Question 1

Government policies resulting in reduced efficiency include

Accepted Answer

A)  (i) only 
B)  (ii) only 
C)  (i) and (ii) only 
D)  (i), (ii), and (iii) 
A)  (i) only 
B)  (ii) only 
C)  (i) and (ii) only 
D)  (i), (ii), and (iii)

Question 2

A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company. This instance serves as an example of

Accepted Answer

A)  market power. 
B)  inefficient trade. 
C)  inadequate enforcement of property rights. 
D)  the invisible hand at work. 
A)  market power. 
B)  inefficient trade. 
C)  inadequate enforcement of property rights. 
D)  the invisible hand at work.

Question 3

The government can potentially improve market outcomes if market inequalities or market failure exists.

Accepted Answer

A) True 
 B)False

Question 4

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

Accepted Answer

A)  The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
B)  The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
C)  Only half of the cost of the parking permit is part of the opportunity cost of attending college. 
D)  The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances. 
A)  The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
B)  The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 
C)  Only half of the cost of the parking permit is part of the opportunity cost of attending college. 
D)  The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances.

Question 5

In the early 1980s, U.S. economic policy was directed toward reducing inflation. What would you have expected to observe during this short period of time?

Accepted Answer

A)  Inflation fell and unemployment fell. 
B)  Inflation and unemployment were both unaffected. 
C)  Inflation fell and unemployment increased. 
D)  Inflation fell and unemployment was unchanged. 
A)  Inflation fell and unemployment fell. 
B)  Inflation and unemployment were both unaffected. 
C)  Inflation fell and unemployment increased. 
D)  Inflation fell and unemployment was unchanged.

Question 6

Scenario 1-4 You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $12.00 on a ticket and $4.75 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 15 points.
-Refer to Scenario 1-4. What is your opportunity cost of going to the movies?

Accepted Answer

$16.75 and

Question 7

The cost of an action is measured in terms of foregone opportunities.

Accepted Answer

A) True 
 B)False

Question 8

Something that induces a person to act is called

Accepted Answer

A)  a trade-off. 
B)  a policy. 
C)  an incentive. 
D)  an opportunity cost. 
A)  a trade-off. 
B)  a policy. 
C)  an incentive. 
D)  an opportunity cost.

Question 9

Both The Wealth of Nations and the Declaration of Independence share the point of view that

Accepted Answer

A)  every person is entitled to life, liberty, and the pursuit of happiness. 
B)  individuals are best left to their own devices without the government guiding their actions. 
C)  the government plays a central role in organizing a market economy. 
D)  because of human nature a strong legal system is necessary for a market system to survive. 
A)  every person is entitled to life, liberty, and the pursuit of happiness. 
B)  individuals are best left to their own devices without the government guiding their actions. 
C)  the government plays a central role in organizing a market economy. 
D)  because of human nature a strong legal system is necessary for a market system to survive.

Question 10

In communism, central planners decide which of the following?

Accepted Answer

A)  what goods and services will be produced 
B)  how much will be produced 
C)  who produced and consumed the goods and services 
D)  All of the above are correct. 
A)  what goods and services will be produced 
B)  how much will be produced 
C)  who produced and consumed the goods and services 
D)  All of the above are correct.

Question 11

One effect of the government-imposed seat belt law in the U.S. has been

Accepted Answer

A)  a dramatic decrease in the number of pedestrian deaths. 
B)  safer driving. 
C)  an increase in the number of accidents. 
D)  a dramatic decrease in the number of driver deaths. 
A)  a dramatic decrease in the number of pedestrian deaths. 
B)  safer driving. 
C)  an increase in the number of accidents. 
D)  a dramatic decrease in the number of driver deaths.

Question 12

The broken window fallacy states that when a window breaks and someone spends money to repair it, they have created new economic activity that would not have otherwise taken place.

Accepted Answer

A) True 
 B)False

Question 13

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

Accepted Answer

A)  guns and butter. 
B)  efficiency and equality. 
C)  inflation and unemployment. 
D)  work and leisure. 
A)  guns and butter. 
B)  efficiency and equality. 
C)  inflation and unemployment. 
D)  work and leisure.

Question 14

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

Accepted Answer

A)  is $40. 
B)  is $80. 
C)  is $120. 
D)  cannot be determined from the information given. 
A)  is $40. 
B)  is $80. 
C)  is $120. 
D)  cannot be determined from the information given.

Question 15

Which of the following can policy do?

Accepted Answer

A)  alter incentives 
B)  alter trade-offs 
C)  change opportunity costs 
D)  All of the above are correct. 
A)  alter incentives 
B)  alter trade-offs 
C)  change opportunity costs 
D)  All of the above are correct.

Question 16

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

Accepted Answer

A)  $50. 
B)  $500. 
C)  $50,000. 
D)  This cannot be determined from the information given. 
A)  $50. 
B)  $500. 
C)  $50,000. 
D)  This cannot be determined from the information given.

Question 17

Almost all variation in living standards is attributable to differences in countries'

Accepted Answer

A)  population growth rates. 
B)  productivity. 
C)  systems of public education. 
D)  taxes. 
A)  population growth rates. 
B)  productivity. 
C)  systems of public education. 
D)  taxes.

Question 18

Economics is the study of how society manages its

Accepted Answer

A)  limited wants and unlimited resources. 
B)  unlimited wants and unlimited resources. 
C)  limited wants and limited resources. 
D)  unlimited wants and limited resources. 
A)  limited wants and unlimited resources. 
B)  unlimited wants and unlimited resources. 
C)  limited wants and limited resources. 
D)  unlimited wants and limited resources.

Question 19

Which of the following products would be considered scarce?

Accepted Answer

A)  bread 
B)  baseballs autographed by Babe Ruth 
C)  motorcycles 
D)  All of the above are correct. 
A)  bread 
B)  baseballs autographed by Babe Ruth 
C)  motorcycles 
D)  All of the above are correct.

Question 20

To say that government intervenes in the economy to promote efficiency is to say that government is attempting to

Accepted Answer

A)  create a more fair distribution of income. 
B)  change the way in which the economic pie is divided. 
C)  enlarge the economic pie. 
D)  All of the above are correct. 
A)  create a more fair distribution of income. 
B)  change the way in which the economic pie is divided. 
C)  enlarge the economic pie. 
D)  All of the above are correct.

Exam 1: Ten Principles of Economics

Government policies resulting in reduced efficiency include

A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company. This instance serves as an example of

The government can potentially improve market outcomes if market inequalities or market failure exists.

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

In the early 1980s, U.S. economic policy was directed toward reducing inflation. What would you have expected to observe during this short period of time?

The cost of an action is measured in terms of foregone opportunities.

Something that induces a person to act is called

Both The Wealth of Nations and the Declaration of Independence share the point of view that

In communism, central planners decide which of the following?

One effect of the government-imposed seat belt law in the U.S. has been

The broken window fallacy states that when a window breaks and someone spends money to repair it, they have created new economic activity that would not have otherwise taken place.

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

Which of the following can policy do?

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

Almost all variation in living standards is attributable to differences in countries'

Economics is the study of how society manages its

Which of the following products would be considered scarce?

To say that government intervenes in the economy to promote efficiency is to say that government is attempting to

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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