Question 1

The income of a typical worker in a country is most closely linked to which of the following?

Accepted Answer

A)  population 
B)  productivity 
C)  market power 
D)  government policies 
A)  population 
B)  productivity 
C)  market power 
D)  government policies

Question 2

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 3

The study of how society manages its scarce resources is most closely associated with which field of study?

Accepted Answer

A)  environmental studies 
B)  economics 
C)  management 
D)  accounting 
A)  environmental studies 
B)  economics 
C)  management 
D)  accounting

Question 4

Productivity is defined as the

Accepted Answer

A)  amount of goods and services produced from each unit of labor input. 
B)  number of workers required to produce a given amount of goods and services. 
C)  amount of labor that can be saved by replacing workers with machines. 
D)  actual amount of effort workers put into an hour of working time. 
A)  amount of goods and services produced from each unit of labor input. 
B)  number of workers required to produce a given amount of goods and services. 
C)  amount of labor that can be saved by replacing workers with machines. 
D)  actual amount of effort workers put into an hour of working time.

Question 5

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Accepted Answer

A)  For the first 24 houses, the average cost per house was $205,000. 
B)  The marginal cost of the 25th house, if it is built, will equal $250,000. 
C)  If the company can sell the 25th house for at least $202,000, then it should build it. 
D)  All of the above are correct. 
A)  For the first 24 houses, the average cost per house was $205,000. 
B)  The marginal cost of the 25th house, if it is built, will equal $250,000. 
C)  If the company can sell the 25th house for at least $202,000, then it should build it. 
D)  All of the above are correct.

Question 6

Economists use the word equality to describe a situation in which

Accepted Answer

A)  each member of society has the same income. 
B)  each member of society has access to abundant quantities of goods and services, regardless of his or her income. 
C)  society is getting the maximum benefits from its scarce resources. 
D)  society's resources are used efficiently. 
A)  each member of society has the same income. 
B)  each member of society has access to abundant quantities of goods and services, regardless of his or her income. 
C)  society is getting the maximum benefits from its scarce resources. 
D)  society's resources are used efficiently.

Question 7

Tracy quits her job, which pays $25,000 a year, to finish her college degree. Her annual college expenses are $12,000 for tuition and fees and $1,000 for books. What is her opportunity cost of attending college for the year?

Accepted Answer

The answer of Tracy quits her job, which pays $25,000...

Question 8

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

Accepted Answer

A)  the United Kingdom has a better education system than Turkey. 
B)  the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey. 
C)  workers in Turkey are more productive than workers in the United Kingdom. 
D)  there are more instances of market power in Turkey than in the United Kingdom. 
A)  the United Kingdom has a better education system than Turkey. 
B)  the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey. 
C)  workers in Turkey are more productive than workers in the United Kingdom. 
D)  there are more instances of market power in Turkey than in the United Kingdom.

Question 9

Which of the following is an example of something economists study?

Accepted Answer

A)  Mitch chooses to work overtime to earn extra income for his family. 
B)  Megan sells her physics textbook from last semester to her roommate for half the price of a new textbook. 
C)  The unemployment rate in the United States has fallen by two percentage points in the last few years. 
D)  All of the above are correct. 
A)  Mitch chooses to work overtime to earn extra income for his family. 
B)  Megan sells her physics textbook from last semester to her roommate for half the price of a new textbook. 
C)  The unemployment rate in the United States has fallen by two percentage points in the last few years. 
D)  All of the above are correct.

Question 10

In 2011, the average American earned about $48,000 while the average Nigerian earned about $1,200. Which of the following statements is likely?

Accepted Answer

A)  The average American purchases more televisions than the average Nigerian. 
B)  The average American has better nutrition and healthcare than the average Nigerian. 
C)  The average American has a longer life expectancy than the average Nigerian. 
D)  All of the above are correct. 
A)  The average American purchases more televisions than the average Nigerian. 
B)  The average American has better nutrition and healthcare than the average Nigerian. 
C)  The average American has a longer life expectancy than the average Nigerian. 
D)  All of the above are correct.

