Question 1

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 marginal cost?

Accepted Answer

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

Question 4

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 5

The amount of goods and services produced from each unit of labor input is called

Accepted Answer

A)  opportunity cost. 
B)  productivity. 
C)  externality. 
D)  marginal benefit. 
A)  opportunity cost. 
B)  productivity. 
C)  externality. 
D)  marginal benefit.

Question 6

Suppose Country A has a high average wage level and a high level of output per person, while Country B has a low average wage level and a low level of output per person. Which country can benefit from trade?

Accepted Answer

A)  Only Country A can benefit. 
B)  Only Country B can benefit. 
C)  Both Country A and Country B can benefit. 
D)  Neither Country A nor Country B can benefit. 
A)  Only Country A can benefit. 
B)  Only Country B can benefit. 
C)  Both Country A and Country B can benefit. 
D)  Neither Country A nor Country B can benefit.

Question 7

Trade between countries tends to

Accepted Answer

A)  reduce both competition and specialization. 
B)  reduce competition and increase specialization. 
C)  increase competition and reduce specialization. 
D)  increase both competition and specialization. 
A)  reduce both competition and specialization. 
B)  reduce competition and increase specialization. 
C)  increase competition and reduce specialization. 
D)  increase both competition and specialization.

Question 8

A marginal change is a

Accepted Answer

A)  change that involves little, if anything, that is important. 
B)  large, significant adjustment. 
C)  change for the worse, and so it is usually a short-term change. 
D)  small, incremental adjustment. 
A)  change that involves little, if anything, that is important. 
B)  large, significant adjustment. 
C)  change for the worse, and so it is usually a short-term change. 
D)  small, incremental adjustment.

Question 9

To raise productivity, policymakers could

Accepted Answer

A)  increase spending on education. 
B)  provide tax credits to firms for capital improvements. 
C)  fund research and development. 
D)  All of the above are correct. 
A)  increase spending on education. 
B)  provide tax credits to firms for capital improvements. 
C)  fund research and development. 
D)  All of the above are correct.

Question 10

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 11

Market failure is the ability of a single person to have a substantial influence on market prices.

Accepted Answer

A) True 
 B)False

Question 12

A tradeoff exists between a clean environment and a higher level of income in that

Accepted Answer

A)  studies show that individuals with higher levels of income pollute less than low-income individuals. 
B)  efforts to reduce pollution typically are not completely successful. 
C)  laws that reduce pollution raise costs of production and reduce incomes. 
D)  employing individuals to clean up pollution causes increases in employment and income. 
A)  studies show that individuals with higher levels of income pollute less than low-income individuals. 
B)  efforts to reduce pollution typically are not completely successful. 
C)  laws that reduce pollution raise costs of production and reduce incomes. 
D)  employing individuals to clean up pollution causes increases in employment and income.

Question 13

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 14

Stephen is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5,800. Stephen discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do?

Accepted Answer

A)  He should sell the car now for $3,800. 
B)  He should keep the car since it wouldn't be rational to spend $6,400 restoring a car and then sell it for only $5,800. 
C)  He should complete the additional work and sell the car for $5,800. 
D)  It does not matter which action he takes since the outcome will be the same either way. 
A)  He should sell the car now for $3,800. 
B)  He should keep the car since it wouldn't be rational to spend $6,400 restoring a car and then sell it for only $5,800. 
C)  He should complete the additional work and sell the car for $5,800. 
D)  It does not matter which action he takes since the outcome will be the same either way.

Question 15

The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following firms is likely to have the greatest market power?

Accepted Answer

A)  an electric company 
B)  a farmer 
C)  a grocery store 
D)  a local electronics retailer 
A)  an electric company 
B)  a farmer 
C)  a grocery store 
D)  a local electronics retailer

Question 17

Trade can make everyone better off except in the case where one person is better at doing everything.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

Accepted Answer

A)  Melissa needs to pay her rent and her electric bill. 
B)  Kevin must choose between buying a new flat screen television and buying his textbooks for this semester. 
C)  Robert must decide between studying for his psychology exam and working at his part-time job. 
D)  Lisa can spend her money on a new smart phone or on a weekend trip. 
A)  Melissa needs to pay her rent and her electric bill. 
B)  Kevin must choose between buying a new flat screen television and buying his textbooks for this semester. 
C)  Robert must decide between studying for his psychology exam and working at his part-time job. 
D)  Lisa can spend her money on a new smart phone or on a weekend trip.

Question 19

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 20

The historical rise in living standards of American workers is primarily a result of

Accepted Answer

A)  the influence of labor unions in America. 
B)  tariff protection imposed by the American government. 
C)  the enactment of minimum-wage laws in America. 
D)  the rise in American productivity. 
A)  the influence of labor unions in America. 
B)  tariff protection imposed by the American government. 
C)  the enactment of minimum-wage laws in America. 
D)  the rise in American productivity.

Exam 1: Ten Principles of Economics

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.

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 marginal cost?

The term "invisible hand" was coined by

The amount of goods and services produced from each unit of labor input is called

Suppose Country A has a high average wage level and a high level of output per person, while Country B has a low average wage level and a low level of output per person. Which country can benefit from trade?

Trade between countries tends to

A marginal change is a

To raise productivity, policymakers could

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?

Market failure is the ability of a single person to have a substantial influence on market prices.

A tradeoff exists between a clean environment and a higher level of income in that

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

The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior.

Which of the following firms is likely to have the greatest market power?

Trade can make everyone better off except in the case where one person is better at doing everything.

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

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

The historical rise in living standards of American workers is primarily a result of

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

Filters