Question 1

Give an example of government intervention that is intended to improve equality.

Accepted Answer

The income

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

Explain the concept of market failure.

Accepted Answer

Market failure is a situation

Question 4

Which of these activities will most likely impose an external cost?

Accepted Answer

A)  Betty plants flowers in her garden. 
B)  Bonnie gets a flu vaccine. 
C)  Bridget drives her car after having too much alcohol to drink. 
D)  Becky buys a new flat screen television. 
A)  Betty plants flowers in her garden. 
B)  Bonnie gets a flu vaccine. 
C)  Bridget drives her car after having too much alcohol to drink. 
D)  Becky buys a new flat screen television.

Question 5

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

Accepted Answer

A)  intended to reduce unemployment. 
B)  may lead to excessive inflation over time. 
C)  resulted in higher taxes and an increased supply of money. 
D)  Both a and b are correct. 
A)  intended to reduce unemployment. 
B)  may lead to excessive inflation over time. 
C)  resulted in higher taxes and an increased supply of money. 
D)  Both a and b are correct.

Question 6

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Accepted Answer

A)  David Ricardo 
B)  Thorstein Veblen 
C)  John Maynard Keynes 
D)  Adam Smith 
A)  David Ricardo 
B)  Thorstein Veblen 
C)  John Maynard Keynes 
D)  Adam Smith

Question 7

Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?

Accepted Answer

A)  Michelle can attend the concert only if she takes her sister with her. 
B)  Michael is hungry and homeless. 
C)  Andrea must repair the tire on her bike before she can ride it to class. 
D)  Dani must decide between going to Florida or Brazil for spring break. 
A)  Michelle can attend the concert only if she takes her sister with her. 
B)  Michael is hungry and homeless. 
C)  Andrea must repair the tire on her bike before she can ride it to class. 
D)  Dani must decide between going to Florida or Brazil for spring break.

Question 8

The increase in living standards of American workers over the past century is primarily due to

Accepted Answer

A)  the success of labor unions. 
B)  minimum-wage laws. 
C)  improvements in productivity. 
D)  None of the above are correct. 
A)  the success of labor unions. 
B)  minimum-wage laws. 
C)  improvements in productivity. 
D)  None of the above are correct.

Question 9

In a market economy, economic activity is guided by

Accepted Answer

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

Question 10

Scenario 1-5
Suppose that you have a choice between going to the movies with a friend for three hours or working at your job. If you go to the movies, you will spend $12 on a ticket and $6 on popcorn. If you choose to work, you will earn $10 an hour.
-Refer to Scenario 1-5. What is your opportunity cost of going to the movies?

Accepted Answer

The answer of Scenario 1-5
Suppose that you have a choice...

Question 11

Which of the following is an important cause of inflation in an economy?

Accepted Answer

A)  increases in productivity in the economy 
B)  the influence of positive externalities on the economy 
C)  lack of property rights in the economy 
D)  growth in the quantity of money in the economy 
A)  increases in productivity in the economy 
B)  the influence of positive externalities on the economy 
C)  lack of property rights in the economy 
D)  growth in the quantity of money in the economy

Question 12

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

Accepted Answer

A)  the value of a good to society, but not the cost of making it. 
B)  the cost of making a good to society, but not its value. 
C)  both the value of a good to society and the cost of making it. 
D)  neither the value of a good to society nor the cost of making it. 
A)  the value of a good to society, but not the cost of making it. 
B)  the cost of making a good to society, but not its value. 
C)  both the value of a good to society and the cost of making it. 
D)  neither the value of a good to society nor the cost of making it.

Question 13

In less than two years in the early 1920s, the cost of a German newspaper rose from 0.30 marks to 70,000,000 marks. This is a spectacular example of

Accepted Answer

A)  market power caused by a change in the country's standard of living. 
B)  market power caused by a single firm controlling the newspaper production. 
C)  inflation caused by increased productivity in the economy. 
D)  inflation caused by an increase in the quantity of money in the economy. 
A)  market power caused by a change in the country's standard of living. 
B)  market power caused by a single firm controlling the newspaper production. 
C)  inflation caused by increased productivity in the economy. 
D)  inflation caused by an increase in the quantity of money in the economy.

Question 14

Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

Accepted Answer

A)  only if it allows us to obtain things that we couldn't make for ourselves. 
B)  because it allows specialization, which increases total output. 
C)  to us if we can gain and the others involved in the trade lose. 
D)  in only a limited number of circumstances because others are typically self-interested. 
A)  only if it allows us to obtain things that we couldn't make for ourselves. 
B)  because it allows specialization, which increases total output. 
C)  to us if we can gain and the others involved in the trade lose. 
D)  in only a limited number of circumstances because others are typically self-interested.

Question 15

If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be irrational for the railroad to allow any passenger to ride for less than $75.

Accepted Answer

A) True 
 B)False

Question 16

A marginal change is a small incremental adjustment to an existing plan of action.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a principle concerning how people interact?

Accepted Answer

A)  Markets are usually a good way to organize economic activity. 
B)  Rational people think at the margin. 
C)  People respond to incentives. 
D)  All of the above are correct. 
A)  Markets are usually a good way to organize economic activity. 
B)  Rational people think at the margin. 
C)  People respond to incentives. 
D)  All of the above are correct.

Question 18

When a government program is justified not on its merits but on the number of jobs it will create,

Accepted Answer

A)  the program is an efficient use of taxpayer dollars. 
B)  it should be approved only if the unemployment rate is low. 
C)  taxes should be raised to fund the program. 
D)  it is known as the "broken window fallacy." 
A)  the program is an efficient use of taxpayer dollars. 
B)  it should be approved only if the unemployment rate is low. 
C)  taxes should be raised to fund the program. 
D)  it is known as the "broken window fallacy."

Question 19

For most students, the largest single cost of a college education is

Accepted Answer

A)  the wages given up to attend school. 
B)  tuition, fees, and books. 
C)  room and board. 
D)  transportation, parking, and entertainment. 
A)  the wages given up to attend school. 
B)  tuition, fees, and books. 
C)  room and board. 
D)  transportation, parking, and entertainment.

Question 20

Efficiency means that

Accepted Answer

A)  society is conserving resources in order to save them for the future. 
B)  society's goods and services are distributed equally among society's members. 
C)  society's goods and services are distributed fairly, though not necessarily equally, among society's members. 
D)  society is getting the maximum benefits from its scarce resources. 
A)  society is conserving resources in order to save them for the future. 
B)  society's goods and services are distributed equally among society's members. 
C)  society's goods and services are distributed fairly, though not necessarily equally, among society's members. 
D)  society is getting the maximum benefits from its scarce resources.

Exam 1: Ten Principles of Economics

Give an example of government intervention that is intended to improve equality.

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.

Explain the concept of market failure.

Which of these activities will most likely impose an external cost?

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?

The increase in living standards of American workers over the past century is primarily due to

In a market economy, economic activity is guided by

Which of the following is an important cause of inflation in an economy?

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

In less than two years in the early 1920s, the cost of a German newspaper rose from 0.30 marks to 70,000,000 marks. This is a spectacular example of

Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be irrational for the railroad to allow any passenger to ride for less than $75.

A marginal change is a small incremental adjustment to an existing plan of action.

Which of the following is a principle concerning how people interact?

When a government program is justified not on its merits but on the number of jobs it will create,

For most students, the largest single cost of a college education is

Efficiency means that

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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