Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Large or persistent inflation is almost always caused by

Accepted Answer

A)   excessive government spending.
B)   excessive growth in the quantity of money.
C)   foreign competition.
D)   higher-than-normal levels of productivity.E) B) and C)
F) B) and D)

Question 3

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

Accepted Answer

A)   $99,000.
B)   $103,000.
C)   $108,000.
D)   $121,000.E) B) and C)
F) None of the above

Question 4

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.E) A) and B)
F) All of the above

Question 5

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

Accepted Answer

A)   people respond to incentives.
B)   rational people think at the margin.
C)   people face tradeoffs.
D)   improvements in efficiency sometimes come at the expense of equality.E) B) and D)
F) A) and C)

Question 6

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) None of the above
F) B) and D)

Question 7

The "invisible hand" refers to

Accepted Answer

A)   how central planners made economic decisions.
B)   how the decisions of households and firms lead to desirable market outcomes.
C)   the control that large firms have over the economy.
D)   government regulations without which the economy would be less efficient.E) None of the above
F) A) and D)

Question 8

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

Accepted Answer

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

Question 9

The economy of the former Soviet Union is best described as a

Accepted Answer

A)   primitive economy.
B)   market economy.
C)   hybrid economy.
D)   centrally-planned economy.E) B) and C)
F) A) and C)

Question 10

President Gerald Ford referred to inflation as

Accepted Answer

A)   a blight on our nation's economy.
B)   a necessary evil to combat high unemployment.
C)   public enemy number one.
D)   a fly in the ointment.E) A) and B)
F) A) and C)

Question 11

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Accepted Answer

A)   The marginal benefit of going to Cancun increases.
B)   The marginal cost of going to Cancun decreases.
C)   The marginal benefit of going to Ft. Lauderdale decreases.
D)   The marginal cost of going to Ft. Lauderdale decreases.E) A) and B)
F) All of the above

Question 12

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Accepted Answer

A)   For the first 24 houses, the average cost per house was $205,000.
B)   The marginal cost of the 25th house, if it is built, will equal $250,000.
C)   If the company can sell the 25th house for at least $202,000, then it should build it.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is the most correct statement about the relationship between inflation and unemployment?

Accepted Answer

A)   In the short run, falling inflation is associated with falling unemployment.
B)   In the short run, falling inflation is associated with rising unemployment.
C)   In the long run, falling inflation is associated with falling unemployment.
D)   In the long run, falling inflation is associated with rising unemployment.E) A) and B)
F) None of the above

Question 15

When Ukraine trades with Italy,

Accepted Answer

A)   both countries are likely made better off.
B)   only Italy benefits since Ukraine can produce all goods at a higher level of quality than Italy.
C)   only Ukraine benefits since Italy's low wages guarantee that Italian firms will be profitable regardless of trade.
D)   neither country will benefit since Ukraine is more efficient than Italy in the production of all goods.E) A) and C)
F) B) and D)

Question 16

Economists study how people make decisions.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements about market economies is correct?

Accepted Answer

A)   In a market economy, no one is looking out for the economic well-being of society as a whole.
B)   Market economies are characterized by decentralized decision making and self-interested decision makers.
C)   Market economies have proven remarkably successful in promoting overall economic well-being.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Question 20

Efficiency

Accepted Answer

A)   and equality both refer to how much a society can produce with its resources.
B)   and equality both refer to how fairly the benefits from using resources are distributed between members of a society.
C)   refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society.
D)   refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resourcesE) C) and D)
F) A) and C)

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following is the most correct statement about the relationship between inflation and unemployment?

Correct Answer
verified

The "invisible hand" refers to

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The economy of the former Soviet Union is best described as a

Correct Answer
verified

Efficiency

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

Correct Answer
verified

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

Correct Answer
verified

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

Correct Answer
verified

Correct Answer
verified

Economists study how people make decisions.

Correct Answer
verified

When Ukraine trades with Italy,

Correct Answer
verified

Large or persistent inflation is almost always caused by

Correct Answer
verified

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Correct Answer
verified

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Correct Answer
verified

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

Correct Answer
verified

President Gerald Ford referred to inflation as

Correct Answer
verified

Which of the following statements about market economies is correct?

Correct Answer
verified

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is the most correct statement about the relationship between inflation and unemployment?

Correct AnswerverifiedShow Answer

The "invisible hand" refers to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The economy of the former Soviet Union is best described as a

Correct AnswerverifiedShow Answer

Efficiency

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economists study how people make decisions.

Correct AnswerverifiedShow Answer

When Ukraine trades with Italy,

Correct AnswerverifiedShow Answer

Large or persistent inflation is almost always caused by

Correct AnswerverifiedShow Answer

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

President Gerald Ford referred to inflation as

Correct AnswerverifiedShow Answer

Which of the following statements about market economies is correct?

Correct AnswerverifiedShow Answer

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