Question 1

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

Accepted Answer

A)  Your full room-and-board expenses should always be included. 
B)  None of your room-and-board expenses should ever be included. 
C)  You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college. 
D)  You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college. 
A)  Your full room-and-board expenses should always be included. 
B)  None of your room-and-board expenses should ever be included. 
C)  You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college. 
D)  You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college.

Question 2

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A)  command economy. 
B)  centrally-planned economy. 
C)  market economy. 
D)  All of the above are correct. 
A)  command economy. 
B)  centrally-planned economy. 
C)  market economy. 
D)  All of the above are correct.

Question 3

Public policies

Accepted Answer

A)  may be able to improve either economic efficiency or equality. 
B)  may be able to improve economic efficiency but cannot improve equality. 
C)  may be able to improve equality but cannot improve economic efficiency. 
D)  cannot improve either equality or economic efficiency. 
A)  may be able to improve either economic efficiency or equality. 
B)  may be able to improve economic efficiency but cannot improve equality. 
C)  may be able to improve equality but cannot improve economic efficiency. 
D)  cannot improve either equality or economic efficiency.

Question 4

In a market economy, who makes the decisions that guide most economic activity?

Accepted Answer

A)  firms only 
B)  households only 
C)  firms and households 
D)  government 
A)  firms only 
B)  households only 
C)  firms and households 
D)  government

Question 5

If Switzerland chooses to engage in trade, it

Accepted Answer

A)  will only benefit if it trades with countries that produce goods Switzerland cannot produce. 
B)  cannot benefit if it trades with less developed countries. 
C)  should first attempt to produce the good itself. 
D)  can benefit by trading with any other country. 
A)  will only benefit if it trades with countries that produce goods Switzerland cannot produce. 
B)  cannot benefit if it trades with less developed countries. 
C)  should first attempt to produce the good itself. 
D)  can benefit by trading with any other country.

Question 6

Government policies that improve equality usually increase efficiency at the same time.

Accepted Answer

A) True 
 B)False

Question 7

Prices direct economic activity in a market economy by

Accepted Answer

A)  influencing the actions of buyers and sellers. 
B)  reducing scarcity of the goods and services produced. 
C)  eliminating the need for government intervention. 
D)  allocating goods and services in the most equitable way. 
A)  influencing the actions of buyers and sellers. 
B)  reducing scarcity of the goods and services produced. 
C)  eliminating the need for government intervention. 
D)  allocating goods and services in the most equitable way.

Question 8

In the 1990s, inflation in the United States was

Accepted Answer

A)  very close to zero. 
B)  about 3 percent per year. 
C)  about 6 percent per year. 
D)  commonly referred to as "public enemy number one." 
A)  very close to zero. 
B)  about 3 percent per year. 
C)  about 6 percent per year. 
D)  commonly referred to as "public enemy number one."

Question 9

High-school athletes who skip college to become professional athletes

Accepted Answer

A)  obviously do not understand the value of a college education. 
B)  usually do so because they cannot get into college. 
C)  understand that the opportunity cost of attending college is very high. 
D)  are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes. 
A)  obviously do not understand the value of a college education. 
B)  usually do so because they cannot get into college. 
C)  understand that the opportunity cost of attending college is very high. 
D)  are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes.

Question 10

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

Accepted Answer

A)  its average cost is greater than its marginal cost. 
B)  its average cost and its marginal cost are equal. 
C)  its average cost is less than its marginal cost. 
D)  This cannot be determined from the information given. 
A)  its average cost is greater than its marginal cost. 
B)  its average cost and its marginal cost are equal. 
C)  its average cost is less than its marginal cost. 
D)  This cannot be determined from the information given.

Question 11

The marginal benefit Kyra gets from eating a second sandwich is

Accepted Answer

A)  the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich. 
B)  the same as the total benefit she gets from eating two sandwiches. 
C)  less than the marginal cost of eating the second sandwich since she chose to eat the second sandwich. 
D)  the total benefit Kyra gets from eating three sandwiches minus the total benefit she gets from eating two sandwiches. 
A)  the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich. 
B)  the same as the total benefit she gets from eating two sandwiches. 
C)  less than the marginal cost of eating the second sandwich since she chose to eat the second sandwich. 
D)  the total benefit Kyra gets from eating three sandwiches minus the total benefit she gets from eating two sandwiches.

Question 12

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.76 million. Which of the following statements is correct?

Accepted Answer

A)  For the first 30 houses, the average cost per house was $250,000. 
B)  The marginal cost of the 31st house, if it is built, will be $260,000. 
C)  If the company can experience a marginal benefit of $275,000 by building the 31st house, then the company should build it. 
D)  All of the above are correct. 
A)  For the first 30 houses, the average cost per house was $250,000. 
B)  The marginal cost of the 31st house, if it is built, will be $260,000. 
C)  If the company can experience a marginal benefit of $275,000 by building the 31st house, then the company should build it. 
D)  All of the above are correct.

Question 13

In considering how to allocate its scarce resources among its various members, a household considers

Accepted Answer

A)  each member's abilities. 
B)  each member's efforts. 
C)  each member's desires. 
D)  All of the above are correct. 
A)  each member's abilities. 
B)  each member's efforts. 
C)  each member's desires. 
D)  All of the above are correct.

Question 14

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Accepted Answer

A) True 
 B)False

Question 15

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

Accepted Answer

A) True 
 B)False

Question 16

The term market failure refers to

Accepted Answer

A)  a situation in which the market on its own fails to allocate resources efficiently. 
B)  an unsuccessful advertising campaign which reduces demand for a product. 
C)  a situation in which competition among firms becomes ruthless. 
D)  a firm which is forced out of business because of losses. 
A)  a situation in which the market on its own fails to allocate resources efficiently. 
B)  an unsuccessful advertising campaign which reduces demand for a product. 
C)  a situation in which competition among firms becomes ruthless. 
D)  a firm which is forced out of business because of losses.

Question 17

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.
-Give an example of a trade-off faced by society.

Accepted Answer

Efficiency and equality; a cle

Question 18

For which of the following problems can well-designed public policy enhance economic efficiency?

Accepted Answer

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

Question 19

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents. As a student of economics, you know that

Accepted Answer

A)  this is a case of the "broken window fallacy." 
B)  this is a great use of taxpayer dollars. 
C)  this policy diverts money from spending somewhere else in the economy. 
D)  Both a and c are correct. 
A)  this is a case of the "broken window fallacy." 
B)  this is a great use of taxpayer dollars. 
C)  this policy diverts money from spending somewhere else in the economy. 
D)  Both a and c are correct.

Exam 1: Ten Principles of Economics

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

The decisions of firms and households are guided by prices and self-interest in a

Public policies

In a market economy, who makes the decisions that guide most economic activity?

If Switzerland chooses to engage in trade, it

Government policies that improve equality usually increase efficiency at the same time.

Prices direct economic activity in a market economy by

In the 1990s, inflation in the United States was

High-school athletes who skip college to become professional athletes

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

The marginal benefit Kyra gets from eating a second sandwich is

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.76 million. Which of the following statements is correct?

In considering how to allocate its scarce resources among its various members, a household considers

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

The term market failure refers to

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. -Give an example of a trade-off faced by society.

For which of the following problems can well-designed public policy enhance economic efficiency?

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents. As a student of economics, you know 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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