Question 1

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Accepted Answer

A) True 
 B)False

Question 2

The principle that trade can make everyone better off applies to

Accepted Answer

A)   individuals.
B)   families.
C)   countries.
D)   All of the aboveE) A) and B)
F) All of the above

Question 3

In the short run,an increase in the money supply is likely to lead to

Accepted Answer

A)   lower unemployment and lower inflation.
B)   lower unemployment and higher inflation.
C)   higher unemployment and lower inflation.
D)   higher unemployment and higher inflation.E) All of the above
F) A) and B)

Question 4

Define opportunity cost.What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Accepted Answer

Whatever must be given up to obtain some...

Question 5

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 6

Which of the following is an example of an externality?

Accepted Answer

A)   Annie purchases a handbag.
B)   Bob's dog barks loudly during the night waking his neighbors.
C)   Clark sells a book to Calvin.
D)   David watches a scary movie.E) All of the above
F) A) and C)

Question 7

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

Question 8

George has spent $600 purchasing and repairing an old fishing boat,which he expects to sell for $900 once the repairs are complete.George discovers that,in addition to the $600 he has already spent,he needs to make an additional repair,which will cost another $400,in order to make the boat worth $900 to potential buyers.He can sell the boat as it is now for $400.What should he do?

Accepted Answer

A)   He should sell the boat as it is now for $400.
B)   He should keep the boat since it would not be rational to spend $1,000 on repairs and then sell the boat for $900.
C)   He should complete the repairs and sell the boat for $900.
D)   It does not matter which action he takes; the outcome is the same either way.E) A) and C)
F) A) and B)

Question 9

In a market economy,who makes the decisions that guide most economic activity?

Accepted Answer

A)   firms only
B)   households only
C)   firms and households
D)   governmentE) B) and C)
F) B) and D)

Question 10

The marginal benefit Claire gets from purchasing a third pair of flip-flops is

Accepted Answer

A)   the same as the total benefit of purchasing three pairs of flip-flops.
B)   more than the marginal cost of purchasing the third pair of flip-flops.
C)   the total benefit Claire gets from purchasing three pairs of flip-flops minus the total benefit she gets from purchasing two pairs of flip-flops.
D)   the total benefit Claire gets from purchasing four pairs of flip-flops minus the total benefit she gets from purchasing three pairs of flip-flops.E) C) and D)
F) A) and B)

Question 11

When the government attempts to improve equality in an economy the result is often

Accepted Answer

A)   an increase in overall output in the economy.
B)   additional government revenue since overall income will increase.
C)   a reduction in equality.
D)   a reduction in efficiency.E) All of the above
F) A) and B)

Question 12

Public policies

Accepted Answer

A)   may be able to improve either economic efficiency or equality.
B)   may be able to improve economic efficiency but cannot improve equality.
C)   may be able to improve equality but cannot improve economic efficiency.
D)   cannot improve either equality or economic efficiency.E) A) and B)
F) A) and C)

Question 13

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke.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) A) and C)
F) B) and D)

Question 14

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) A) and C)

Question 15

In a particular country in 1998,the average worker needed to work 25 hours to produce 40 units of output.In that same country in 2008,the average worker needed to work 40 hours to produce 68 units of output.In that country,the productivity of the average worker

Accepted Answer

A)   decreased by 1.7 percent between 1998 and 2008.
B)   remained unchanged between 1998 and 2008.
C)   increased by 4.75 percent between 1998 and 2008.
D)   increased by 6.25 percent between 1998 and 2008.E) B) and C)
F) A) and D)

Question 16

When the government prevents prices from adjusting naturally to supply and demand,

Accepted Answer

A)   it equates the amount buyers want to buy with the amount sellers want to sell.
B)   it adversely affects the allocation of resources.
C)   it improves equality and efficiency.
D)   it improves efficiency but reduces equality.E) B) and C)
F) A) and B)

Question 17

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million.If the company builds a 31ˢᵗ house,its total cost will increase to $7.76 million.Which of the following statements is correct?

Accepted Answer

A)   For the first 30 houses, the average cost per house was $250,000.
B)   The marginal cost of the 31st house, if it is built, will be $260,000.
C)   If the company can experience a marginal benefit of $275,000 by building the 31st house, then the company should build it.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 18

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 C)
F) B) and C)

Question 19

The fact that different countries experience different standards of living is largely explained by differences in those countries'

Accepted Answer

A)   populations.
B)   productivity levels.
C)   locations.
D)   None of the above is correct. Economists are puzzled by differences in standards of living around the world.E) B) and D)
F) B) and C)

Question 20

Economists study how people make decisions.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics.

People are likely to respond to a policy change

Correct Answer
verified

When the government prevents prices from adjusting naturally to supply and demand,

Correct Answer
verified

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke.This is an example of

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

Correct Answer
verified

In a market economy,who makes the decisions that guide most economic activity?

Correct Answer
verified

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Correct Answer
verified

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

Correct Answer
verified

Economists study how people make decisions.

Correct Answer
verified

Which of the following is an example of an externality?

Correct Answer
verified

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

Correct Answer
verified

The marginal benefit Claire gets from purchasing a third pair of flip-flops is

Correct Answer
verified

Define opportunity cost.What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Correct Answer
verified
Whatever must be given up to obtain some...
View Answer

In the short run,an increase in the money supply is likely to lead to

Correct Answer
verified

The fact that different countries experience different standards of living is largely explained by differences in those countries'

Correct Answer
verified

In a particular country in 1998,the average worker needed to work 25 hours to produce 40 units of output.In that same country in 2008,the average worker needed to work 40 hours to produce 68 units of output.In that country,the productivity of the average worker

Correct Answer
verified

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million.If the company builds a 31ˢᵗ house,its total cost will increase to $7.76 million.Which of the following statements is correct?

Correct Answer
verified

Public policies

Correct Answer
verified

When the government attempts to improve equality in an economy the result is often

Correct Answer
verified

The principle that trade can make everyone better off applies to

Correct Answer
verified

Exam 1: Ten Principles of Economics.

People are likely to respond to a policy change

Correct AnswerverifiedShow Answer

When the government prevents prices from adjusting naturally to supply and demand,

Correct AnswerverifiedShow Answer

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke.This is an example of

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

Correct AnswerverifiedShow Answer

In a market economy,who makes the decisions that guide most economic activity?

Correct AnswerverifiedShow Answer

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economists study how people make decisions.

Correct AnswerverifiedShow Answer

Which of the following is an example of an externality?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The marginal benefit Claire gets from purchasing a third pair of flip-flops is

Correct AnswerverifiedShow Answer

Define opportunity cost.What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Correct AnswerverifiedWhatever must be given up to obtain some...View AnswerShow Answer

In the short run,an increase in the money supply is likely to lead to

Correct AnswerverifiedShow Answer

The fact that different countries experience different standards of living is largely explained by differences in those countries'

Correct AnswerverifiedShow Answer

In a particular country in 1998,the average worker needed to work 25 hours to produce 40 units of output.In that same country in 2008,the average worker needed to work 40 hours to produce 68 units of output.In that country,the productivity of the average worker

Correct AnswerverifiedShow Answer

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million.If the company builds a 31ˢᵗ house,its total cost will increase to $7.76 million.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Public policies

Correct AnswerverifiedShow Answer

When the government attempts to improve equality in an economy the result is often

Correct AnswerverifiedShow Answer

The principle that trade can make everyone better off applies to

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Whatever must be given up to obtain some...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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