Question 1

The primary determinant of a country's standard of living is

Accepted Answer

A)   the country's ability to prevail over foreign competition.
B)   the country's ability to produce goods and services.
C)   the total supply of money in the economy.
D)   the average age of the country's labor force.E) A) and B)
F) All of the above

Question 2

Which of the following is not an example of a group responding to an incentive?

Accepted Answer

A)   Students attend class because of an attendance policy that reduces their grade for absences.
B)   Consumers buy more of a product when it is on sale at a reduced price.
C)   Universities offer fewer online classes when they generate more revenue than traditional classes.
D)   Employees work harder to earn higher commissions.E) A) and B)
F) None of the above

Question 3

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

Accepted Answer

A) True 
 B)False

Question 4

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

Accepted Answer

A)   the value of a good to society, but not the cost of making it.
B)   the cost of making a good to society, but not its value.
C)   both the value of a good to society and the cost of making it.
D)   neither the value of a good to society nor the cost of making it.E) A) and B)
F) A) and C)

Question 5

The mainstream view among economists is that

Accepted Answer

A)   society faces a tradeoff between unemployment and inflation, but only in the short run.
B)   society faces a tradeoff between unemployment and inflation, but only in the long run.
C)   society faces a tradeoff between unemployment and inflation, both in the short run and in the long run.
D)   no tradeoff exists between unemployment and inflation, either in the short run or in the long run.E) C) and D)
F) A) and B)

Question 6

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Accepted Answer

A) True 
 B)False

Question 7

For which of the following problems can well-designed public policy enhance economic efficiency?

Accepted Answer

A)   both externalities and market power
B)   externalities, but not market power
C)   market power, but not externalities
D)   neither externalities nor market powerE) A) and B)
F) A) and D)

Question 8

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) C) and D)
F) A) and B)

Question 9

Which of the following is not an example of the opportunity cost of going to school?

Accepted Answer

A)   The money a student could have earned by working if he had not gone to college.
B)   The nap a student could have enjoyed if he had not attended class.
C)   The party a student could have enjoyed if he had not stayed in to study for his exam.
D)   The money a student spends on rent for his apartment while attending school.E) None of the above
F) A) and B)

Question 10

Which of the following words and phrases best captures the notion of equality?

Accepted Answer

A)   minimum waste
B)   maximum benefit
C)   sameness
D)   efficiencyE) None of the above
F) A) and C)

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) None of the above
F) A) and C)

Question 12

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

Accepted Answer

A) True 
 B)False

Question 13

An example of an externality is the impact of

Accepted Answer

A)   bad weather on the income of farmers.
B)   the personal income tax on a person's ability to purchase goods and services.
C)   pollution from a factory on the health of people in the vicinity of the factory.
D)   increases in health care costs on the health of individuals in society.E) B) and D)
F) B) and C)

Question 14

Which of the following statements about markets is most accurate?

Accepted Answer

A)   Markets are usually a good way to organize economic activity.
B)   Markets are usually inferior to central planning as a way to organize economic activity.
C)   Markets fail and are therefore not an acceptable way to organize economic activity.
D)   Markets are a good way to organize economic activity in developed nations, but not in less developed nations.E) A) and D)
F) B) and C)

Question 15

If the rent for apartments in New York City were fixed below the current price, then we would expect

Accepted Answer

A)   an increase in the number of people wanting to rent apartments in New York City.
B)   a decrease in the number of people wanting to rent 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.E) B) and D)
F) B) and C)

Question 16

Making rational decisions "at the margin" means that people

Accepted Answer

A)   make those decisions that do not impose a marginal cost.
B)   evaluate how easily a decision can be reversed if problems arise.
C)   compare the marginal costs and marginal benefits of each decision.
D)   always calculate the dollar costs for each decision.E) None of the above
F) B) and D)

Question 17

Which of the following statements best characterizes a basic difference between market economies and centrally-planned economies?

Accepted Answer

A)   Society relies more upon prices to allocate resources when the economy is centrally-planned than when it is market-based.
B)   The self-interest of households is reflected more fully in the outcome of a centrally-planned economy than in the outcome of a market economy.
C)   Government plays a larger role in the economic affairs of a market economy than in the economic affairs of a centrally-planned economy.
D)   None of the above are correct.E) B) and C)
F) A) and D)

Question 18

People are likely to respond to a policy change

Accepted Answer

A)   only if they think the policy is a good one.
B)   only if the policy change changes the costs of their behavior.
C)   only if the policy change changes the benefits of their behavior.
D)   if the policy changes either the costs or benefits of their behavior.E) A) and B)
F) None of the above

Question 19

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A)   command economy.
B)   centrally-planned economy.
C)   market economy.
D)   All of the above are correct.E) A) and B)
F) A) and D)

Question 20

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

Exam 1: Ten Principles of Economics

Correct Answer
verified

Which of the following words and phrases best captures the notion of equality?

Correct Answer
verified

For which of the following problems can well-designed public policy enhance economic efficiency?

Correct Answer
verified

The primary determinant of a country's standard of living is

Correct Answer
verified

People are likely to respond to a policy change

Correct Answer
verified

The decisions of firms and households are guided by prices and self-interest in a

Correct Answer
verified

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

Correct Answer
verified

Which of the following is not an example of a group responding to an incentive?

Correct Answer
verified

If the rent for apartments in New York City were fixed below the current price, then we would expect

Correct Answer
verified

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.

Correct Answer
verified

Making rational decisions "at the margin" means that people

Correct Answer
verified

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Correct Answer
verified

Which of the following statements about markets is most accurate?

Correct Answer
verified

The mainstream view among economists is that

Correct Answer
verified

Which of the following is not an example of the opportunity cost of going to school?

Correct Answer
verified

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

Correct Answer
verified

An example of an externality is the impact of

Correct Answer
verified

Which of the following statements best characterizes a basic difference between market economies and centrally-planned economies?

Correct Answer
verified

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

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

Exam 1: Ten Principles of Economics

Correct AnswerverifiedShow Answer

Which of the following words and phrases best captures the notion of equality?

Correct AnswerverifiedShow Answer

For which of the following problems can well-designed public policy enhance economic efficiency?

Correct AnswerverifiedShow Answer

The primary determinant of a country's standard of living is

Correct AnswerverifiedShow Answer

People are likely to respond to a policy change

Correct AnswerverifiedShow Answer

The decisions of firms and households are guided by prices and self-interest in a

Correct AnswerverifiedShow Answer

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

Correct AnswerverifiedShow Answer

Which of the following is not an example of a group responding to an incentive?

Correct AnswerverifiedShow Answer

If the rent for apartments in New York City were fixed below the current price, then we would expect

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Making rational decisions "at the margin" means that people

Correct AnswerverifiedShow Answer

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Correct AnswerverifiedShow Answer

Which of the following statements about markets is most accurate?

Correct AnswerverifiedShow Answer

The mainstream view among economists is that

Correct AnswerverifiedShow Answer

Which of the following is not an example of the opportunity cost of going to school?

Correct AnswerverifiedShow Answer

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

Correct AnswerverifiedShow Answer

An example of an externality is the impact of

Correct AnswerverifiedShow Answer

Which of the following statements best characterizes a basic difference between market economies and centrally-planned economies?

Correct AnswerverifiedShow Answer

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

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

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