Question 1

A donut shop sells fresh-baked donuts from 6 a.m.until 5 p.m.every day.The shop does not sell day-old donuts, so all unsold donuts are thrown away at 5 p.m.each day.The cost of making and selling a dozen donuts is $1; there are no costs associated with throwing donuts away.If the manager has seven dozen donuts left at 4 p.m.on a particular day, which of the following alternatives is most attractive?

Accepted Answer

A)  Lower the price of the remaining donuts, even if the price falls below $1 per dozen.
B)  Lower the price of the remaining donuts, but under no circumstances should the price fall below $1 per dozen.
C)  Throw the donuts away and produce seven fewer dozen donuts tomorrow.
D)  Starting tomorrow, lower the price on all donuts so they will all be sold earlier in the day.E) A) and D)
F) All of the above

Question 2

Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper. This scenario is an example of which principle of economics?

Accepted Answer

A)  Trade can make everyone better off.
B)  Markets are usually a good way to organize economic activity.
C)  Governments can sometimes improve market outcomes.
D)  Prices rise when the government prints too much money.E) None of the above
F) C) and D)

Question 3

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

Accepted Answer

A)  the Federal Reserve is worried about inflation.
B)  the Federal Reserve is worried about unemployment.
C)  the Federal Reserve is hoping to reduce the demand for goods and services.
D)  the Federal Reserve is worried that the economy is growing too quickly.E) A) and B)
F) A) and C)

Question 4

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

Accepted Answer

A) True 
 B)False

Question 5

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 6

The property of society getting the most it can from its scarce resources is called

Accepted Answer

A)  efficiency.
B)  equality.
C)  externality.
D)  productivity.E) A) and D)
F) B) and C)

Question 7

Fossil fuels are considered to be nonrenewable energy sources. Which of the following statements is correct?

Accepted Answer

A)  Fossil fuels are unlimited resources.
B)  Fossil fuels are scarce resources.
C)  Fossil fuels are nonscarce resources.
D)  Fossil fuels are not resources.E) All of the above
F) A) and B)

Question 8

Scenario 1-5
Suppose that you have a choice between going to the movies with a friend for three hours or working at your job. If you go to the movies, you will spend $12 on a ticket and $6 on popcorn. If you choose to work, you will earn $10 an hour.
-Refer to Scenario 1-5. What is your opportunity cost of going to the movies?

Accepted Answer

The answer of Scenario 1-5
Suppose that you have a choice...

Question 9

Prices direct economic activity in a market economy by

Accepted Answer

A)  influencing the actions of buyers and sellers.
B)  reducing scarcity of the goods and services produced.
C)  reducing opportunity cost of goods and services produced.
D)  allocating goods and services in the most equitable way.E) A) and C)
F) A) and D)

Question 10

Suppose that in Peru total annual output is worth $750 million and people work 40 million hours. In Oman, total annual output is worth 650 million and people work 20 million hours. Productivity is higher

Accepted Answer

A)  in Oman.Most variation in the standard of living across countries is due to differences in productivity.
B)  in Oman.Differences in productivity explain very little of the variation in the standard of living across countries.
C)  in Peru.Most variation in the standard of living across countries is due to differences in productivity.
D)  in Peru.Differences in productivity explain very little of the variation in the standard of living across countries.E) All of the above
F) None of the above

Question 11

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

Accepted Answer

A)  inefficiency
B)  inequality
C)  scarcity
D)  market failureE) None of the above
F) C) and D)

Question 12

Suppose that you have received $650 as a birthday gift. You can spend it today or you can put the money in a savings account for a year and earn 2 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

Accepted Answer

A)  $0.
B)  $13.00.
C)  $652.00.
D)  $663.00.E) C) and D)
F) All of the above

Question 13

When society requires that firms reduce pollution, there is

Accepted Answer

A)  a tradeoff because of reduced incomes to the firms' owners and workers.
B)  a tradeoff only if some firms are forced to close.
C)  no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements.
D)  no tradeoff, since everyone benefits from reduced pollution.E) C) and D)
F) A) and B)

Question 14

Market power and externalities are two possible causes of market failure.

