Question 1

In economics, the cost of something is

Accepted Answer

A)  the dollar amount of obtaining it.
B)  always measured in units of time given up to get it.
C)  what you give up to get it.
D)  often impossible to quantify, even in principle.E) A) and B)
F) A) and C)

Question 2

Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market?

Accepted Answer

A)  to promote efficiency
B)  to promote equality
C)  to enforce property rights
D)  to protect an industry from foreign competitionE) A) and D)
F) B) and D)

Question 3

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

Question 4

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 5

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Accepted Answer

A)  enhance equality.
B)  reduce efficiency.
C)  reduce the reward for working hard.
D)  All of the above are correct.E) A) and B)
F) B) and D)

Question 6

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)  people face tradeoffs.
D)  all costs are included in the price of a product.E) B) and D)
F) C) and D)

Question 7

Inflation increases the value of money.

Accepted Answer

A) True 
 B)False

Question 8

In the broadest sense, economics is the study of

Accepted Answer

A)  production methods.
B)  how society manages its scarce resources.
C)  how households decide who performs which tasks.
D)  the interaction of business and government.E) All of the above
F) B) and D)

Question 9

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) None of the above
F) All of the above

Question 10

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) B) and C)

Question 11

Which of the following statements exemplifies a principle of individual decisionmaking?

Accepted Answer

A)  Trade can make everyone better off.
B)  Governments can sometimes improve market outcomes.
C)  The cost of something is what you give up to get it.
D)  All of the above are correct.E) C) and D)
F) B) and D)

Question 12

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

Accepted Answer

A)  government actions that distort prices.
B)  increased competition in markets.
C)  enforcement of property rights.
D)  too much attention paid to efficiency.E) B) and C)
F) A) and D)

Question 13

In the context of decisionmaking, the word "marginal" is most closely associated with the word

Accepted Answer

A)  "unimportant."
B)  "slow."
C)  "edge."
D)  "irrational."E) B) and D)
F) All of the above

Question 14

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Accepted Answer

A)  safety glass in all new cars.
B)  seat belts in all new cars.
C)  air bags in all new cars.
D)  stricter drunk driving laws in all states.E) All of the above
F) A) and B)

Question 15

In the short run, an increase in the money supply is likely to lead to ______ inflation and ______ unemployment.

Accepted Answer

The answer of In the short run, an increase in...

Question 16

US citizens have better nutrition, better healthcare, and a longer life expectancy than citizens of Ghana. Which of the following conclusions can be drawn from this statement?

Accepted Answer

A)  Average income in the US is higher than the average income in Ghana.
B)  The US has a higher standard of living than Ghana.
C)  Productivity in the US is higher than productivity in Ghana.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 17

Give an example of government intervention that is intended to reduce an externality.

Accepted Answer

Laws that restrict t...

Question 18

The business cycle is the

Accepted Answer

A)  relationship between unemployment and inflation.
B)  irregular fluctuations in economic activity.
C)  positive relationship between the quantity of money in an economy and inflation.
D)  predictable changes in economic activity due to changes in government spending and taxes.E) B) and C)
F) All of the above

Question 19

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

Accepted Answer

A)  the United Kingdom has a better education system than Turkey.
B)  the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey.
C)  workers in Turkey are more productive than workers in the United Kingdom.
D)  there are more instances of market power in Turkey than in the United Kingdom.E) A) and B)
F) B) and C)

Question 20

Both the production of goods and services and the unemployment rate are used to measure

Accepted Answer

A)  the business cycle.
B)  productivity.
C)  the interest rate.
D)  inflation.E) C) and D)
F) None of the above

Exam 1: Ten Principles of Economics

In the short run, an increase in the money supply is likely to lead to ______ inflation and ______ unemployment.

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

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Inflation increases the value of money.

Correct AnswerverifiedShow Answer

In the broadest sense, economics is the study of

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

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

Correct AnswerverifiedShow Answer

Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market?

Correct AnswerverifiedShow Answer

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Correct AnswerverifiedShow Answer

In economics, the cost of something is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

Correct AnswerverifiedShow Answer

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Correct AnswerverifiedShow Answer

The business cycle is the

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Efficiency

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Give an example of government intervention that is intended to reduce an externality.

Correct AnswerverifiedLaws that restrict t...View AnswerShow Answer

In the context of decisionmaking, the word "marginal" is most closely associated with the word

Correct AnswerverifiedShow Answer

Both the production of goods and services and the unemployment rate are used to measure

Correct AnswerverifiedShow Answer

Which of the following statements exemplifies a principle of individual decisionmaking?

Correct AnswerverifiedShow Answer

US citizens have better nutrition, better healthcare, and a longer life expectancy than citizens of Ghana. Which of the following conclusions can be drawn from this statement?

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

In the short run, an increase in the money supply is likely to lead to inflation and unemployment.

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Laws that restrict t...
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