Question 1

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.

Question 2

What are the two short­run effects of increasing the quantity of nation's money?

Accepted Answer

The answer of What are the two short­run effects of...

Question 3

What is the most important factor that explains differences in living standards across countries?

Accepted Answer

A)  the quantity of money 
B)  the level of unemployment 
C)  productivity 
D)  equality

Question 4

John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that

Accepted Answer

A)  trade can make everyone better off. 
B)  people face trade-offs. 
C)  rational people think at the margin. 
D)  people respond to incentives.

Question 5

Market failure refers to a situation in which the market does not allocate resources efficiently.

Accepted Answer

A) True 
 B)False

Question 6

For which of the following individuals would the opportunity cost of going to college be highest?

Accepted Answer

A)  a promising young mathematician who will command a high salary once she earns her college degree 
B)  a student with average grades who has never held a job 
C)  a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree 
D)  a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball

Question 7

Trade

Accepted Answer

A)  allows specialization, which increases costs. 
B)  allows specialization, which reduces costs. 
C)  reduces specialization, which increases costs. 
D)  reduces specialization, which reduces costs.

Question 8

U.S. laws requiring that drivers wear seat belts have resulted in

Accepted Answer

A)  a reduction in both driver deaths and pedestrian deaths. 
B)  fewer accidents and fewer deaths per accident. 
C)  fewer driver deaths, fewer accidents and fewer pedestrian deaths. 
D)  little change in the number of driver deaths, but more accidents and more pedestrian deaths.

Question 9

Productivity is defined as the

Accepted Answer

A)  amount of goods and services produced from each unit of labor input. 
B)  number of workers required to produce a given amount of goods and services. 
C)  amount of labor that can be saved by replacing workers with machines. 
D)  actual amount of effort workers put into an hour of working time.

Question 10

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Accepted Answer

A)  the $60 she earns working. 
B)  the $60 minus the enjoyment she would have received from going to the park. 
C)  the enjoyment she would have received had she gone to the park. 
D)  nothing, since she would have received less than $60 worth of enjoyment from going to the park.

Question 11

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that

Accepted Answer

A)  trade can make everyone better off. 
B)  people face trade-offs. 
C)  rational people think at the margin. 
D)  decisions made at the margin are not particularly important.

Question 12

If the government were to intervene and set the rent for apartments in New York City below the market rent, then we would expect, relative to the market outcome,

Accepted Answer

A)  an increase in the number of people wanting to live in apartments in New York City. 
B)  a decrease in the number of people wanting to live in apartments in New York City. 
C)  an increase in the number of apartments available for rent in New York City. 
D)  None of the above is correct.

Question 13

Resources are

Accepted Answer

A)  scarce for households but plentiful for economies. 
B)  plentiful for households but scarce for economies. 
C)  scarce for households and scarce for economies. 
D)  plentiful for households and plentiful for economies.

Question 14

Maureen's college raises the cost of room and board per semester. This increase raises Maureen's opportunity cost of attending college

Accepted Answer

A)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost reduces Maureen's incentive to attend college. 
B)  even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost increases Maureen's incentive to attend college. 
C)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Maureen's incentive to attend college. 
D)  only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost increases Maureen's incentive to attend college.

Question 15

If the government were to intervene and set the price of a dozen eggs above the market price, then we would expect, relative to the market outcome,

Accepted Answer

A)  an increase in the number of eggs people want to buy and an increase in the number of eggs farmers want to sell. 
B)  an increase in the number of eggs people want to buy and a decrease in the number of eggs farmers want to sell. 
C)  a decrease in the number of eggs people want to buy and an increase in the number of eggs farmers want to sell. 
D)  a decrease in the number of eggs people want to buy and a decrease in the number of eggs farmers want to sell.

Question 16

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.

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.

Question 18

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

Accepted Answer

A) True 
 B)False

Question 19

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Accepted Answer

A)  U.S. textile workers belong to a union, whereas Vietnamese textile workers do not belong to a union. 
B)  There is little demand for cotton cloth in Vietnam and great demand in the U.S. 
C)  Labor is more productive making cotton cloth with a mechanical loom than with a hand loom. 
D)  Vietnam has a low-wage policy to make its textile industry more competitive in world markets.

Question 20

The principle that "people face tradeoffs" applies to

Accepted Answer

A)  individuals. 
B)  families. 
C)  societies. 
D)  All of the above are correct.

Exam 1: Ten Principles of Economics

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

What are the two shortrun effects of increasing the quantity of nation's money?

What is the most important factor that explains differences in living standards across countries?

John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that

Market failure refers to a situation in which the market does not allocate resources efficiently.

For which of the following individuals would the opportunity cost of going to college be highest?

Trade

U.S. laws requiring that drivers wear seat belts have resulted in

Productivity is defined as the

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that

If the government were to intervene and set the rent for apartments in New York City below the market rent, then we would expect, relative to the market outcome,

Resources are

Maureen's college raises the cost of room and board per semester. This increase raises Maureen's opportunity cost of attending college

If the government were to intervene and set the price of a dozen eggs above the market price, then we would expect, relative to the market outcome,

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?

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

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

The principle that "people face tradeoffs" applies to

Exam 1: Ten Principles of Economics

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

What are the two short­run effects of increasing the quantity of nation's money?

What is the most important factor that explains differences in living standards across countries?

John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that

Market failure refers to a situation in which the market does not allocate resources efficiently.

For which of the following individuals would the opportunity cost of going to college be highest?

Trade

U.S. laws requiring that drivers wear seat belts have resulted in

Productivity is defined as the

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that

If the government were to intervene and set the rent for apartments in New York City below the market rent, then we would expect, relative to the market outcome,

Resources are

Maureen's college raises the cost of room and board per semester. This increase raises Maureen's opportunity cost of attending college

If the government were to intervene and set the price of a dozen eggs above the market price, then we would expect, relative to the market outcome,

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?

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

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

The principle that "people face tradeoffs" applies to

What are the two shortrun effects of increasing the quantity of nation's money?