Question 1

Which of the following statements about trade is false?

Accepted Answer

A)  Trade increases competition. 
B)  With trade, one country wins and one country loses. 
C)  Bulgaria can benefit, potentially, from trade with any other country. 
D)  Trade allows people to buy a greater variety of goods and services at lower cost. 
A)  Trade increases competition. 
B)  With trade, one country wins and one country loses. 
C)  Bulgaria can benefit, potentially, from trade with any other country. 
D)  Trade allows people to buy a greater variety of goods and services at lower cost.

Question 2

The government enforces property rights by

Accepted Answer

A)  requiring property owners to pay property taxes. 
B)  providing police and courts. 
C)  forcing people to own property. 
D)  providing public parks and recreation facilities. 
A)  requiring property owners to pay property taxes. 
B)  providing police and courts. 
C)  forcing people to own property. 
D)  providing public parks and recreation facilities.

Question 3

In a market economy, economic activity is guided by

Accepted Answer

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

Question 4

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

Accepted Answer

A)  more than $40, as the average benefit will exceed the marginal cost. 
B)  more than $40, as the marginal benefit will exceed the marginal cost. 
C)  more than $80, as the average benefit will exceed the marginal cost. 
D)  more than $80, as the marginal benefit will exceed the marginal cost. 
A)  more than $40, as the average benefit will exceed the marginal cost. 
B)  more than $40, as the marginal benefit will exceed the marginal cost. 
C)  more than $80, as the average benefit will exceed the marginal cost. 
D)  more than $80, as the marginal benefit will exceed the marginal cost.

Question 5

Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

Accepted Answer

A)  $0. 
B)  $15. 
C)  $305. 
D)  $315. 
A)  $0. 
B)  $15. 
C)  $305. 
D)  $315.

Question 6

Central planning refers to

Accepted Answer

A)  markets guiding economic activity. Today many countries that had this system have abandoned it. 
B)  markets guiding economic activity. Today many countries that did not have this system have implemented it. 
C)  government guiding economic activity. Today many countries that had this system have abandoned it. 
D)  government guiding economic activity. Today many countries that did not have this system have implemented it. 
A)  markets guiding economic activity. Today many countries that had this system have abandoned it. 
B)  markets guiding economic activity. Today many countries that did not have this system have implemented it. 
C)  government guiding economic activity. Today many countries that had this system have abandoned it. 
D)  government guiding economic activity. Today many countries that did not have this system have implemented it.

Question 7

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Accepted Answer

A)  the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs. 
B)  the benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs. 
C)  the benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs. 
D)  the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs. 
A)  the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs. 
B)  the benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs. 
C)  the benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs. 
D)  the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs.

Question 8

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

Accepted Answer

A)  the quantity of money 
B)  the level of unemployment 
C)  productivity 
D)  equality 
A)  the quantity of money 
B)  the level of unemployment 
C)  productivity 
D)  equality

Question 9

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 10

Which is the most accurate statement about trade?

Accepted Answer

A)  Trade can make every nation better off. 
B)  Trade makes some nations better off and others worse off. 
C)  Trading for a good can make a nation better off only if the nation cannot produce that good itself. 
D)  Trade helps rich nations and hurts poor nations. 
A)  Trade can make every nation better off. 
B)  Trade makes some nations better off and others worse off. 
C)  Trading for a good can make a nation better off only if the nation cannot produce that good itself. 
D)  Trade helps rich nations and hurts poor nations.

Question 11

A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Accepted Answer

A)  Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen. 
B)  Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen. 
C)  Throw the bagels away and produce 8 fewer dozen bagels tomorrow. 
D)  Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day. 
A)  Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen. 
B)  Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen. 
C)  Throw the bagels away and produce 8 fewer dozen bagels tomorrow. 
D)  Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day.

Question 12

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 13

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 14

Which of the following is a subject that economists study?

Accepted Answer

A)  the growth in average income 
B)  the fraction of the population that cannot find work 
C)  the rate at which prices are rising 
D)  All of the above are correct. 
A)  the growth in average income 
B)  the fraction of the population that cannot find work 
C)  the rate at which prices are rising 
D)  All of the above are correct.

Question 15

What are the two possible causes of market failure?

Accepted Answer

Externalit

Question 16

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 17

The fact that different countries experience different standards of living is largely explained by differences in those countries'

Accepted Answer

A)  populations. 
B)  productivity levels. 
C)  locations. 
D)  None of the above is correct. Economists are puzzled by differences in standards of living around the world. 
A)  populations. 
B)  productivity levels. 
C)  locations. 
D)  None of the above is correct. Economists are puzzled by differences in standards of living around the world.

Question 18

For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%. Country B had inflation of 4% for many years, but very recently inflation unexpectedly rose to 9%. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

Accepted Answer

A)  both country A and country B 
B)  neither country A nor country B 
C)  country A but not country B 
D)  country B but not country A 
A)  both country A and country B 
B)  neither country A nor country B 
C)  country A but not country B 
D)  country B but not country A

Question 19

A direct or positive relationship exists between a country's

Accepted Answer

A)  productivity and its standard of living. 
B)  amount of government spending and its productivity. 
C)  total population and its average citizen's income. 
D)  rate of population growth and the extent of its trade with other countries. 
A)  productivity and its standard of living. 
B)  amount of government spending and its productivity. 
C)  total population and its average citizen's income. 
D)  rate of population growth and the extent of its trade with other countries.

Question 20

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Accepted Answer

A)  The marginal benefit of going to Spain increases. 
B)  The marginal cost of going to Spain increases. 
C)  The marginal benefit of going to Ireland increases. 
D)  The marginal cost of going to Ireland decreases. 
A)  The marginal benefit of going to Spain increases. 
B)  The marginal cost of going to Spain increases. 
C)  The marginal benefit of going to Ireland increases. 
D)  The marginal cost of going to Ireland decreases.

Exam 1: Ten Principles of Economics

Which of the following statements about trade is false?

The government enforces property rights by

In a market economy, economic activity is guided by

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

Central planning refers to

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

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

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

Which is the most accurate statement about trade?

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

Which of the following is not an example of scarcity?

Which of the following is a subject that economists study?

What are the two possible causes of market failure?

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

The fact that different countries experience different standards of living is largely explained by differences in those countries'

A direct or positive relationship exists between a country's

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

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 Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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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