Question 1

Economists use the word equality to describe a situation in which

Accepted Answer

A)  each member of society has the same income.
B)  each member of society has access to abundant quantities of goods and services,regardless of his or her income.
C)  society is getting the maximum benefits from its scarce resources.
D)  society's resources are used efficiently.E) A) and D)
F) B) and D)

Question 2

The word "economy" comes from the Greek word oikonomos,which means

Accepted Answer

A)  "environment."
B)  "production."
C)  "one who manages a household."
D)  "one who makes decisions."E) B) and D)
F) C) and D)

Question 3

When a society cannot produce all the goods and services people wish to have,it is said that the economy is experiencing

Accepted Answer

A)  scarcity.
B)  surpluses.
C)  inefficiencies.
D)  inequalities.E) A) and B)
F) A) and C)

Question 4

Government policies that improve equality usually increase efficiency at the same time.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

In a market economy,economic activity is guided by

Accepted Answer

A)  the government.
B)  corporations.
C)  central planners.
D)  self-interest and prices.E) B) and C)
F) A) and D)

Question 7

The term "invisible hand" was coined by

Accepted Answer

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

Question 8

Which of the following is the most correct statement about the relationship between inflation and unemployment?

Accepted Answer

A)  In the short run,falling inflation is associated with falling unemployment.
B)  In the short run,falling inflation is associated with rising unemployment.
C)  In the long run,falling inflation is associated with falling unemployment.
D)  In the long run,falling inflation is associated with rising unemployment.E) B) and C)
F) A) and D)

Question 9

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night,the hotel manager should

Accepted Answer

A)  rent the room because the marginal benefit exceeds the marginal cost.
B)  rent the room because the marginal benefit exceeds the average cost.
C)  not rent the room because the marginal benefit is less than the marginal cost.
D)  not rent the room because the marginal benefit is less than the average cost.E) All of the above
F) A) and C)

Question 10

The government can potentially improve market outcomes if market inequalities or market failure exists.

Accepted Answer

A) True 
 B)False

Question 11

When a government program is justified not on its merits but on the number of jobs it will create,

Accepted Answer

A)  the program is an efficient use of taxpayer dollars.
B)  it should be approved only if the unemployment rate is low.
C)  taxes should be raised to fund the program.
D)  it is known as the "broken window fallacy."E) A) and C)
F) All of the above

Question 12

Efficiency means that

Accepted Answer

A)  society is conserving resources in order to save them for the future.
B)  society's goods and services are distributed equally among society's members.
C)  society's goods and services are distributed fairly,though not necessarily equally,among society's members.
D)  society is getting the maximum benefits from its scarce resources.E) A) and B)
F) All of the above

Question 13

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 B)
F) C) and D)

Question 14

An increase in the overall level of prices in an economy is referred to as

Accepted Answer

A)  the income effect.
B)  inflation.
C)  deflation.
D)  the substitution effect.E) None of the above
F) A) and D)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 17

To promote good economic outcomes,policymakers should strive to enact policies that

Accepted Answer

A)  enhance productivity.
B)  enhance individuals' market power.
C)  result in a rapidly-growing quantity of money.
D)  All of the above are correct.E) B) and D)
F) A) and B)

Question 18

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 D)
F) A) and C)

Question 19

For markets to work well,there must be

Accepted Answer

A)  market power.
B)  a central planner.
C)  property rights.
D)  abundant,not scarce,resources.E) None of the above
F) A) and B)

Question 20

With careful planning,we can usually get something that we like without having to give up something else that we like.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

To promote good economic outcomes,policymakers should strive to enact policies that

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The word "economy" comes from the Greek word oikonomos,which means

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When a society cannot produce all the goods and services people wish to have,it is said that the economy is experiencing

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When a government program is justified not on its merits but on the number of jobs it will create,

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Central planning refers to

Correct AnswerverifiedShow Answer

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

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Economists use the word equality to describe a situation in which

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Government policies that improve equality usually increase efficiency at the same time.

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When society requires that firms reduce pollution,there is

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Which of the following is the most correct statement about the relationship between inflation and unemployment?

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Efficiency means that

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

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

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With careful planning,we can usually get something that we like without having to give up something else that we like.

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The government can potentially improve market outcomes if market inequalities or market failure exists.

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For markets to work well,there must be

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The term "invisible hand" was coined by

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An increase in the overall level of prices in an economy is referred to as

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In a market economy,economic activity is guided by

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Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night,the hotel manager should

Correct AnswerverifiedShow Answer

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