Question 1

Which of the following statements best characterizes a basic difference between market economies and centrally-planned economies?

Accepted Answer

A)  Society relies more upon prices to allocate resources when the economy is centrally-planned than when it is market-based.
B)  The self-interest of households is reflected more fully in the outcome of a centrally-planned economy than in the outcome of a market economy.
C)  Government plays a larger role in the economic affairs of a market economy than in the economic affairs of a centrally-planned economy.
D)  None of the above are correct.E) A) and B)
F) C) and D)

Question 2

With respect to the attainment of an efficient allocation of resources,which of the following statements is correct?

Accepted Answer

A)  Markets are always a good way to organize economic activity.
B)  Markets are often a good way to organize economic activity.
C)  Markets are seldom a good way to organize economic activity.
D)  Markets are never a good way to organize economic activity.E) C) and D)
F) B) and C)

Question 3

Warren drinks four cups of coffee during a particular day.The marginal benefit he enjoys from drinking the fourth cup

Accepted Answer

A)  can be thought of as the total benefit Warren enjoys by drinking four cups minus the total benefit he would have enjoyed by drinking just three cups.
B)  determines Warren's willingness to pay for the fourth cup.
C)  is likely different from the marginal benefit provided to Warren by the third cup.
D)  All of the above are correct.E) B) and D)
F) A) and B)

Question 4

In Germany in the early 1920s,on average,

Accepted Answer

A)  prices were rising 50 percent every month, while the quantity of money was rising 20 percent every month.
B)  prices were doubling every month, while the quantity of money fell 10 percent every month.
C)  prices were tripling every month, while the quantity of money remained almost constant every month.
D)  prices and the quantity of money both tripled every month.E) All of the above
F) C) and D)

Question 5

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

Question 6

Market failure can be caused by

Accepted Answer

A)  low consumer demand.
B)  government intervention and price controls.
C)  externalities and market power.
D)  high prices and foreign competition.E) B) and C)
F) A) and D)

Question 7

During which decade did the United States experience an inflationary episode similar to that experienced by Germany during the 1920s?

Accepted Answer

A)  the 1880s
B)  the 1930s
C)  the 1970s
D)  None of the above are correct.E) C) and D)
F) B) and D)

Question 8

For a college student who wishes to calculate the true costs of going to college,the costs of room and board

Accepted Answer

A)  should be counted in full, regardless of the costs of eating and sleeping elsewhere.
B)  should be counted only to the extent that they are more expensive at college than elsewhere.
C)  usually exceed the opportunity cost of going to college.
D)  plus the cost of tuition, equals the opportunity cost of going to college.E) A) and B)
F) A) and C)

Question 9

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

Question 10

When the government redistributes income from the wealthy to the poor,

Accepted Answer

A)  efficiency is improved, but equity is not.
B)  both wealthy people and poor people benefit directly.
C)  people work less and produce fewer goods and services.
D)  wealthy people consume fewer goods, but poor people consume more goods, resulting in no real change.E) B) and D)
F) A) and C)

Question 11

A rational decision maker takes an action only if the

Accepted Answer

A)  marginal benefit is less than the marginal cost.
B)  marginal benefit is greater than the marginal cost.
C)  average benefit is greater than the average cost.
D)  marginal benefit is greater than both the average cost and the marginal cost.E) C) and D)
F) A) and D)

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

Question 13

A rationale for government involvement in a market economy is as follows:

Accepted Answer

A)  Markets sometimes fail to produce a fair distribution of economic well-being.
B)  Markets sometimes fail to produce an efficient allocation of resources.
C)  Property rights have to be enforced.
D)  All of the above are correct.E) A) and D)
F) A) and B)

Question 14

In the imaginary country of Countriana,in 1996,the average worker had to work 10 hours to produce 20 units of output.In that same country in 2006,the average worker needed to work 18 hours to produce 36 units of output.In that country,the productivity of the average worker

Accepted Answer

A)  increased by 2 percent between 1996 and 2006.
B)  increased by 5 percent between 1996 and 2006.
C)  remained unchanged between 1996 and 2006.
D)  decreased by 3 percent between 1996 and 2006.E) A) and B)
F) A) and C)

Question 15

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 C)
F) A) and C)

Question 16

The invisible hand works to promote general well-being in the economy primarily through

Accepted Answer

A)  government intervention.
B)  the political process.
C)  people's pursuit of self-interest.
D)  altruism.E) C) and D)
F) B) and C)

Question 17

Almost all variation in living standards is attributable to differences in countries'

Accepted Answer

A)  population growth rates.
B)  productivity.
C)  systems of public education.
D)  taxes.E) All of the above
F) None of the above

Question 18

If the average income of an Australian is higher than the average income of a Russian,it is most likely because

Accepted Answer

A)  productivity is higher in Australia than in Russia.
B)  Australia has a more industrial economy than Russia.
C)  there is more competition in Australia than in Russia.
D)  labor unions are more powerful in Australia than in Russia.E) B) and C)
F) C) and D)

Question 19

A furniture maker currently produces 100 tables per week and sells them for a profit.She is considering expanding her operation in order to make more tables.Should she expand?

Accepted Answer

A)  Yes, because making tables is profitable.
B)  No, because she may not be able to sell the additional tables.
C)  It depends on the marginal cost of producing more tables and the marginal revenue she will earn from selling more tables.
D)  It depends on the average cost of producing more tables and the average revenue she will earn from selling more tables.E) A) and B)
F) B) and D)

Question 20

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...

Exam 1: Ten Principles of Economics

A furniture maker currently produces 100 tables per week and sells them for a profit.She is considering expanding her operation in order to make more tables.Should she expand?

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For a college student who wishes to calculate the true costs of going to college,the costs of room and board

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A rationale for government involvement in a market economy is as follows:

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Warren drinks four cups of coffee during a particular day.The marginal benefit he enjoys from drinking the fourth cup

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During which decade did the United States experience an inflationary episode similar to that experienced by Germany during the 1920s?

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When the government redistributes income from the wealthy to the poor,

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If the average income of an Australian is higher than the average income of a Russian,it is most likely because

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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

Almost all variation in living standards is attributable to differences in countries'

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In Germany in the early 1920s,on average,

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

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The invisible hand works to promote general well-being in the economy primarily through

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Market failure can be caused by

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The tradeoff between inflation and unemployment

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In the imaginary country of Countriana,in 1996,the average worker had to work 10 hours to produce 20 units of output.In that same country in 2006,the average worker needed to work 18 hours to produce 36 units of output.In that country,the productivity of the average worker

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With respect to the attainment of an efficient allocation of resources,which of the following statements is correct?

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

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The term "market failure"

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Which of the following statements best characterizes a basic difference between market economies and centrally-planned economies?

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A rational decision maker takes an action only if the

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Whatever must be given up to obtain some...
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