Accepted Answer

A) True 
 B)False

Question 15

Scenario 1-2
Suppose that you have a choice between going to the movies with a friend for two hours or working at your job. If you go to the movies, you will spend $7 on a ticket and $5 on popcorn. If you choose to work, you will earn $10 an hour.
-Refer to Scenario 1-2. What is your opportunity cost of working?

Accepted Answer

The enjoyment you wo...

Question 16

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

Accepted Answer

A)  sell the ticket because the marginal benefit exceeds the marginal cost.
B)  sell the ticket because the marginal benefit exceeds the average cost.
C)  not sell the ticket because the marginal benefit is less than the marginal cost.
D)  not sell the ticket because the marginal benefit is less than the average cost.E) B) and C)
F) C) and D)

Question 17

Savion's aunt gave him $25 for his birthday with the condition that Savion buys himself something. In deciding how to spend the money, Savion narrows his options down to four choices: Option 1, Option 2, Option 3, and Option 4. Each option costs $25. Finally, he decides on Option 2. The opportunity cost of this decision is

Accepted Answer

A)  the value to Savion of the option he would have chosen had Option 2 not been available.
B)  the value to Savion of Options 1, 3, and 4 combined.
C)  the average of the values to Savion of Options 1, 3, and 4.
D)  $25.E) A) and C)
F) B) and C)

Question 18

A marginal change is a small incremental adjustment to an existing plan of action.

Accepted Answer

A) True 
 B)False

Question 19

Which of these activities will most likely impose an external cost?

Accepted Answer

A)  An athlete works out at a gym.
B)  A postal worker smokes a cigarette in a crowded break room.
C)  A young father pushes his baby in a stroller.
D)  A construction worker eats a hotdog during her lunch break.E) A) and B)
F) A) and C)

Question 20

The business cycle refers to fluctuations in economic activity such as employment and production.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A marginal change is a small incremental adjustment to an existing plan of action.

Correct Answer
verified

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

Correct Answer
verified

Suppose that you have received $650 as a birthday gift. You can spend it today or you can put the money in a savings account for a year and earn 2 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

Correct Answer
verified

The property of society getting the most it can from its scarce resources is called

Correct Answer
verified

The business cycle refers to fluctuations in economic activity such as employment and production.

Correct Answer
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What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

Correct Answer
verified

Correct Answer
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The enjoyment you wo...
View Answer

Suppose that in Peru total annual output is worth $750 million and people work 40 million hours. In Oman, total annual output is worth 650 million and people work 20 million hours. Productivity is higher

Correct Answer
verified

Market power and externalities are two possible causes of market failure.

Correct Answer
verified

When society requires that firms reduce pollution, there is

Correct Answer
verified

Correct Answer
verified

Prices direct economic activity in a market economy by

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Fossil fuels are considered to be nonrenewable energy sources. Which of the following statements is correct?

Correct Answer
verified

Which of these activities will most likely impose an external cost?

Correct Answer
verified

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

Correct Answer
verified

Exam 1: Ten Principles of Economics

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A marginal change is a small incremental adjustment to an existing plan of action.

Correct AnswerverifiedShow Answer

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

Correct AnswerverifiedShow Answer

Suppose that you have received $650 as a birthday gift. You can spend it today or you can put the money in a savings account for a year and earn 2 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

Correct AnswerverifiedShow Answer

The property of society getting the most it can from its scarce resources is called

Correct AnswerverifiedShow Answer

The business cycle refers to fluctuations in economic activity such as employment and production.

Correct AnswerverifiedShow Answer

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe enjoyment you wo...View AnswerShow Answer

Suppose that in Peru total annual output is worth $750 million and people work 40 million hours. In Oman, total annual output is worth 650 million and people work 20 million hours. Productivity is higher

Correct AnswerverifiedShow Answer

Market power and externalities are two possible causes of market failure.

Correct AnswerverifiedShow Answer

When society requires that firms reduce pollution, there is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Prices direct economic activity in a market economy by

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

Correct AnswerverifiedShow Answer

Fossil fuels are considered to be nonrenewable energy sources. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of these activities will most likely impose an external cost?

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

Correct AnswerverifiedShow Answer

Correct Answer
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The enjoyment you wo...
View Answer

Correct Answer
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Correct Answer
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