Question 1

A species of snakes became extinct due to pollution in a river where the snakes once lived. This is an example of

Accepted Answer

A)  a market failure caused by an externality. 
B)  a market failure caused by market power. 
C)  a market failure caused by equality. 
D)  There is no market failure in this case. 
A)  a market failure caused by an externality. 
B)  a market failure caused by market power. 
C)  a market failure caused by equality. 
D)  There is no market failure in this case.

Question 2

Barb's aunt gave her $100 for her birthday with the condition that Barb buy herself something. In deciding how to spend the money, Barb narrows her options down to four choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally she decides on Option B. The opportunity cost of this decision is

Accepted Answer

A)  the value to Barb of the option she would have chosen had Option B not been available. 
B)  the value to Barb of Options A, C and D combined. 
C)  the average of the values to Barb of Options A, C, and D. 
D)  $100. 
A)  the value to Barb of the option she would have chosen had Option B not been available. 
B)  the value to Barb of Options A, C and D combined. 
C)  the average of the values to Barb of Options A, C, and D. 
D)  $100.

Question 3

In the long run the primary effect of increasing the quantity of money is higher prices.

Accepted Answer

A) True 
 B)False

Question 4

The self-interest of the participants in an economy is guided into promoting general economic self-interest by

Accepted Answer

A)  the invisible hand. 
B)  market power. 
C)  government intervention. 
D)  oikonomos. 
A)  the invisible hand. 
B)  market power. 
C)  government intervention. 
D)  oikonomos.

Question 5

The "invisible hand" works to promote general well­being in the economy primarily through

Accepted Answer

A)  government intervention. 
B)  the political process. 
C)  people's pursuit of self­interest. 
D)  altruism. 
A)  government intervention. 
B)  the political process. 
C)  people's pursuit of self­interest. 
D)  altruism.

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 studying economics?

Accepted Answer

The enjoyment you wo

Question 7

Benefits from trade would not include

Accepted Answer

A)  the ability of people and nations to specialize. 
B)  a greater variety of goods and services becoming available. 
C)  less competition. 
D)  lower prices. 
A)  the ability of people and nations to specialize. 
B)  a greater variety of goods and services becoming available. 
C)  less competition. 
D)  lower prices.

Question 8

Inflation increases the value of money.

Accepted Answer

A) True 
 B)False

Question 9

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

Accepted Answer

A)  an increase in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
B)  an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. 
C)  a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
D)  a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. 
A)  an increase in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
B)  an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide. 
C)  a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide. 
D)  a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

Question 10

Economists use the term to refer to fluctuations in economic activity, such as employment and production.

Accepted Answer

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

Question 11

When the "invisible hand" guides economic activity, prices of products reflect

Accepted Answer

A)  only the values that society places on those products. 
B)  only the costs to society of producing those products. 
C)  both the values that society places on those products and the costs to society of producing those products. 
D)  none of the above; when the "invisible hand" guides economic activity, prices of products are set by the government in a manner that is thought to be "fair." 
A)  only the values that society places on those products. 
B)  only the costs to society of producing those products. 
C)  both the values that society places on those products and the costs to society of producing those products. 
D)  none of the above; when the "invisible hand" guides economic activity, prices of products are set by the government in a manner that is thought to be "fair."

Question 12

Which of the following firms is most likely to have market power?

Accepted Answer

A)  a grocery store in a metropolitan area 
B)  a convenience store in a suburb 
C)  a pub in a college town 
D)  the only gasoline station in a rural area 
A)  a grocery store in a metropolitan area 
B)  a convenience store in a suburb 
C)  a pub in a college town 
D)  the only gasoline station in a rural area

Question 13

Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.

Accepted Answer

A) True 
 B)False

Question 14

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Accepted Answer

A)  is more efficient and more equal for society. 
B)  is more efficient but less equal for society. 
C)  is more equal but less efficient for society. 
D)  is less equal and less efficient for society. 
A)  is more efficient and more equal for society. 
B)  is more efficient but less equal for society. 
C)  is more equal but less efficient for society. 
D)  is less equal and less efficient for society.

Question 15

Give an example of government intervention that is intended to reduce an externality.

Accepted Answer

Laws that restrict t

Question 16

Katie is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $2,500 and replacing the roof will cost her $9,000. Katie expects the new carpeting to increase the value of her house by $3,000 and the new roof to increase the value of her house by $7,000.

Accepted Answer

A)  She should make both improvements to her house. 
B)  She should replace the carpeting but not replace the roof. 
C)  She should replace the roof but not replace the carpeting. 
D)  She should not make either improvement to her house. 
A)  She should make both improvements to her house. 
B)  She should replace the carpeting but not replace the roof. 
C)  She should replace the roof but not replace the carpeting. 
D)  She should not make either improvement to her house.

Question 17

A society allocates its scarce resources to various jobs. These scarce resources include

Accepted Answer

A)  land. 
B)  people. 
C)  machines. 
D)  All of the above are correct. 
A)  land. 
B)  people. 
C)  machines. 
D)  All of the above are correct.

Question 18

Air pollution from burning fossil fuels causes damages to crops and public health. This is an example of

Accepted Answer

A)  a market failure caused by an externality. 
B)  a market failure caused by market power. 
C)  a market failure caused by equality. 
D)  There is no market failure in this case. 
A)  a market failure caused by an externality. 
B)  a market failure caused by market power. 
C)  a market failure caused by equality. 
D)  There is no market failure in this case.

Question 19

If an externality is present in a market, economic efficiency may be enhanced by

Accepted Answer

A)  government intervention. 
B)  a decrease in foreign competition. 
C)  fewer market participants. 
D)  weaker property rights. 
A)  government intervention. 
B)  a decrease in foreign competition. 
C)  fewer market participants. 
D)  weaker property rights.

Question 20

The term used to describe a situation in which markets do not allocate resources efficiently is

Accepted Answer

A)  economic meltdown. 
B)  market failure. 
C)  equilibrium. 
D)  the effect of the invisible hand. 
A)  economic meltdown. 
B)  market failure. 
C)  equilibrium. 
D)  the effect of the invisible hand.

Exam 1: Ten Principles of Economics

A species of snakes became extinct due to pollution in a river where the snakes once lived. This is an example of

In the long run the primary effect of increasing the quantity of money is higher prices.

The self-interest of the participants in an economy is guided into promoting general economic self-interest by

The "invisible hand" works to promote general well­being in the economy primarily through

Benefits from trade would not include

Inflation increases the value of money.

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

Economists use the term to refer to fluctuations in economic activity, such as employment and production.

When the "invisible hand" guides economic activity, prices of products reflect

Which of the following firms is most likely to have market power?

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Give an example of government intervention that is intended to reduce an externality.

A society allocates its scarce resources to various jobs. These scarce resources include

Air pollution from burning fossil fuels causes damages to crops and public health. This is an example of

If an externality is present in a market, economic efficiency may be enhanced by

The term used to describe a situation in which markets do not allocate resources efficiently is

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

Filters

The "invisible hand" works to promote general wellbeing in the economy primarily through