Question 1

Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda

Accepted Answer

A)   can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas.
B)   determines Bridget's willingness to pay for the third soda.
C)   is likely different from the marginal benefit provided to Bridget by the second soda.
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 2

The term "invisible hand" was coined by

Accepted Answer

A)   Adam Smith.
B)   David Ricardo.
C)   Karl Marx.
D)   Benjamin Franklin.E) A) and C)
F) All of the above

Question 3

Rick buys a 1966 Mustang for $3,000, planning to restore and sell the car. He goes on to spend $9,000 restoring the car. At this point he can sell the car for $10,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $13,000. Rick should

Accepted Answer

A)   complete the repairs and sell the car for $13,000.
B)   sell the car now for $10,000.
C)   never try such an expensive project again.
D)   be indifferent between (i)  selling the car now and (ii)  replacing the engine and then selling it.E) A) and B)
F) A) and C)

Question 4

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 D)
F) A) and C)

Question 5

For a very long time Treeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

Accepted Answer

A)   could be due to slower money supply growth. We would expect unemployment to be higher.
B)   could be due to slower money supply growth. We would expect unemployment to be lower.
C)   could be due to higher money supply growth. We would expect unemployment to be higher.
D)   could be due to higher money supply growth. We would expect unemployment to be lower.E) A) and B)
F) All of the above

Question 6

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

Accepted Answer

A)   worker productivity in Bangladesh is higher than in India.
B)   the standard of living will likely be higher in India than in Bangladesh.
C)   productivity is 4 units per hour for the worker in Bangladesh and 3 units per hour for the worker in India.
D)   there will be no difference between the standard of living in India and Bangladesh.E) A) and B)
F) All of the above

Question 7

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Accepted Answer

A) True 
 B)False

Question 8

The business cycle refers to fluctuations in economic activity such as employment and production.

Accepted Answer

A) True 
 B)False

Question 9

Economics is the study of how society allocates its unlimited resources.

Accepted Answer

A) True 
 B)False

Question 10

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 D)
F) A) and D)

Question 11

England can benefit from trade

Accepted Answer

A)   only with nations that can produce goods England cannot produce.
B)   only with less developed nations.
C)   only with nations outside of Europe.
D)   with any nation.E) None of the above
F) B) and C)

Question 12

The "invisible hand" directs economic activity through

Accepted Answer

A)   advertising.
B)   prices.
C)   central planning.
D)   government regulations.E) A) and B)
F) A) and C)

Question 13

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) C) and D)

Question 14

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

Accepted Answer

A)   Your full room-and-board expenses should always be included.
B)   None of your room-and-board expenses should ever be included.
C)   You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college.
D)   You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college.E) C) and D)
F) B) and C)

Question 15

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 16

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

Question 17

Katie is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $2,500 and replacing the roof will cost her $9,000. Katie expects the new carpeting to increase the value of her house by $3,000 and the new roof to increase the value of her house by $7,000.

Accepted Answer

A)   She should make both improvements to her house.
B)   She should replace the carpeting but not replace the roof.
C)   She should replace the roof but not replace the carpeting.
D)   She should not make either improvement to her house.E) B) and D)
F) B) and C)

Question 18

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit?

Accepted Answer

A)   only the one with a low level of output per person.
B)   only the one with a high level of output per person.
C)   both
D)   neitherE) B) and C)
F) A) and D)

Question 19

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) All of the above

Question 20

The amount of goods and services produced from each unit of labor input is called

Accepted Answer

A)   opportunity cost.
B)   productivity.
C)   externality.
D)   marginal benefit.E) C) and D)
F) All of the above

Exam 1: Ten Principles of Economics

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Correct Answer
verified

Economics is the study of how society allocates its unlimited resources.

Correct Answer
verified

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit?

Correct Answer
verified

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 Answer
verified

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 Answer
verified

Correct Answer
verified

The amount of goods and services produced from each unit of labor input is called

Correct Answer
verified

When society requires that firms reduce pollution, there is

Correct Answer
verified

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 Answer
verified

For a very long time Treeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

Correct Answer
verified

The business cycle refers to fluctuations in economic activity such as employment and production.

Correct Answer
verified

England can benefit from trade

Correct Answer
verified

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

Correct Answer
verified

The "invisible hand" directs economic activity through

Correct Answer
verified

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

Correct Answer
verified

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

Correct Answer
verified

The term "invisible hand" was coined by

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda

Correct Answer
verified

Exam 1: Ten Principles of Economics

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Correct AnswerverifiedShow Answer

Economics is the study of how society allocates its unlimited resources.

Correct AnswerverifiedShow Answer

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit?

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

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

Correct AnswerverifiedShow Answer

The amount of goods and services produced from each unit of labor input is called

Correct AnswerverifiedShow Answer

When society requires that firms reduce pollution, there is

Correct AnswerverifiedShow Answer

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

For a very long time Treeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

Correct AnswerverifiedShow Answer

The business cycle refers to fluctuations in economic activity such as employment and production.

Correct AnswerverifiedShow Answer

England can benefit from trade

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The "invisible hand" directs economic activity through

Correct AnswerverifiedShow Answer

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

Correct AnswerverifiedShow Answer

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

Correct AnswerverifiedShow Answer

The term "invisible hand" was coined by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda

Correct AnswerverifiedShow Answer

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