Question 1

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.

Question 2

Aiden and Zaria charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, six people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have six or five cars parked on their lawn does not affect their costs. From this information it follows that

Accepted Answer

A) they should leave the price at $10. 
B) it does not matter if they charge $10 or $15. 
C) they would do better charging $15 than $10. 
D) they should raise the price even more.

Question 3

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

The answer of One tradeoff society faces is between efficiency...

Question 4

Central planning refers to

Accepted Answer

A) markets guiding economic activity.Today many countries that had this system have abandoned it. 
B) markets guiding economic activity.Today many countries that did not have this system have implemented it. 
C) government guiding economic activity.Today many countries that had this system have abandoned it. 
D) government guiding economic activity.Today many countries that did not have this system have implemented it.

Question 5

A hair stylist currently cuts and colors hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Accepted Answer

A) Yes, because cutting hair is profitable. 
B) No, because he may not be able to sell more services. 
C) It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients. 
D) It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

Question 6

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is

Accepted Answer

A) the $22 she earns working. 
B) the $22 minus the enjoyment she would have received from going shopping. 
C) the enjoyment she would have received had she gone shopping. 
D) nothing, since she would have received less than $22 worth of enjoyment from going shopping.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

A rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

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...

Question 10

Trade with any nation can be mutually beneficial.

Accepted Answer

A) True 
 B)False

Question 11

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

Accepted Answer

A) True 
 B)False

Question 12

In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

Accepted Answer

A) 4 percent per year 
B) 5 percent per year 
C) 7 percent per year 
D) 8 percent per year

Question 13

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Accepted Answer

The answer of Define opportunity cost. What is the opportunity...

Question 14

In a centrally-planned economy, economic activity is guided by ______.

Accepted Answer

The answer of In a centrally-planned economy, economic activity is...

Question 15

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

Accepted Answer

A) True 
 B)False

Question 16

For a number of years country A had inflation of 3 percent but for the last five years has had inflation of 6 percent. Country B had inflation of 4 percent for many years, but very recently inflation unexpectedly rose to 9 percent. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

Accepted Answer

A) both country A and country B 
B) neither country A nor country B 
C) country A but not country B 
D) country B but not country A

Question 17

Scenario 1-6 It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors. -Refer to Scenario 1-6. What is the minimum price that would induce this company to produce the 601^st heart rate monitor?

Accepted Answer

The answer of Scenario 1-6
It costs a company $30,000 to...

Question 18

Fundamentally, economics deals with

Accepted Answer

A) scarcity. 
B) money. 
C) poverty. 
D) banking.

Question 19

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

A) the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. 
B) the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. 
C) producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. 
D) water prices are held artificially low by governments, since water is necessary for life.

Question 20

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A) There is no such thing as a free lunch. 
B) People buy more when prices are high than when prices are low. 
C) No matter how much people earn, they tend to spend more than they earn. 
D) Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Exam 1: Ten Principles of Economics

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

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.

Central planning refers to

A hair stylist currently cuts and colors hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is

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

A rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost.

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

Trade with any nation can be mutually beneficial.

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

In a centrally-planned economy, economic activity is guided by ______.

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

Fundamentally, economics deals with

People are willing to pay more for a diamond than for a bottle of water because

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?