Question 1

A barber currently cuts hair for 50 clients per week and earns a profit.He is considering expanding his operation in order to serve more clients.Should he expand?

Accepted Answer

A)   Yes, because cutting hair is profitable.
B)   No, because he may not be able to sell more services.
C)   It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients.
D)   It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.E) B) and D)
F) B) and C)

Question 2

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort.This law is likely to

Accepted Answer

A)   increase efficiency and increase equality.
B)   increase efficiency but decrease equality.
C)   decrease efficiency but increase equality.
D)   decrease efficiency and decrease equality.E) C) and D)
F) B) and D)

Question 3

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Accepted Answer

A) True 
 B)False

Question 4

Over the past century,the average income in the United States has risen about

Accepted Answer

A)   twofold.
B)   fivefold.
C)   eightfold.
D)   tenfold.E) A) and B)
F) B) and D)

Question 5

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

Question 6

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

Question 7

An example of a firm with market power is a

Accepted Answer

A)   delicatessen in New York.
B)   cable TV provider in St. Louis.
C)   clothing store in Los Angeles.
D)   family farm in Illinois.E) C) and D)
F) None of the above

Question 8

When computing the opportunity cost of attending a concert you should include

Accepted Answer

A)   the price you pay for the ticket and the value of your time.
B)   the price you pay for the ticket, but not the value of your time.
C)   the value of your time, but not the price you pay for the ticket.
D)   neither the price of the ticket nor the value of your time.E) A) and C)
F) All of the above

Question 9

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Accepted Answer

A)   David Ricardo
B)   Thorstein Veblen
C)   John Maynard Keynes
D)   Adam SmithE) B) and C)
F) All of the above

Question 10

According to Adam Smith,the success of decentralized market economies is primarily due to

Accepted Answer

A)   the basic benevolence of society.
B)   society's legal system.
C)   individuals' pursuit of self-interest.
D)   partnerships that are forged between business and government.E) None of the above
F) All of the above

Question 11

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 12

The tradeoff between inflation and unemployment

Accepted Answer

A)   implies that policies designed to reduce unemployment also reduce inflation.
B)   was eliminated by improved economic policies in the 1900s.
C)   is a long-run tradeoff, persisting for decades, according to most economists.
D)   None of the above are correct.E) B) and D)
F) B) and C)

Question 13

Suppose that the Federal Reserve Bank announces that it will be making a change to a key interest rate to increase the money supply.This is likely because

Accepted Answer

A)   the Federal Reserve Bank is worried about inflation.
B)   the Federal Reserve Bank is worried about unemployment.
C)   the Federal Reserve Bank is hoping to reduce the demand for goods and services.
D)   the Federal Reserve Bank is worried that the economy is growing too quickly.E) A) and B)
F) A) and C)

Question 14

After much consideration,you have chosen Cancun over Ft.Lauderdale as your Spring Break destination this year.However,Spring Break is still months away,and you may reverse this decision.Which of the following events would prompt you to reverse this decision?

Accepted Answer

A)   The marginal benefit of going to Cancun increases.
B)   The marginal cost of going to Cancun decreases.
C)   The marginal benefit of going to Ft. Lauderdale decreases.
D)   The marginal cost of going to Ft. Lauderdale decreases.E) A) and D)
F) B) and C)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Suppose Country A has a high average wage level and a high level of output per person,while Country B has a low average wage level and a low level of output per person.Which country can benefit from trade?

Accepted Answer

A)   Only Country A can benefit.
B)   Only Country B can benefit.
C)   Both Country A and Country B can benefit.
D)   Neither Country A nor Country B can benefit.E) None of the above
F) A) and B)

Question 17

How does the study of economics depend upon the phenomenon of scarcity?

Accepted Answer

Because economics is the study of how so...

Question 18

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 C)

Question 19

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

Question 20

Incomes of U.S.households in the 1970s and 1980s

Accepted Answer

A)   grew rapidly, due to the widespread success of labor unions in pushing up wages during those decades.
B)   grew rapidly, due to several increases in the minimum wage during those decades.
C)   grew rapidly, due to government policies that discouraged the importation of foreign products during those decades.
D)   grew slowly, due to slow growth of the output of goods and services per hour of U.S. workers' time during those decades.E) B) and C)
F) A) and C)

Exam 1: Ten Principles of Economics.

When computing the opportunity cost of attending a concert you should include

Correct AnswerverifiedShow Answer

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort.This law is likely to

Correct AnswerverifiedShow Answer

An example of a firm with market power is a

Correct AnswerverifiedShow Answer

Incomes of U.S.households in the 1970s and 1980s

Correct AnswerverifiedShow Answer

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that the Federal Reserve Bank announces that it will be making a change to a key interest rate to increase the money supply.This is likely because

Correct AnswerverifiedShow Answer

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Correct AnswerverifiedShow Answer

A barber currently cuts hair for 50 clients per week and earns a profit.He is considering expanding his operation in order to serve more clients.Should he expand?

Correct AnswerverifiedShow Answer

How does the study of economics depend upon the phenomenon of scarcity?

Correct AnswerverifiedBecause economics is the study of how so...View AnswerShow Answer

Suppose Country A has a high average wage level and a high level of output per person,while Country B has a low average wage level and a low level of output per person.Which country can benefit from trade?

Correct AnswerverifiedShow Answer

Over the past century,the average income in the United States has risen about

Correct AnswerverifiedShow Answer

After much consideration,you have chosen Cancun over Ft.Lauderdale as your Spring Break destination this year.However,Spring Break is still months away,and you may reverse this decision.Which of the following events would prompt you to reverse this decision?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economists use the word equality to describe a situation in which

Correct AnswerverifiedShow Answer

The tradeoff between inflation and unemployment

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to Adam Smith,the success of decentralized market economies is primarily due to

Correct AnswerverifiedShow Answer

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Because economics is the study of how so...
View Answer

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