Question 1

Under what conditions might government intervention in a market economy improve the economy's performance?

Accepted Answer

If there is a market failure,such as an ...

Question 2

Between 1929 and 1933,the U.S.economy went from a situation of full employment to one of 25 percent unemployment.Which of the following events would you have expected to observe over this relatively short period of time?

Accepted Answer

A)  The overall price level remained unchanged.
B)  The overall price level decreased.
C)  The overall price level increased.
D)  It is impossible to speculate on what happened to the overall level of prices from the information given.E) None of the above
F) A) and B)

Question 3

Causes of market failure include

Accepted Answer

A)  externalities and market power.
B)  market power and incorrect forecasts of consumer demand.
C)  externalities and foreign competition.
D)  incorrect forecasts of consumer demand and foreign competition.E) None of the above
F) C) and D)

Question 4

If the United States decides to trade with Mexico,we know that

Accepted Answer

A)  Mexico will benefit, but trade with a less developed country could not benefit the United States.
B)  it will not benefit Mexico because workers in the United States are more productive.
C)  Mexico and the United States can both benefit.
D)  it will not benefit either country because their cultural differences are too vast.E) C) and D)
F) A) and B)

Question 5

Economics deals primarily with the concept of

Accepted Answer

A)  scarcity.
B)  poverty.
C)  change.
D)  power.E) All of the above
F) C) and D)

Question 6

Which of the following claims is consistent with the views of mainstream economists?

Accepted Answer

A)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall.
B)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily rise.
C)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently fall.
D)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently rise.E) B) and D)
F) None of the above

Question 7

In the 1990s,inflation in the United States was

Accepted Answer

A)  very close to zero.
B)  about 3 percent per year.
C)  about 6 percent per year.
D)  commonly referred to as "public enemy number one."E) A) and B)
F) A) and C)

Question 8

A company that formerly produced software went out of business because too many potential customers bought illegally-produced copies of the software instead of buying the product directly from the company.This instance serves as an example of

Accepted Answer

A)  market power.
B)  market failure.
C)  inadequate enforcement of property rights.
D)  the invisible hand at work.E) B) and D)
F) B) and C)

Question 9

The opportunity cost of an item is

Accepted Answer

A)  the number of hours needed to earn money to buy the item.
B)  what you give up to get that item.
C)  usually less than the dollar value of the item.
D)  the dollar value of the item.E) All of the above
F) A) and C)

Question 10

The relatively low inflation experienced in the United States in the 1990s is attributable to

Accepted Answer

A)  slow growth of U.S.productivity during the 1990s.
B)  slow growth of the quantity of money in the U.S.in the 1990s.
C)  low levels of government spending in the U.S.in the 1980s and 1990s.
D)  the eight-year presidency of William Jefferson Clinton during the 1990s.E) A) and C)
F) None of the above

Question 11

A rational decisionmaker takes an action if and only if

Accepted Answer

A)  the marginal benefit of the action exceeds the marginal cost of the action.
B)  the marginal cost of the action exceeds the marginal benefit of the action.
C)  the marginal cost of the action is zero.
D)  the opportunity cost of the action is zero.E) B) and D)
F) A) and D)

Question 12

The adage,"There is no such thing as a free lunch," is used to illustrate the principle that

Accepted Answer

A)  goods are scarce.
B)  people face tradeoffs.
C)  income must be earned.
D)  households face many decisions.E) All of the above
F) A) and B)

Question 13

Which of the following statements is not true?

Accepted Answer

A)  In the presence of a market failure, government action will always improve on the market outcome.
B)  In the presence of a market failure, government action can sometimes improve on the market outcome.
C)  In the presence of a market failure, government action might not improve on the market outcome because some leaders are not fully informed about the effects of their actions.
D)  In the presence of a market failure, government action might not improve on the market outcome because sometimes public policies simply reward the politically powerful.E) A) and D)
F) C) and D)

Question 14

When society requires that firms reduce pollution,there is

Accepted Answer

A)  a tradeoff because of reduced incomes to the firms' owners and workers.
B)  a tradeoff only if some firms are forced to close.
C)  no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements.
D)  no tradeoff, since everyone benefits from reduced pollution.E) A) and B)
F) A) and C)

Question 15

Trade between the United States and India

Accepted Answer

A)  benefits both the United States and India.
B)  is a losing proposition for the United States because India has cheaper labor.
C)  is a losing proposition for India because capital is much more abundant in the U.S.than in India.
D)  is a losing proposition for India because U.S.workers are more productive.E) A) and C)
F) A) and B)

Question 16

Mallory decides to spend three hours working overtime rather than watching a video with her friends.She earns $8 an hour.Her opportunity cost of working is

Accepted Answer

A)  the $24 she earns working.
B)  the $24 minus the enjoyment she would have received from watching the video.
C)  the enjoyment she would have received had she watched the video.
D)  nothing, since she would have received less than $24 of enjoyment from the video.E) None of the above
F) A) and B)

Question 17

The adage,"There is no such thing as a free lunch," means

Accepted Answer

A)  even people on welfare have to pay for food.
B)  the cost of living is always increasing.
C)  to get something we like, we usually have to give up another thing we like.
D)  all costs are included in the price of a product.E) B) and C)
F) A) and B)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

One of the 20th century's worst episodes of inflation occurred in

Accepted Answer

A)  the United States in the 1960s.
B)  Italy in the 1950s.
C)  Russia in the 1930s.
D)  Germany in the 1920s.E) None of the above
F) B) and D)

Question 20

One tradeoff society faces is between efficiency and equity.Define each term.If the U.S.government redistributes income from the rich to the poor,explain how this action affects equity as well as efficiency in the economy.

Accepted Answer

Efficiency is the property of society ge...

Exam 1: Ten Principles of Economics

The opportunity cost of an item is

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The relatively low inflation experienced in the United States in the 1990s is attributable to

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The adage,"There is no such thing as a free lunch," means

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

Correct AnswerverifiedShow Answer

In the 1990s,inflation in the United States was

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The adage,"There is no such thing as a free lunch," is used to illustrate the principle that

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When society requires that firms reduce pollution,there is

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Mallory decides to spend three hours working overtime rather than watching a video with her friends.She earns $8 an hour.Her opportunity cost of working is

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If the United States decides to trade with Mexico,we know that

Correct AnswerverifiedShow Answer

Which of the following claims is consistent with the views of mainstream economists?

Correct AnswerverifiedShow Answer

One tradeoff society faces is between efficiency and equity.Define each term.If the U.S.government redistributes income from the rich to the poor,explain how this action affects equity as well as efficiency in the economy.

Correct AnswerverifiedEfficiency is the property of society ge...View AnswerShow Answer

A company that formerly produced software went out of business because too many potential customers bought illegally-produced copies of the software instead of buying the product directly from the company.This instance serves as an example of

Correct AnswerverifiedShow Answer

One of the 20th century's worst episodes of inflation occurred in

Correct AnswerverifiedShow Answer

Between 1929 and 1933,the U.S.economy went from a situation of full employment to one of 25 percent unemployment.Which of the following events would you have expected to observe over this relatively short period of time?

Correct AnswerverifiedShow Answer

Under what conditions might government intervention in a market economy improve the economy's performance?

Correct AnswerverifiedIf there is a market failure,such as an ...View AnswerShow Answer

A rational decisionmaker takes an action if and only if

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Causes of market failure include

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Trade between the United States and India

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Which of the following statements is not true?

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Economics deals primarily with the concept of

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Efficiency is the property of society ge...
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If there is a market failure,such as an ...
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