Question 11

Which of the following statements about markets is most accurate?

Accepted Answer

A)  Markets are usually a good way to organize economic activity. 
B)  Markets are usually inferior to central planning as a way to organize economic activity. 
C)  Markets fail and are therefore not an acceptable way to organize economic activity. 
D)  Markets are a good way to organize economic activity in developed nations, but not in less developed nations. 
A)  Markets are usually a good way to organize economic activity. 
B)  Markets are usually inferior to central planning as a way to organize economic activity. 
C)  Markets fail and are therefore not an acceptable way to organize economic activity. 
D)  Markets are a good way to organize economic activity in developed nations, but not in less developed nations.

Question 12

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 13

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Accepted Answer

A)  to produce good quality products so that society would benefit from the resources used 
B)  to conserve on costs, so as to maintain efficiency in the economy 
C)  to produce enough to meet the output target, without regard for quality or cost 
D)  to produce those products that society desires most 
A)  to produce good quality products so that society would benefit from the resources used 
B)  to conserve on costs, so as to maintain efficiency in the economy 
C)  to produce enough to meet the output target, without regard for quality or cost 
D)  to produce those products that society desires most

Question 14

What are the two basic types of economies?

Accepted Answer

Centrally

Question 15

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

Accepted Answer

A)  automakers 
B)  pedestrians 
C)  drivers 
D)  owners of collision-repair shops 
A)  automakers 
B)  pedestrians 
C)  drivers 
D)  owners of collision-repair shops

Question 16

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 17

Causes of market failure include

Accepted Answer

A)  externalities and market power. 
B)  market power and incorrect forecasts of consumer demand. 
C)  externalities and foreign competition. 
D)  incorrect forecasts of consumer demand and foreign competition. 
A)  externalities and market power. 
B)  market power and incorrect forecasts of consumer demand. 
C)  externalities and foreign competition. 
D)  incorrect forecasts of consumer demand and foreign competition.

Question 18

When the government redistributes income from the wealthy to the poor,

Accepted Answer

A)  efficiency is improved, but equality is not. 
B)  equality is improved, but efficiency is not. 
C)  both efficiency and equality are improved. 
D)  neither efficiency nor equality are improved. 
A)  efficiency is improved, but equality is not. 
B)  equality is improved, but efficiency is not. 
C)  both efficiency and equality are improved. 
D)  neither efficiency nor equality are improved.

Question 19

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

Accepted Answer

A) True 
 B)False

Question 20

Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana

Accepted Answer

A)  can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana. 
B)  determines Ashley's marginal cost of the first and second bananas. 
C)  does not depend on how many bananas Ashley has already eaten. 
D)  cannot be determined unless we know how much she paid for the bananas. 
A)  can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana. 
B)  determines Ashley's marginal cost of the first and second bananas. 
C)  does not depend on how many bananas Ashley has already eaten. 
D)  cannot be determined unless we know how much she paid for the bananas.

Exam 1: Ten Principles of Economics

The income of a typical worker in a country is most closely linked to which of the following?

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

The study of how society manages its scarce resources is most closely associated with which field of study?

Productivity is defined as the

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Economists use the word equality to describe a situation in which

Tracy quits her job, which pays $25,000 a year, to finish her college degree. Her annual college expenses are $12,000 for tuition and fees and $1,000 for books. What is her opportunity cost of attending college for the year?

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

Which of the following is an example of something economists study?

In 2011, the average American earned about $48,000 while the average Nigerian earned about $1,200. Which of the following statements is likely?

Which of the following statements about markets is most accurate?

Market failure can be caused by

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

What are the two basic types of economies?

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

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

Causes of market failure include

When the government redistributes income from the wealthy to the poor,

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana

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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