Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Mike has spent $500 purchasing and repairing an old fishing boat,which he expects to sell for $800 once the repairs are complete.Mike discovers that,in addition to the $500 he has already spent,he needs to make an additional repair,which will cost another $400,in order to make the boat worth $800 to potential buyers.He can sell the boat as it is now for $300.What should he do?

Accepted Answer

A)   He should sell the boat as it is now for $300.
B)   He should keep the boat since it would not be rational to spend $900 on repairs and then sell the boat for $800.
C)   He should complete the repairs and sell the boat for $800.
D)   It does not matter which action he takes;the outcome is the same either way.E) A) and B)
F) A) and C)

Question 3

If the United States decides to trade with Mexico,we know that

Accepted Answer

A)   Mexico will benefit,but trade with a less developed country could not benefit the United States.
B)   it will not benefit Mexico because workers in the United States are more productive.
C)   Mexico and the United States can both benefit.
D)   it will not benefit either country because their cultural differences are too vast.E) B) and D)
F) A) and D)

Question 4

In the 1990s,inflation in the United States was

Accepted Answer

A)   very close to zero.
B)   about 3 percent per year.
C)   about 6 percent per year.
D)   commonly referred to as "public enemy number one."E) B) and D)
F) A) and C)

Question 5

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

Accepted Answer

A)   1960s.
B)   1970s.
C)   1980s.
D)   1990s.E) A) and D)
F) C) and D)

Question 6

The terms equality and efficiency are similar in that they both refer to benefits to society.However they are different in that

Accepted Answer

A)   equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
B)   equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits.
C)   equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits.
D)   equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.E) A) and D)
F) B) and D)

Question 7

Sam and Sadie charge people to park on their lawn while attending a nearby craft fair.At the current price of $10,eight people park on their lawn.If they raise the price to $15,they know that only six people will want to park on their lawn.Whether they have eight or six cars parked on their lawn does not affect their costs.From this information it follows that

Accepted Answer

A)   they should leave the price at $10.
B)   it does not matter if they charge $10 or $15.
C)   they would do better charging $15 than $10.
D)   they should raise the price even more.E) C) and D)
F) A) and B)

Question 8

In which of the following decades was there both high inflation and rapid money supply growth in the US?

Accepted Answer

A)   the 1970's and the 1990's
B)   the 1970's but not the 1990's
C)   the 1990's but not the 1970's
D)   neither the 1970's nor the 1990'sE) A) and C)
F) A) and B)

Question 9

It costs a company $40,000 to produce 4000 basketballs.The company's cost will be $40,009 if it produces an additional basketball.If the company produces 4,000 basketballs then

Accepted Answer

A)   its average cost is greater than its marginal cost.
B)   its average cost and its marginal cost are equal.
C)   its average cost is less than its marginal cost.
D)   there is insufficient information to compute average and marginal costs..E) A) and B)
F) C) and D)

Question 10

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

Question 11

People are likely to respond to a policy change

Accepted Answer

A)   only if they think the policy is a good one.
B)   only if the policy change changes the costs of their behavior.
C)   only if the policy change changes the benefits of their behavior.
D)   if the policy changes either the costs or benefits of their behavior.E) A) and C)
F) B) and C)

Question 12

The income of a typical worker in a country is most closely linked to which of the following?

Accepted Answer

A)   population
B)   productivity
C)   market power
D)   government policiesE) A) and D)
F) All of the above

Question 13

An example of an externality is the impact of

Accepted Answer

A)   bad weather on the income of farmers.
B)   the personal income tax on a person's ability to purchase goods and services.
C)   pollution from a factory on the health of people in the vicinity of the factory.
D)   increases in health care costs on the health of individuals in society.E) All of the above
F) A) and C)

Question 14

A company that formerly produced software went out of business because too many potential customers bought illegally-produced copies of the software instead of buying the product directly from the company.This instance serves as an example of

Accepted Answer

A)   market power.
B)   inefficient trade.
C)   inadequate enforcement of property rights.
D)   the invisible hand at work.E) All of the above
F) None of the above

Question 15

Which of these activities will most likely result in an external benefit?

