Question 1

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.E) A) and C)
F) B) and D)

Question 2

Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?

Accepted Answer

A)   People respond to incentives
B)   Rational people think at the margin
C)   Trade can make everyone better off
D)   Markets are usually a good way to organize economic activityE) All of the above
F) C) and D)

Question 3

Which of the following is true?

Accepted Answer

A)   Efficiency refers to the size of the economic pie; equality refers to how the pie is divided.
B)   Government policies usually improve upon both equality and efficiency.
C)   As long as the economic pie continually gets larger, no one will have to go hungry.
D)   Efficiency and equality can both be achieved if the economic pie is cut into equal pieces.E) B) and C)
F) B) and D)

Question 4

One reason we need government, even in a market economy, is that

Accepted Answer

A)   there is insufficient market power in the absence of government.
B)   property rights are too strong in the absence of government.
C)   the invisible hand is not perfect.
D)   Both a and b are correct.E) A) and B)
F) A) and C)

Question 5

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.E) B) and C)
F) None of the above

Question 6

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.E) B) and C)
F) A) and B)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

In 2011, the average American earned about $48,000 while the average Nigerian earned about $1,200. Which of the following statements is likely?

Accepted Answer

A)   The average American purchases more televisions than the average Nigerian.
B)   The average American has better nutrition and healthcare than the average Nigerian.
C)   The average American has a longer life expectancy than the average Nigerian.
D)   All of the above are correct.E) B) and D)
F) C) and D)

Question 9

According to Adam Smith, the success of decentralized market economies is primarily due to

Accepted Answer

A)   the basic benevolence of society.
B)   society's legal system.
C)   individuals' pursuit of self-interest.
D)   partnerships that are forged between business and government.E) A) and B)
F) C) and D)

Question 10

The word "economy" comes from the Greek word oikonomos, which means

Accepted Answer

A)   "environment."
B)   "production."
C)   "one who manages a household."
D)   "one who makes decisions."E) C) and D)
F) B) and D)

Question 11

Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

Accepted Answer

A)   only if it allows us to obtain things that we couldn't make for ourselves.
B)   because it allows specialization, which increases total output.
C)   to us if we can gain and the others involved in the trade lose.
D)   in only a limited number of circumstances because others are typically self-interested.E) A) and D)
F) All of the above

Question 12

Betty's Bakery bakes fresh bread every morning. Any bread not sold by the end of the day is thrown away. A loaf of bread costs Betty $2.00 to produce, and she prices loaves of bread at $3.50 per loaf. Suppose near the end of one day Betty still has 12 loaves of bread on hand. Which of the following is correct?

Accepted Answer

A)   Betty should only sell the remaining bread for $3.50 per loaf since that is the regular price.
B)   Betty should only sell the remaining bread for $2.00 per loaf or more since that is what the bread costs to make.
C)   Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something.
D)   Betty should just throw the bread away and change the price of her bread starting tomorrow to make sure she sells all of her bread each day.E) A) and B)
F) None of the above

Question 13

Which of the following could reduce economic efficiency?

Accepted Answer

A)   laws that encourage lawsuits
B)   policies that redistribute income
C)   policies that impose significant restrictions on international trade
D)   All of the above are correctE) All of the above
F) A) and B)

Question 14

Debbie quits her job, which pays $30,000 a year, to finish her college degree. Her annual college expenses are $10,000 for tuition, $2,000 for books, and $700 for food. What is her opportunity cost of attending college for the year?

Accepted Answer

The answer of Debbie quits her job, which pays $30,000...

Question 15

The amount of goods and services produced from each unit of labor input is called

Accepted Answer

A)   opportunity cost.
B)   productivity.
C)   externality.
D)   marginal benefit.E) C) and D)
F) B) and C)

Question 16

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.E) B) and C)
F) A) and D)

Question 17

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Accepted Answer

A)   inflation
B)   unemployment
C)   both inflation and unemployment
D)   neither inflation nor unemploymentE) A) and D)
F) A) and C)

Question 18

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to decrease the money supply. This is likely because the Federal Reserve is

Accepted Answer

A)   worried about inflation.
B)   worried about unemployment.
C)   hoping to increase the demand for goods and services.
D)   worried that the economy is growing too slowly.E) C) and D)
F) B) and C)

Question 19

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Accepted Answer

A)   15 years.
B)   25 years.
C)   35 years.
D)   45 years.E) B) and C)
F) None of the above

Question 20

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Accepted Answer

A)   David Ricardo
B)   Thorstein Veblen
C)   John Maynard Keynes
D)   Adam SmithE) None of the above
F) B) and C)

Exam 1: Ten Principles of Economics

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

Correct Answer
verified

Which of the following could reduce economic efficiency?

Correct Answer
verified

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to decrease the money supply. This is likely because the Federal Reserve is

Correct Answer
verified

Correct Answer
verified

Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

Correct Answer
verified

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?

Correct Answer
verified

In 2011, the average American earned about $48,000 while the average Nigerian earned about $1,200. Which of the following statements is likely?

Correct Answer
verified

Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?

Correct Answer
verified

The word "economy" comes from the Greek word oikonomos, which means

Correct Answer
verified

The amount of goods and services produced from each unit of labor input is called

Correct Answer
verified

Debbie quits her job, which pays $30,000 a year, to finish her college degree. Her annual college expenses are $10,000 for tuition, $2,000 for books, and $700 for food. What is her opportunity cost of attending college for the year?

Correct Answer
verified

Which of the following is true?

Correct Answer
verified

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Correct Answer
verified

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Correct Answer
verified

One reason we need government, even in a market economy, is that

Correct Answer
verified

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

Correct Answer
verified

According to Adam Smith, the success of decentralized market economies is primarily due to

Correct Answer
verified

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Exam 1: Ten Principles of Economics

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

Correct AnswerverifiedShow Answer

Which of the following could reduce economic efficiency?

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to decrease the money supply. This is likely because the Federal Reserve is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

In 2011, the average American earned about $48,000 while the average Nigerian earned about $1,200. Which of the following statements is likely?

Correct AnswerverifiedShow Answer

Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?

Correct AnswerverifiedShow Answer

The word "economy" comes from the Greek word oikonomos, which means

Correct AnswerverifiedShow Answer

The amount of goods and services produced from each unit of labor input is called

Correct AnswerverifiedShow Answer

Debbie quits her job, which pays $30,000 a year, to finish her college degree. Her annual college expenses are $10,000 for tuition, $2,000 for books, and $700 for food. What is her opportunity cost of attending college for the year?

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Correct AnswerverifiedShow Answer

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Correct AnswerverifiedShow Answer

One reason we need government, even in a market economy, is that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to Adam Smith, the success of decentralized market economies is primarily due to

Correct AnswerverifiedShow Answer

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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