can from its scarce resources, then the outcome is called

Accepted Answer

A)  equitable. 
B)  efficient. 
C)  normal. 
D)  efficacious. 
A)  equitable. 
B)  efficient. 
C)  normal. 
D)  efficacious.

Question 6

What are the two possible causes of market failure?

Accepted Answer

Externalit

Question 7

In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker

Accepted Answer

A)  decreased by 1.7 percent between 1998 and 2008. 
B)  remained unchanged between 1998 and 2008. 
C)  increased by 4.75 percent between 1998 and 2008. 
D)  increased by 6.25 percent between 1998 and 2008. 
A)  decreased by 1.7 percent between 1998 and 2008. 
B)  remained unchanged between 1998 and 2008. 
C)  increased by 4.75 percent between 1998 and 2008. 
D)  increased by 6.25 percent between 1998 and 2008.

Question 8

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

Accepted Answer

A) True 
 B)False

Question 9

The Get-There-Safe Bus company incurs an average cost of $45 for each passenger it carries on its trip from Atlanta to Chattanooga. In advance of a particular trip, four seats remain unsold. The bus company could increase its profit only if it

Accepted Answer

A)  charged any ticket price above $0 for the four remaining seats. 
B)  charged at least $11.25 for each of the four remaining seats. 
C)  charged at least $45 for each of the four remaining seats. 
D)  paid four people to occupy the four remaining seats. 
A)  charged any ticket price above $0 for the four remaining seats. 
B)  charged at least $11.25 for each of the four remaining seats. 
C)  charged at least $45 for each of the four remaining seats. 
D)  paid four people to occupy the four remaining seats.

Question 10

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Accepted Answer

A)  the unexpected repairs and the increase in the price of gas 
B)  the unexpected increase for repairs, but not the increase in the price of gas 
C)  the increase in the price of gas, but not the unexpected repairs 
D)  neither the unexpected increase in the price of gas nor the unexpected repairs 
A)  the unexpected repairs and the increase in the price of gas 
B)  the unexpected increase for repairs, but not the increase in the price of gas 
C)  the increase in the price of gas, but not the unexpected repairs 
D)  neither the unexpected increase in the price of gas nor the unexpected repairs

Question 11

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by

Accepted Answer

A)  unstable economic conditions in Eastern Europe. 
B)  increased competition from abroad. 
C)  a decline in the rate of increase in U.S. productivity. 
D)  a strong U.S. dollar abroad, hurting U.S. exports. 
A)  unstable economic conditions in Eastern Europe. 
B)  increased competition from abroad. 
C)  a decline in the rate of increase in U.S. productivity. 
D)  a strong U.S. dollar abroad, hurting U.S. exports.

Question 12

Scenario 1-3
It costs a company $35,000 to produce 700 graphing calculators. The company's cost will be $35,070 if it produces an additional graphing calculator. The company is currently producing 700 graphing calculators.
-Refer to Scenario 1-3. What is the company's average cost?

Accepted Answer

The answer of Scenario 1-3
It costs a company $35,000 to...

Question 13

A rational decisionmaker takes an action if and only if

Accepted Answer

A)  the marginal benefit of the action exceeds the marginal cost of the action. 
B)  the marginal cost of the action exceeds the marginal benefit of the action. 
C)  the marginal cost of the action is zero. 
D)  the opportunity cost of the action is zero. 
A)  the marginal benefit of the action exceeds the marginal cost of the action. 
B)  the marginal cost of the action exceeds the marginal benefit of the action. 
C)  the marginal cost of the action is zero. 
D)  the opportunity cost of the action is zero.

Question 14

Market failure can be caused by

Accepted Answer

A)  low consumer demand. 
B)  equilibrium prices. 
C)  externalities and market power. 
D)  high prices and foreign competition. 
A)  low consumer demand. 
B)  equilibrium prices. 
C)  externalities and market power. 
D)  high prices and foreign competition.

Question 15

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

Accepted Answer

A)  worker productivity in Bangladesh is higher than in India. 
B)  the standard of living will likely be higher in India than in Bangladesh. 
C)  productivity is 4 units per hour for the worker in Bangladesh and 3 units per hour for the worker in India. 
D)  there will be no difference between the standard of living in India and Bangladesh. 
A)  worker productivity in Bangladesh is higher than in India. 
B)  the standard of living will likely be higher in India than in Bangladesh. 
C)  productivity is 4 units per hour for the worker in Bangladesh and 3 units per hour for the worker in India. 
D)  there will be no difference between the standard of living in India and Bangladesh.

Question 16

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

Accepted Answer

A)  people respond to incentives. 
B)  rational people think at the margin. 
C)  people face tradeoffs. 
D)  improvements in efficiency sometimes come at the expense of equality. 
A)  people respond to incentives. 
B)  rational people think at the margin. 
C)  people face tradeoffs. 
D)  improvements in efficiency sometimes come at the expense of equality.

Question 17

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should

Accepted Answer

A)  rent the room because the marginal benefit exceeds the marginal cost. 
B)  rent the room because the marginal benefit exceeds the average cost. 
C)  not rent the room because the marginal benefit is less than the marginal cost. 
D)  not rent the room because the marginal benefit is less than the average cost. 
A)  rent the room because the marginal benefit exceeds the marginal cost. 
B)  rent the room because the marginal benefit exceeds the average cost. 
C)  not rent the room because the marginal benefit is less than the marginal cost. 
D)  not rent the room because the marginal benefit is less than the average cost.

Question 18

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 19

If the government were to intervene and set the rent for apartments in New York City below the market rent, then we would expect, relative to the market outcome,

Accepted Answer

A)  an increase in the number of people wanting to live in apartments in New York City. 
B)  a decrease in the number of people wanting to live in apartments in New York City. 
C)  an increase in the number of apartments available for rent in New York City. 
D)  None of the above is correct. 
A)  an increase in the number of people wanting to live in apartments in New York City. 
B)  a decrease in the number of people wanting to live in apartments in New York City. 
C)  an increase in the number of apartments available for rent in New York City. 
D)  None of the above is correct.

Question 20

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

Accepted Answer

A)  $50. 
B)  $500. 
C)  $50,000. 
D)  This cannot be determined from the information given. 
A)  $50. 
B)  $500. 
C)  $50,000. 
D)  This cannot be determined from the information given.

Exam 1: Ten Principles of Economics

For markets to work well, there must be

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.

Making rational decisions "at the margin" means that people

In most societies, resources are allocated by

When society gets the most it can from its scarce resources, then the outcome is called

What are the two possible causes of market failure?

In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

The Get-There-Safe Bus company incurs an average cost of $45 for each passenger it carries on its trip from Atlanta to Chattanooga. In advance of a particular trip, four seats remain unsold. The bus company could increase its profit only if it

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by

Scenario 1-3 It costs a company $35,000 to produce 700 graphing calculators. The company's cost will be $35,070 if it produces an additional graphing calculator. The company is currently producing 700 graphing calculators. -Refer to Scenario 1-3. What is the company's average cost?

A rational decisionmaker takes an action if and only if

Market failure can be caused by

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should

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

If the government were to intervene and set the rent for apartments in New York City below the market rent, then we would expect, relative to the market outcome,

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

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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