Accepted Answer

A)   A college student buys a deck of cards to play solitaire in her dorm room.
B)   An elderly woman plants a flower garden on the vacant lot next to her house.
C)   An executive purchases a book to read on a business trip.
D)   A ten-year-old uses his allowance to buy new Nike shoes.E) All of the above
F) B) and C)

Question 16

The basic principles of economics suggest that

Accepted Answer

A)   markets are seldom,if ever,a good way to organize economic activity.
B)   government should become involved in markets when trade between countries is involved.
C)   government should become involved in markets when those markets fail to produce efficient or fair outcomes.
D)   All of the above are correct.E) All of the above
F) A) and D)

Question 17

In a particular country in 1998,the average worker needed to work 40 hours to produce 60 units of output.In that same country in 2008,the average worker needed to work 35 hours to produce 55 units of output.In that country,the productivity of the average worker

Accepted Answer

A)   decreased between 1998 and 2008,so we would expect the standard of living to have decreased accordingly.
B)   increased between 1998 and 2008,so we would expect the standard of living to have increased accordingly.
C)   decreased between 1998 and 2008,so we would expect inflation to have decreased accordingly.
D)   increased between 1998 and 2008,so we would expect inflation to have increased accordingly.E) B) and D)
F) B) and C)

Question 18

Prior to the collapse of communism,communist countries worked on the premise that economic well-being could be best attained by

Accepted Answer

A)   a market economy.
B)   a strong reliance on prices and individuals' self-interests.
C)   a system of large privately-owned firms.
D)   the actions of government central planners.E) A) and D)
F) A) and C)

Question 19

The term "productivity"

Accepted Answer

A)   means the same thing as "efficiency."
B)   is seldom used by economists,as its meaning is not precise.
C)   refers to the quantity of goods and services produced from each unit of labor input.
D)   refers to the variety of goods and services from which households can choose when they shop.E) None of the above
F) A) and C)

Question 20

Economics is the study of

Accepted Answer

A)   production methods.
B)   how society manages its scarce resources.
C)   how households decide who performs which tasks.
D)   the interaction of business and government.E) A) and B)
F) None of the above

Exam 1: Ten Principles of Economics

An example of an externality is the impact of

Correct Answer
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The terms equality and efficiency are similar in that they both refer to benefits to society.However they are different in that

Correct Answer
verified

The term "productivity"

Correct Answer
verified

Correct Answer
verified

If the United States decides to trade with Mexico,we know that

Correct Answer
verified

Prior to the collapse of communism,communist countries worked on the premise that economic well-being could be best attained by

Correct Answer
verified

Correct Answer
verified

People are likely to respond to a policy change

Correct Answer
verified

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

Correct Answer
verified

A company that formerly produced software went out of business because too many potential customers bought illegally-produced copies of the software instead of buying the product directly from the company.This instance serves as an example of

Correct Answer
verified

In the 1990s,inflation in the United States was

Correct Answer
verified

The income of a typical worker in a country is most closely linked to which of the following?

Correct Answer
verified

The basic principles of economics suggest that

Correct Answer
verified

Which of these activities will most likely result in an external benefit?

Correct Answer
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In which of the following decades was there both high inflation and rapid money supply growth in the US?

Correct Answer
verified

Economics is the study of

Correct Answer
verified

It costs a company $40,000 to produce 4000 basketballs.The company's cost will be $40,009 if it produces an additional basketball.If the company produces 4,000 basketballs then

Correct Answer
verified

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

Correct Answer
verified

In a particular country in 1998,the average worker needed to work 40 hours to produce 60 units of output.In that same country in 2008,the average worker needed to work 35 hours to produce 55 units of output.In that country,the productivity of the average worker

Correct Answer
verified

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

Correct Answer
verified

Exam 1: Ten Principles of Economics

An example of an externality is the impact of

Correct AnswerverifiedShow Answer

The terms equality and efficiency are similar in that they both refer to benefits to society.However they are different in that

Correct AnswerverifiedShow Answer

The term "productivity"

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the United States decides to trade with Mexico,we know that

Correct AnswerverifiedShow Answer

Prior to the collapse of communism,communist countries worked on the premise that economic well-being could be best attained by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

People are likely to respond to a policy change

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A company that formerly produced software went out of business because too many potential customers bought illegally-produced copies of the software instead of buying the product directly from the company.This instance serves as an example of

Correct AnswerverifiedShow Answer

In the 1990s,inflation in the United States was

Correct AnswerverifiedShow Answer

The income of a typical worker in a country is most closely linked to which of the following?

Correct AnswerverifiedShow Answer

The basic principles of economics suggest that

Correct AnswerverifiedShow Answer

Which of these activities will most likely result in an external benefit?

Correct AnswerverifiedShow Answer

In which of the following decades was there both high inflation and rapid money supply growth in the US?

Correct AnswerverifiedShow Answer

Economics is the study of

Correct AnswerverifiedShow Answer

It costs a company $40,000 to produce 4000 basketballs.The company's cost will be $40,009 if it produces an additional basketball.If the company produces 4,000 basketballs then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a particular country in 1998,the average worker needed to work 40 hours to produce 60 units of output.In that same country in 2008,the average worker needed to work 35 hours to produce 55 units of output.In that country,the productivity of the average worker

Correct AnswerverifiedShow Answer

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

Correct AnswerverifiedShow Answer

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