Question 1

Economics is the study of how society allocates its unlimited resources.

Accepted Answer

A) True 
 B)False

Question 2

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 3

To promote good economic outcomes, policymakers should strive to enact policies that

Accepted Answer

A)  enhance productivity. 
B)  enhance individuals' market power. 
C)  result in a rapidly-growing quantity of money. 
D)  All of the above are correct. 
A)  enhance productivity. 
B)  enhance individuals' market power. 
C)  result in a rapidly-growing quantity of money. 
D)  All of the above are correct.

Question 4

The short-run tradeoff between inflation and unemployment implies that, in the short run,

Accepted Answer

A)  a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
B)  an increase in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
C)  policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate. 
D)  policymakers can influence the inflation rate, but not the unemployment rate. 
A)  a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
B)  an increase in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. 
C)  policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate. 
D)  policymakers can influence the inflation rate, but not the unemployment rate.

Question 5

Which of the following is an example of an externality?

Accepted Answer

A)  Annie purchases a new dress. 
B)  Antonio's dog barks loudly during the night, waking his neighbors. 
C)  Harold sells a book to Cathy, who reads the book and then gives it to James as a gift. 
D)  Gloria watches a scary movie. 
A)  Annie purchases a new dress. 
B)  Antonio's dog barks loudly during the night, waking his neighbors. 
C)  Harold sells a book to Cathy, who reads the book and then gives it to James as a gift. 
D)  Gloria watches a scary movie.

Question 6

An example of a firm with market power is a

Accepted Answer

A)  delicatessen in New York. 
B)  cable TV provider in Tulsa. 
C)  clothing store in Chicago. 
D)  family farm in Kansas. 
A)  delicatessen in New York. 
B)  cable TV provider in Tulsa. 
C)  clothing store in Chicago. 
D)  family farm in Kansas.

Question 7

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 8

Explain the concept of externality and give an example.

Accepted Answer

The impact of one pe

Question 9

In the short run, which of the following is not correct?

Accepted Answer

A)  Increasing the money supply increases the demand for goods and services. 
B)  Increasing the money supply encourages firms to hire more workers. 
C)  Lowering the money supply leads to a higher level of unemployment. 
D)  Policies that encourage higher employment will also induce a lower rate of inflation. 
A)  Increasing the money supply increases the demand for goods and services. 
B)  Increasing the money supply encourages firms to hire more workers. 
C)  Lowering the money supply leads to a higher level of unemployment. 
D)  Policies that encourage higher employment will also induce a lower rate of inflation.

Question 10

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 11

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

Accepted Answer

A)  A college student buys a deck of cards to play solitaire in her dorm room. 
B)  An elderly woman plants a flower garden on the vacant lot next to her house. 
C)  An executive purchases a book to read on a business trip. 
D)  A ten-year-old uses his allowance to buy new Nike shoes. 
A)  A college student buys a deck of cards to play solitaire in her dorm room. 
B)  An elderly woman plants a flower garden on the vacant lot next to her house. 
C)  An executive purchases a book to read on a business trip. 
D)  A ten-year-old uses his allowance to buy new Nike shoes.

Question 12

Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper. This scenario is an example of which principle of economics?

Accepted Answer

A)  Trade can make everyone better off. 
B)  Markets are usually a good way to organize economic activity. 
C)  Governments can sometimes improve market outcomes. 
D)  Prices rise when the government prints too much money. 
A)  Trade can make everyone better off. 
B)  Markets are usually a good way to organize economic activity. 
C)  Governments can sometimes improve market outcomes. 
D)  Prices rise when the government prints too much money.

Question 13

Maureen's college raises the cost of room and board per semester. This increase raises Maureen's opportunity cost of attending college

Accepted Answer

A)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost reduces Maureen's incentive to attend college. 
B)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost increases Maureen's incentive to attend college. 
C)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Maureen's incentive to attend college. 
D)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost increases Maureen's incentive to attend college. 
A)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost reduces Maureen's incentive to attend college. 
B)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost increases Maureen's incentive to attend college. 
C)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Maureen's incentive to attend college. 
D)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost increases Maureen's incentive to attend college.

Question 14

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce

Accepted Answer

A)  efficiency. 
B)  equality. 
C)  externalities. 
D)  productivity. 
A)  efficiency. 
B)  equality. 
C)  externalities. 
D)  productivity.

Question 15

Scarcity means that there is less of a good or resource available than people wish to have.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not an example of the opportunity cost of going to school?

Accepted Answer

A)  The money a student could have earned by working if he had not gone to college. 
B)  The nap a student could have enjoyed if he had not attended class. 
C)  The party a student could have enjoyed if he had not stayed in to study for his exam. 
D)  The money a student spends on rent for his apartment while attending school. 
A)  The money a student could have earned by working if he had not gone to college. 
B)  The nap a student could have enjoyed if he had not attended class. 
C)  The party a student could have enjoyed if he had not stayed in to study for his exam. 
D)  The money a student spends on rent for his apartment while attending school.

Question 17

Which of the following can lead to market failure?

Accepted Answer

A)  externalities and market power 
B)  externalities but not market power 
C)  market power but not externalities 
D)  neither externalities nor market power 
A)  externalities and market power 
B)  externalities but not market power 
C)  market power but not externalities 
D)  neither externalities nor market power

Question 18

The "invisible hand" directs economic activity through

Accepted Answer

A)  advertising. 
B)  prices. 
C)  central planning. 
D)  government regulations. 
A)  advertising. 
B)  prices. 
C)  central planning. 
D)  government regulations.

Question 19

In the short run, an increase in the money supply is likely to lead to

Accepted Answer

A)  lower unemployment and lower inflation. 
B)  lower unemployment and higher inflation. 
C)  higher unemployment and lower inflation. 
D)  higher unemployment and higher inflation. 
A)  lower unemployment and lower inflation. 
B)  lower unemployment and higher inflation. 
C)  higher unemployment and lower inflation. 
D)  higher unemployment and higher inflation.

Question 20

Economists use the term to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

Accepted Answer

The answer of Economists use the term to refer to...

Exam 1: Ten Principles of Economics

Economics is the study of how society allocates its unlimited resources.

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

To promote good economic outcomes, policymakers should strive to enact policies that

The short-run tradeoff between inflation and unemployment implies that, in the short run,

Which of the following is an example of an externality?

An example of a firm with market power is a

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

Explain the concept of externality and give an example.

In the short run, which of the following is not correct?

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

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

Maureen's college raises the cost of room and board per semester. This increase raises Maureen's opportunity cost of attending college

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce

Scarcity means that there is less of a good or resource available than people wish to have.

Which of the following is not an example of the opportunity cost of going to school?

Which of the following can lead to market failure?

The "invisible hand" directs economic activity through

In the short run, an increase in the money supply is likely to lead to

Economists use the term to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

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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