Question 1

When the government prevents prices from adjusting naturally to supply and demand, it

Accepted Answer

A)  equates the amount buyers want to buy with the amount sellers want to sell.
B)  adversely affects the allocation of resources.
C)  improves equality and efficiency.
D)  improves efficiency but reduces equality.E) C) and D)
F) B) and D)

Question 2

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 C)
F) A) and D)

Question 3

Making rational decisions at the margin means that people

Accepted Answer

A)  make those decisions that do not impose a marginal cost.
B)  evaluate how easily a decision can be reversed if problems arise.
C)  compare the marginal costs and marginal benefits of each decision.
D)  always calculate the dollar costs for each decision.E) B) and D)
F) A) and C)

Question 4

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 5

A worker in Thailand can earn $12 per day making cotton cloth on a hand loom. A worker in the United States can earn $82 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Accepted Answer

A)  United States textile workers belong to a union, whereas Thailand textile workers do not belong to a union.
B)  There is little demand for cotton cloth in Thailand and great demand in the United States.
C)  Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.
D)  Thailand has a low-wage policy to make its textile industry more competitive in world markets.E) A) and D)
F) A) and B)

Question 6

What is another word for "marginal"?

Accepted Answer

incrementa...

Question 7

The opportunity cost of an item is

Accepted Answer

A)  the number of hours needed to earn money to buy the item.
B)  what you give up to get that item.
C)  usually less than the dollar value of the item.
D)  the dollar value of the item.E) A) and B)
F) A) and C)

Question 8

Give an example of government intervention that is intended to improve equality.

Accepted Answer

The income...

Question 9

Consider two countries, Muria and Zenya. In Muria total annual output is worth $800 million and people work 40 million hours. In Zenya total annual output is worth $900 million and people work 50 million hours. In which country is productivity higher?

Accepted Answer

The answer of Consider two countries, Muria and Zenya. In...

Question 10

Your professor loves her work, teaching math. She has been offered other positions in the corporate world that would increase her income by 15 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) All of the above
F) B) and C)

Question 11

In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker

Accepted Answer

A)  decreased by 1.7 percent between 1998 and 2008.
B)  remained unchanged between 1998 and 2008.
C)  increased by 4.75 percent between 1998 and 2008.
D)  increased by 6.25 percent between 1998 and 2008.E) All of the above
F) B) and C)

Question 12

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Accepted Answer

A) True 
 B)False

Question 13

The term ______ refers to the size of the economic pie, and the term ______ refers to how the pie is divided.

Accepted Answer

efficiency...

Question 14

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

Accepted Answer

A)  productivity.
B)  an externality.
C)  market power.
D)  property rights.E) C) and D)
F) A) and B)

Question 15

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Accepted Answer

A)  only Dale is made better off by trade.
B)  only Terrence is made better off by trade.
C)  both Dale and Terrence are made better off by trade.
D)  neither Dale nor Terrence are made better off by trade.E) A) and D)
F) C) and D)

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)  government should never become involved in markets.E) None of the above
F) B) and C)

Question 17

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 18

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

Accepted Answer

A)  A utility company
B)  A farmer
C)  A grocery store
D)  A local electronics retailerE) B) and C)
F) None of the above

Question 19

In the short run, an increase in the money supply is likely to lead to

Accepted Answer

A)  lower unemployment and lower inflation.
B)  lower unemployment and higher inflation.
C)  higher unemployment and lower inflation.
D)  higher unemployment and higher inflation.E) C) and D)
F) A) and C)

Question 20

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

Exam 1: Ten Principles of Economics

Your professor loves her work, teaching math. She has been offered other positions in the corporate world that would increase her income by 15 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

Correct AnswerverifiedShow Answer

The basic principles of economics suggest that

Correct AnswerverifiedShow Answer

A worker in Thailand can earn $12 per day making cotton cloth on a hand loom. A worker in the United States can earn $82 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Correct AnswerverifiedShow Answer

The opportunity cost of an item is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the short run, an increase in the money supply is likely to lead to

Correct AnswerverifiedShow Answer

The term ______ refers to the size of the economic pie, and the term ______ refers to how the pie is divided.

Correct Answerverifiedefficiency...View AnswerShow Answer

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

Correct AnswerverifiedShow Answer

In a market economy, economic activity is guided by

Correct AnswerverifiedShow Answer

In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker

Correct AnswerverifiedShow Answer

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Correct AnswerverifiedShow Answer

What is another word for "marginal"?

Correct Answerverifiedincrementa...View AnswerShow 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

When the government prevents prices from adjusting naturally to supply and demand, it

Correct AnswerverifiedShow Answer

Consider two countries, Muria and Zenya. In Muria total annual output is worth $800 million and people work 40 million hours. In Zenya total annual output is worth $900 million and people work 50 million hours. In which country is productivity higher?

Correct AnswerverifiedShow Answer

Making rational decisions at the margin means that people

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

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

Correct AnswerverifiedShow Answer

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Correct AnswerverifiedShow Answer

Give an example of government intervention that is intended to improve equality.

Correct AnswerverifiedThe income...View AnswerShow Answer

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The term refers to the size of the economic pie, and the term refers to how the pie is divided.

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efficiency...
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incrementa...
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To lower inflation, the government may c...
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The income...
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