Question 1

Suppose the state of Illinois passes a law that bans smoking in restaurants.As a result,residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there.Which of the following principles does this best illustrate?

Accepted Answer

A)   People respond to incentives
B)   Rational people think at the margin
C)   Trade can make everyone better off
D)   Markets are usually a good way to organize economic activityE) All of the above
F) B) and D)

Question 2

Economists use the term ______ to refer to an increase in the overall level of prices in the economy.

Accepted Answer

The answer of Economists use the term ______ to refer...

Question 3

Caroline eats two bananas during a particular day.The marginal benefit she enjoys from eating the second banana

Accepted Answer

A)   can be thought of as the total benefit Caroline enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana.
B)   determines Caroline's marginal cost of the first and second bananas.
C)   does not depend on how many bananas Caroline has already eaten.
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 4

Most economists believe that an increase in the quantity of money results in

Accepted Answer

A)   an increase in the demand for goods and services.
B)   lower unemployment in the short run.
C)   higher inflation in the long run.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 5

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

Accepted Answer

A) True 
 B)False

Question 8

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

Question 9

To improve living standards,policymakers should

Accepted Answer

A)   impose restrictions on foreign competition.
B)   formulate policies designed to increase productivity.
C)   impose tougher immigration policies.
D)   provide tax breaks for the middle class.E) All of the above
F) B) and C)

Question 10

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

Question 11

Low rates of inflation are generally associated with

Accepted Answer

A)   low rates of government spending.
B)   small or nonexistent government budget deficits.
C)   low rates of productivity growth.
D)   low rates of growth of the quantity of money.E) C) and D)
F) A) and B)

Question 12

Inflation increases the value of money.

Accepted Answer

A) True 
 B)False

Question 13

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight.The marginal cost of flying a passenger is

Accepted Answer

A)   $50.
B)   $500.
C)   $50,000.
D)   This cannot be determined from the information given.E) A) and C)
F) All of the above

Question 14

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) A) and C)

Question 15

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

Accepted Answer

They reduce the reward for wor...

Question 16

Which of the following statements about markets is most accurate?

Accepted Answer

A)   Markets are usually a good way to organize economic activity.
B)   Markets are usually inferior to central planning as a way to organize economic activity.
C)   Markets fail and are therefore not an acceptable way to organize economic activity.
D)   Markets are a good way to organize economic activity in developed nations,but not in less developed nations.E) A) and B)
F) All of the above

Question 17

Slow growth in US incomes during the 1970s and 1980s was primarily due to

Accepted Answer

A)   slow productivity growth in the US.
B)   increased competition from Japan.
C)   increased competition from European countries.
D)   a rapid decrease in the quantity of money in the economy.E) None of the above
F) A) and B)

Question 18

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 19

The broken window fallacy states that when a window breaks and someone spends money to repair it,they have created new economic activity that would not have otherwise taken place.

Accepted Answer

A) True 
 B)False

Question 20

The term ______ refers to a small incremental adjustment to an existing plan of action.

Accepted Answer

The answer of The term ______ refers to a small...

Exam 1: Ten Principles of Economics

An example of an externality is the impact of

Correct AnswerverifiedShow Answer

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Low rates of inflation are generally associated with

Correct AnswerverifiedShow Answer

The term ______ refers to a small incremental adjustment to an existing plan of action.

Correct AnswerverifiedShow Answer

To improve living standards,policymakers should

Correct AnswerverifiedShow Answer

Most economists believe that an increase in the quantity of money results in

Correct AnswerverifiedShow Answer

The broken window fallacy states that when a window breaks and someone spends money to repair it,they have created new economic activity that would not have otherwise taken place.

Correct AnswerverifiedShow Answer

Slow growth in US incomes during the 1970s and 1980s was primarily due to

Correct AnswerverifiedShow Answer

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight.The marginal cost of flying a passenger is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

Correct AnswerverifiedShow Answer

Inflation increases the value of money.

Correct AnswerverifiedShow Answer

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

Correct AnswerverifiedThey reduce the reward for wor...View AnswerShow Answer

Caroline eats two bananas during a particular day.The marginal benefit she enjoys from eating the second banana

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economists use the term ______ to refer to an increase in the overall level of prices in the economy.

Correct AnswerverifiedShow Answer

Which of the following statements about markets is most accurate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the state of Illinois passes a law that bans smoking in restaurants.As a result,residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there.Which of the following principles does this best illustrate?

Correct AnswerverifiedShow Answer

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They reduce the reward for wor...
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