Question 1

Prices usually reflect

Accepted Answer

A)   only the value of a good to society.
B)   only the cost to society of making a good.
C)   both the value of a good to society and the cost to society of making the good.
D)   neither the value of a good to society nor the cost to society of making the good.E) None of the above
F) B) and D)

Question 2

Because resources are scarce,a society cannot give all individuals the standard of living to which each aspires.

Accepted Answer

A) True 
 B)False

Question 3

In 2008,the average American earned about $47,000 while the average Nigerian earned about $1,400.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 C)
F) A) and B)

Question 4

The term market failure refers to

Accepted Answer

A)   a situation in which the market on its own fails to allocate resources efficiently.
B)   an unsuccessful advertising campaign which reduces demand for a product.
C)   a situation in which competition among firms becomes ruthless.
D)   a firm which is forced out of business because of losses.E) A) and B)
F) A) and C)

Question 5

The classic tradeoff between "guns and butter" states that when a society spends more on national defense,it has less to spend on consumer goods to raise the standard of living.

Accepted Answer

A) True 
 B)False

Question 6

Shane receives $100 as a birthday gift.In deciding how to spend the money,he narrows his options down to four choices: Option A,Option B,Option C,and Option D.Each option costs $100.Finally he decides on Option B.The opportunity cost of this decision is

Accepted Answer

A)   the value to Shane of the option he would have chosen had Option B not been available.
B)   the value to Shane of Options A,C and D combined.
C)   $50.
D)   $100.E) A) and B)
F) None of the above

Question 7

When a single person (or small group) has the ability to influence market prices,there is

Accepted Answer

A)   competition.
B)   market power.
C)   an externality.
D)   a lack of property rights.E) A) and B)
F) A) and C)

Question 8

A construction company has built 25 houses so far this year at a total cost to the company of $7.2 million.If the company builds a 26th house,its total cost will increase to $7.5 million.Which of the following statements is correct?

Accepted Answer

A)   For the first 25 houses,the average cost per house was $288,000.
B)   The marginal cost of the 26th house,if it is built,will be equal to the average cost per house.
C)   If the company can experience a marginal benefit of $288,000 by building the 26th house,then the company should build it.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 9

Trade allows each person to specialize in the activities he or she does best,thus increasing each individual's productivity.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following examples does not illustrate the principle represented by the adage,"There is no such thing as a free lunch"?

Accepted Answer

A)   Joe needs to pay his rent and his electric bill.
B)   Pete must choose between buying a new flat screen television and buying his textbooks for this semester.
C)   Kevin must decide between studying for his economics exam and working at his part-time job.
D)   Lisa can spend her money on a new sweater or a pair of jeans.E) C) and D)
F) All of the above

Question 11

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Accepted Answer

A)   is a basic principle regarding individual decisionmaking.
B)   amounts to a denial of one of the basic principles regarding interactions among people.
C)   supports the idea that the "invisible hand" should guide economic activity.
D)   was promoted by the economist Adam Smith in a well-known 1776 book.E) A) and B)
F) A) and C)

Question 12

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

Question 13

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

Question 14

The cost of an action is measured in terms of foregone opportunities.

Accepted Answer

A) True 
 B)False

Question 15

How does the study of economics depend upon the phenomenon of scarcity?

Accepted Answer

Because economics is the study of how so...

Question 16

In a particular country in 2000,the average worker needed to work 40 hours to produce 55 units of output.In that same country in 2008,the average worker needed to work 30 hours to produce 45 units of output.In that country,the productivity of the average worker

Accepted Answer

A)   decreased by about 6 percent between 2000 and 2008.
B)   remained unchanged between 2000 and 2008.
C)   increased by about 9 percent between 2000 and 2008.
D)   increased by about 18 percent between 2000 and 2008.E) None of the above
F) B) and D)

Question 17

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor.Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off.An economist would say that

Accepted Answer

A)   we should agree with Senator Brown.
B)   we should agree with Senator Johnson.
C)   a good decision requires that we recognize both viewpoints.
D)   there are no tradeoffs between equity and efficiency.E) A) and D)
F) B) and C)

Question 18

Government policies resulting in reduced efficiency include (i) the welfare system
(ii) unemployment insurance
(iii) progressive income tax

Accepted Answer

A)   (i) only
B)   (ii) only
C)   (i) and (ii) only
D)   (i) ,(ii) ,and (iii) E) A) and B)
F) A) and C)

Question 19

Ed spends an hour studying instead of watching tv with his friends.The opportunity cost to him of studying is

Accepted Answer

A)   the improvement in his grades from studying for the hour.
B)   the improvement in his grades from studying minus the enjoyment of watching tv.
C)   the enjoyment he would have received if he had watched tv with his friends.
D)   zero.Since Ed chose to study rather than to watch tv,the value of studying must have been greater than the value of watching tv.E) A) and D)
F) A) and C)

Question 20

When the government redistributes income from the wealthy to the poor,

Accepted Answer

A)   efficiency is improved,but equality is not.
B)   both wealthy people and poor people benefit directly.
C)   people work less and produce fewer goods and services.
D)   the government collects more revenue in total.E) B) and C)
F) A) and B)

Exam 1: Ten Principles of Economics

In a particular country in 2000,the average worker needed to work 40 hours to produce 55 units of output.In that same country in 2008,the average worker needed to work 30 hours to produce 45 units of output.In that country,the productivity of the average worker

Correct AnswerverifiedShow Answer

When the government redistributes income from the wealthy to the poor,

Correct AnswerverifiedShow Answer

Which of the following examples does not illustrate the principle represented by the adage,"There is no such thing as a free lunch"?

Correct AnswerverifiedShow Answer

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor.Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off.An economist would say that

Correct AnswerverifiedShow Answer

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Correct AnswerverifiedShow Answer

In 2008,the average American earned about $47,000 while the average Nigerian earned about $1,400.Which of the following statements is likely?

Correct AnswerverifiedShow Answer

The cost of an action is measured in terms of foregone opportunities.

Correct AnswerverifiedShow Answer

The classic tradeoff between "guns and butter" states that when a society spends more on national defense,it has less to spend on consumer goods to raise the standard of living.

Correct AnswerverifiedShow Answer

Government policies resulting in reduced efficiency include (i) the welfare system (ii) unemployment insurance (iii) progressive income tax

Correct AnswerverifiedShow Answer

The term market failure refers to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Because resources are scarce,a society cannot give all individuals the standard of living to which each aspires.

Correct AnswerverifiedShow Answer

When a single person (or small group) has the ability to influence market prices,there is

Correct AnswerverifiedShow Answer

Ed spends an hour studying instead of watching tv with his friends.The opportunity cost to him of studying is

Correct AnswerverifiedShow Answer

How does the study of economics depend upon the phenomenon of scarcity?

Correct AnswerverifiedBecause economics is the study of how so...View AnswerShow Answer

A construction company has built 25 houses so far this year at a total cost to the company of $7.2 million.If the company builds a 26th house,its total cost will increase to $7.5 million.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Shane receives $100 as a birthday gift.In deciding how to spend the money,he narrows his options down to four choices: Option A,Option B,Option C,and Option D.Each option costs $100.Finally he decides on Option B.The opportunity cost of this decision is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Prices usually reflect

Correct AnswerverifiedShow Answer

Trade allows each person to specialize in the activities he or she does best,thus increasing each individual's productivity.

Correct AnswerverifiedShow Answer

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Because economics is the study of how so...
View Answer

A construction company has built 25 houses so far this year at a total cost to the company of $7.2 million.If the company builds a 26^th house,its total cost will increase to $7.5 million.Which of the following statements is correct?

Correct Answer
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