Question 1

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Accepted Answer

A)  inflation
B)  unemployment
C)  both inflation and unemployment
D)  neither inflation nor unemploymentE) A) and B)
F) A) and C)

Question 2

A society allocates its scarce resources to various uses. These scarce resources include

Accepted Answer

A)  land.
B)  people.
C)  machines.
D)  All of the above are correct.E) All of the above
F) C) and D)

Question 3

Which of these activities will most likely impose an external cost?

Accepted Answer

A)  An athlete works out at a gym.
B)  A secretary smokes a cigarette in a crowded break room.
C)  A young mother pushes her baby in a stroller.
D)  A construction worker eats a hotdog during his lunch break.E) B) and C)
F) A) and D)

Question 4

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Accepted Answer

A) True 
 B)False

Question 5

Central planning refers to

Accepted Answer

A)  markets guiding economic activity. Today many countries that had this system have abandoned it.
B)  markets guiding economic activity. Today many countries that did not have this system have implemented it.
C)  government guiding economic activity. Today many countries that had this system have abandoned it.
D)  government guiding economic activity. Today many countries that did not have this system have implemented it.E) A) and C)
F) All of the above

Question 6

Low rates of inflation are generally associated with

Accepted Answer

A)  low rates of government spending.
B)  small or nonexistent government budget deficits.
C)  low rates of productivity growth.
D)  low rates of growth of the quantity of money.E) A) and C)
F) A) and B)

Question 7

A rational decisionmaker takes an action if and only if

Accepted Answer

A)  the marginal benefit of the action exceeds the marginal cost of the action.
B)  the marginal cost of the action exceeds the marginal benefit of the action.
C)  the marginal cost of the action is zero.
D)  the opportunity cost of the action is zero.E) B) and D)
F) C) and D)

Question 8

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 9

Suppose the average income of a citizen of Poland is higher than the average income of a citizen of Romania. You might conclude that

Accepted Answer

A)  Polish firms are faced with stricter government regulations than Romanian firms.
B)  total income is divided among fewer workers in Poland since it has a smaller labor force than Romania.
C)  Romania's climate allows for longer growing seasons and therefore Romania can produce large quantities of grain and other crops.
D)  productivity in Poland is higher than in Romania.E) A) and C)
F) B) and D)

Question 10

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

Accepted Answer

A)  is $40.
B)  is $80.
C)  is $120.
D)  cannot be determined from the information given.E) C) and D)
F) A) and B)

Question 11

A direct or positive relationship exists between a country's

Accepted Answer

A)  productivity and its standard of living.
B)  amount of government spending and its productivity.
C)  total population and its average citizen's income.
D)  rate of population growth and the extent of its trade with other countries.E) A) and B)
F) A) and C)

Question 12

The term "market failure"

Accepted Answer

A)  means the same thing as "market power."
B)  refers to the dissolution of a market when firms decide to quit producing a certain product.
C)  refers to the failure of a market to produce an efficient allocation of resources.
D)  refers to government's failure to enforce the property rights of households or firms that participate in a certain market.E) B) and D)
F) B) and C)

Question 13

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

Accepted Answer

A)  productivity.
B)  an externality.
C)  market power.
D)  property rights.E) B) and C)
F) A) and C)

Question 14

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

Question 15

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

Accepted Answer

A)  an increase in the number of visits people want to make and an increase in the number of visits health care providers want to provide.
B)  an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.
C)  a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide.
D)  a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.E) All of the above
F) A) and B)

Question 16

The increase in living standards of American workers over the past century is primarily due to

Accepted Answer

A)  the success of labor unions.
B)  minimum-wage laws.
C)  improvements in productivity.
D)  None of the above are correct.E) B) and D)
F) A) and D)

Question 17

Betty's Bakery bakes fresh bread every morning. Any bread not sold by the end of the day is thrown away. A loaf of bread costs Betty $2.00 to produce, and she prices loaves of bread at $3.50 per loaf. Suppose near the end of one day Betty still has 12 loaves of bread on hand. Which of the following is correct?

Accepted Answer

A)  Betty should only sell the remaining bread for $3.50 per loaf since that is the regular price.
B)  Betty should only sell the remaining bread for $2.00 per loaf or more since that is what the bread costs to make.
C)  Betty should be willing to sell the remaining bread for any price above $0 per loaf since she will have to throw it away if she does not sell it for something.
D)  Betty should just throw the bread away and change the price of her bread starting tomorrow to make sure she sells all of her bread each day.E) None of the above
F) B) and D)

Question 18

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 19

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) All of the above
F) A) and C)

Question 20

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Accepted Answer

A)  15 years.
B)  25 years.
C)  35 years.
D)  45 years.E) B) and C)
F) A) and B)

Exam 1: Ten Principles of Economics

A direct or positive relationship exists between a country's

Correct Answer
verified

A society allocates its scarce resources to various uses. These scarce resources include

Correct Answer
verified

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Correct Answer
verified

Correct Answer
verified

Low rates of inflation are generally associated with

Correct Answer
verified

The "invisible hand" directs economic activity through

Correct Answer
verified

Suppose the average income of a citizen of Poland is higher than the average income of a citizen of Romania. You might conclude that

Correct Answer
verified

A rational decisionmaker takes an action if and only if

Correct Answer
verified

Which of these activities will most likely impose an external cost?

Correct Answer
verified

Prices usually reflect

Correct Answer
verified

The term "market failure"

Correct Answer
verified

The increase in living standards of American workers over the past century is primarily due to

Correct Answer
verified

The "invisible hand" refers to

Correct Answer
verified

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

Correct Answer
verified

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

Correct Answer
verified

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Correct Answer
verified

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Correct Answer
verified

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

Correct Answer
verified

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Correct Answer
verified

Central planning refers to

Correct Answer
verified

Exam 1: Ten Principles of Economics

A direct or positive relationship exists between a country's

Correct AnswerverifiedShow Answer

A society allocates its scarce resources to various uses. These scarce resources include

Correct AnswerverifiedShow Answer

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Low rates of inflation are generally associated with

Correct AnswerverifiedShow Answer

The "invisible hand" directs economic activity through

Correct AnswerverifiedShow Answer

Suppose the average income of a citizen of Poland is higher than the average income of a citizen of Romania. You might conclude that

Correct AnswerverifiedShow Answer

A rational decisionmaker takes an action if and only if

Correct AnswerverifiedShow Answer

Which of these activities will most likely impose an external cost?

Correct AnswerverifiedShow Answer

Prices usually reflect

Correct AnswerverifiedShow Answer

The term "market failure"

Correct AnswerverifiedShow Answer

The increase in living standards of American workers over the past century is primarily due to

Correct AnswerverifiedShow Answer

The "invisible hand" refers to

Correct AnswerverifiedShow Answer

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

Correct AnswerverifiedShow Answer

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

Correct AnswerverifiedShow Answer

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Correct AnswerverifiedShow Answer

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Correct AnswerverifiedShow Answer

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

Correct AnswerverifiedShow Answer

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Correct AnswerverifiedShow Answer

Central planning refers to

Correct AnswerverifiedShow Answer

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