Question 1

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) None of the above
F) All of the above

Question 2

The business cycle is the

Accepted Answer

A)   relationship between unemployment and inflation.
B)   irregular fluctuations in economic activity.
C)   positive relationship between the quantity of money in an economy and inflation.
D)   predictable changes in economic activity due to changes in government spending and taxes.E) A) and C)
F) All of the above

Question 3

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

Accepted Answer

A)   automakers
B)   pedestrians
C)   drivers
D)   owners of collision-repair shopsE) A) and B)
F) B) and D)

Question 4

When a single person (or small group)  has the ability to influence market prices, there is

Accepted Answer

A)   competition.
B)   market power.
C)   an externality.
D)   a lack of property rights.E) None of the above
F) A) and C)

Question 5

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

Accepted Answer

A)   to promote efficiency
B)   to promote equality
C)   to enforce property rights
D)   to protect an industry from foreign competitionE) All of the above
F) A) and C)

Question 6

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Accepted Answer

A) True 
 B)False

Question 7

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

Accepted Answer

A)   cost of teaching increased.
B)   benefit of teaching increased.
C)   cost of a corporate job increased.
D)   benefit of a corporate job decreased.E) None of the above
F) B) and C)

Question 8

Trade

Accepted Answer

A)   allows specialization, which increases costs.
B)   allows specialization, which reduces costs.
C)   reduces specialization, which increases costs.
D)   reduces specialization, which reduces costs.E) A) and B)
F) B) and C)

Question 9

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

Question 10

The average cost per seat on the 75-passenger Get-There-Safe Bus company's trip from Milwaukee to Minneapolis, on which no refreshments are served, is $37. In advance of a particular trip, three seats remain unsold. The bus company could increase its profit only if it

Accepted Answer

A)   charged any ticket price above $0 for the three remaining seats.
B)   charged at least $18.50 for each of the three remaining seats.
C)   charged at least $37 for each of the three remaining seats.
D)   paid three people to occupy the three remaining seats.E) B) and C)
F) A) and B)

Question 11

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

Question 12

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

Question 13

College-age athletes who drop out of college to play professional sports

Accepted Answer

A)   are not rational decision makers.
B)   are well aware that their opportunity cost of attending college is very high.
C)   are concerned more about present circumstances than their future.
D)   underestimate the value of a college education.E) None of the above
F) A) and B)

Question 14

Economics deals primarily with the concept of

Accepted Answer

A)   scarcity.
B)   money.
C)   poverty.
D)   banking.E) All of the above
F) B) and D)

Question 15

For most students, the largest single cost of a college education is

Accepted Answer

A)   the wages given up to attend school.
B)   tuition, fees, and books.
C)   room and board.
D)   transportation, parking, and entertainment.E) B) and C)
F) A) and C)

Question 16

One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

Accepted Answer

Efficiency is the property of society ge...

Question 17

Maureen's college raises the cost of room and board per semester. This increase raises Maureen's opportunity cost of attending college

Accepted Answer

A)   even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost reduces Maureen's incentive to attend college.
B)   even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost increases Maureen's incentive to attend college.
C)   only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Maureen's incentive to attend college.
D)   only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost increases Maureen's incentive to attend college.E) None of the above
F) All of the above

Question 18

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

Accepted Answer

To lower inflation, the government may c...

Question 19

Benefits from trade would not include

Accepted Answer

A)   the ability of people and nations to specialize.
B)   a greater variety of goods and services becoming available.
C)   less competition.
D)   lower prices.E) A) and B)
F) A) and C)

Question 20

Efficiency

Accepted Answer

A)   and equality both refer to how much a society can produce with its resources.
B)   and equality both refer to how fairly the benefits from using resources are distributed between members of a society.
C)   refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society.
D)   refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resourcesE) C) and D)
F) All of the above

Exam 1: Ten Principles of Economics

College-age athletes who drop out of college to play professional sports

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

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Maureen's college raises the cost of room and board per semester. This increase raises Maureen's opportunity cost of attending college

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Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

Correct AnswerverifiedShow Answer

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

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For most students, the largest single cost of a college education is

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When a single person (or small group) has the ability to influence market prices, there is

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Economics deals primarily with the concept of

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Trade

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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

Correct AnswerverifiedShow Answer

The average cost per seat on the 75-passenger Get-There-Safe Bus company's trip from Milwaukee to Minneapolis, on which no refreshments are served, is $37. In advance of a particular trip, three seats remain unsold. The bus company could increase its profit only if it

Correct AnswerverifiedShow Answer

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

Correct AnswerverifiedTo lower inflation, the government may c...View AnswerShow Answer

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

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Prices usually reflect

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Efficiency

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To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Correct AnswerverifiedShow Answer

Central planning refers to

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Benefits from trade would not include

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One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

Correct AnswerverifiedEfficiency is the property of society ge...View AnswerShow Answer

The business cycle is the

Correct AnswerverifiedShow Answer

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To lower inflation, the government may c...
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Correct Answer
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Efficiency is the property of society ge...
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Correct Answer
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