Question 1

Trade between the United States and Guatemala

Accepted Answer

A)  benefits both the United States and Guatemala.
B)  is a losing proposition for the United States because Guatemalan labor is less expensive than U.S. labor.
C)  is a losing proposition for Guatemala because capital is much more abundant in the U.S. than in Guatemala.
D)  is a losing proposition for Guatemala because U.S. workers are more productive than Guatemalan workers.E) B) and D)
F) All of the above

Question 2

In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy?

Accepted Answer

A)  1 percent per year
B)  2 percent per year
C)  3 percent per year
D)  4 percent per yearE) B) and D)
F) A) and C)

Question 3

Which of the following do economists not generally regard 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) C) and D)
F) A) and B)

Question 4

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.

Accepted Answer

A) True 
 B)False

Question 5

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

Accepted Answer

A)  a market failure caused by an externality.
B)  a market failure caused by market power.
C)  a market failure caused by equality.
D)  There is no market failure in this case.E) A) and B)
F) None of the above

Question 6

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

Question 7

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Accepted Answer

A)  People face tradeoffs.
B)  The cost of something is what you give up to get it.
C)  Rational people think at the margin.
D)  People respond to incentives.E) None of the above
F) C) and D)

Question 8

The primary determinant of a country's standard of living is

Accepted Answer

A)  the country's ability to prevail over foreign competition.
B)  the country's ability to produce goods and services.
C)  the total supply of money in the economy.
D)  the average age of the country's labor force.E) A) and B)
F) All of the above

Question 9

Katie is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $2,500 and replacing the roof will cost her $9,000. Katie expects the new carpeting to increase the value of her house by $3,000 and the new roof to increase the value of her house by $7,000.

Accepted Answer

A)  She should make both improvements to her house.
B)  She should replace the carpeting but not replace the roof.
C)  She should replace the roof but not replace the carpeting.
D)  She should not make either improvement to her house.E) A) and B)
F) B) and C)

Question 10

Inflation increases the value of money.

Accepted Answer

A) True 
 B)False

Question 11

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

Accepted Answer

A) True 
 B)False

Question 12

In a market economy, economic activity is guided by

Accepted Answer

A)  the government.
B)  public-interest groups.
C)  central planners.
D)  self-interest and prices.E) All of the above
F) B) and C)

Question 13

Germany could have avoided the high inflation that it experienced in the 1920s by

Accepted Answer

A)  not directing so many of its resources toward preparation for World War II.
B)  not increasing taxes so much on the German middle class.
C)  not allowing the quantity of money to increase so rapidly.
D)  using government policies to stimulate the economy more so than what was done.E) A) and C)
F) C) and D)

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

Question 15

What are the two reasons for the government to intervene in a market?

Accepted Answer

To promote...

Question 16

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

Question 17

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. 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 activity.E) None of the above
F) B) and C)

Question 18

Which of the following firms is most likely to have market power?

Accepted Answer

A)  a grocery store in a metropolitan area
B)  a convenience store in a suburb
C)  a pub in a college town
D)  the only gasoline station in a rural areaE) None of the above
F) A) and C)

Question 19

The mainstream view among economists is that

Accepted Answer

A)  society faces a tradeoff between unemployment and inflation, but only in the short run.
B)  society faces a tradeoff between unemployment and inflation, but only in the long run.
C)  society faces a tradeoff between unemployment and inflation, both in the short run and in the long run.
D)  no tradeoff exists between unemployment and inflation, either in the short run or in the long run.E) All of the above
F) A) and B)

Question 20

Market failure refers to a situation in which the market does not allocate resources efficiently.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

Correct Answer
verified

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 Answer
verified

Market failure refers to a situation in which the market does not allocate resources efficiently.

Correct Answer
verified

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.

Correct Answer
verified

Which of the following firms is most likely to have market power?

Correct Answer
verified

Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market?

Correct Answer
verified

What are the two reasons for the government to intervene in a market?

Correct Answer
verified
To promote...
View Answer

In a market economy, economic activity is guided by

Correct Answer
verified

Inflation increases the value of money.

Correct Answer
verified

Germany could have avoided the high inflation that it experienced in the 1920s by

Correct Answer
verified

The primary determinant of a country's standard of living is

Correct Answer
verified

Correct Answer
verified

Trade between the United States and Guatemala

Correct Answer
verified

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Correct Answer
verified

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate?

Correct Answer
verified

In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy?

Correct Answer
verified

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

Correct Answer
verified

The mainstream view among economists is that

Correct Answer
verified

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

Correct Answer
verified

Prices usually reflect

Correct Answer
verified

Exam 1: Ten Principles of Economics

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

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

Market failure refers to a situation in which the market does not allocate resources efficiently.

Correct AnswerverifiedShow Answer

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.

Correct AnswerverifiedShow Answer

Which of the following firms is most likely to have market power?

Correct AnswerverifiedShow Answer

Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market?

Correct AnswerverifiedShow Answer

What are the two reasons for the government to intervene in a market?

Correct AnswerverifiedTo promote...View AnswerShow Answer

In a market economy, economic activity is guided by

Correct AnswerverifiedShow Answer

Inflation increases the value of money.

Correct AnswerverifiedShow Answer

Germany could have avoided the high inflation that it experienced in the 1920s by

Correct AnswerverifiedShow Answer

The primary determinant of a country's standard of living is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Trade between the United States and Guatemala

Correct AnswerverifiedShow Answer

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Correct AnswerverifiedShow Answer

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate?

Correct AnswerverifiedShow Answer

In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The mainstream view among economists is that

Correct AnswerverifiedShow Answer

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

Correct AnswerverifiedShow Answer

Prices usually reflect

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
To promote...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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