Question 1

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

A)   the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water.
B)   the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.
C)   producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices.
D)   water prices are held artificially low by governments, since water is necessary for life.E) B) and C)
F) A) and D)

Question 2

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Accepted Answer

A)   safety glass in all new cars.
B)   seat belts in all new cars.
C)   air bags in all new cars.
D)   stricter drunk driving laws in all states.E) B) and D)
F) All of the above

Question 3

England can benefit from trade

Accepted Answer

A)   only with nations that can produce goods England cannot produce.
B)   only with less developed nations.
C)   only with nations outside of Europe.
D)   with any nation.E) C) and D)
F) B) and D)

Question 4

Annie is an excellent baker and Sam has a plentiful farm. If Sam trades eggs and butter to Annie for some of Annie's bread and pastries,

Accepted Answer

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

Question 5

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' self­interests.
C)   a system of large privately-owned firms.
D)   the actions of government central planners.E) None of the above
F) B) and C)

Question 6

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Accepted Answer

A)   to produce good quality products so that society would benefit from the resources used
B)   to conserve on costs, so as to maintain efficiency in the economy
C)   to produce enough to meet the output target, without regard for quality or cost
D)   to produce those products that society desires mostE) A) and B)
F) A) and C)

Question 7

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Accepted Answer

A)   the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs.
B)   the benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs.
C)   the benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs.
D)   the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs.E) A) and B)
F) A) and C)

Question 8

A certain state legislature is considering an increase in the state gasoline tax. Representative Campbell argues that an increase in the gasoline tax would harm low-income drivers disproportionately. Representative Richards responds by saying that low-income drivers own smaller cars that use less gasoline, and that low-income drivers therefore would not be harmed disproportionately.

Accepted Answer

A)   Representative Campbell's argument is based primarily on efficiency, while Representative Richards' argument is based primarily on equality.
B)   Representative Campbell's argument is based primarily on equality, while Representative Richards' argument is based primarily on efficiency.
C)   Both representatives' arguments are based primarily on efficiency.
D)   Both representatives' arguments are based primarily on equality.E) B) and C)
F) All of the above

Question 9

Both the production of goods and services and the unemployment rate are used to measure

Accepted Answer

A)   the business cycle.
B)   productivity.
C)   the interest rate.
D)   inflation.E) A) and D)
F) None of the above

Question 10

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is

Accepted Answer

A)   the improvement in his grades from studying for the hour.
B)   the improvement in his grades from studying minus the enjoyment of watching TV.
C)   the enjoyment he would have received if he had watched TV with his friends.
D)   zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV.E) C) and D)
F) B) and D)

Question 11

Tracy quits her job, which pays $25,000 a year, to finish her college degree. Her annual college expenses are $12,000 for tuition and fees and $1,000 for books. What is her opportunity cost of attending college for the year?

Accepted Answer

The answer of Tracy quits her job, which pays $25,000...

Question 12

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A)   command economy.
B)   centrally-planned economy.
C)   market economy.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 13

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

Accepted Answer

A)   in Brazil. Most variation in the standard of living across countries is due to differences in productivity.
B)   in Brazil. 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) None of the above
F) B) and D)

Question 14

With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year.

Accepted Answer

The concept of working longer per year w...

Question 15

The "invisible hand" refers to

Accepted Answer

A)   how central planners made economic decisions.
B)   how the decisions of households and firms lead to desirable market outcomes.
C)   the control that large firms have over the economy.
D)   government regulations without which the economy would be less efficient.E) B) and C)
F) C) and D)

Question 16

Approximately what percentage of the world's economies experience scarcity?

Accepted Answer

A)   10%
B)   40%
C)   85%
D)   100%E) A) and B)
F) B) and C)

Question 17

Economists use the word equality to describe a situation in which

Accepted Answer

A)   each member of society has the same income.
B)   each member of society has access to abundant quantities of goods and services, regardless of his or her income.
C)   society is getting the maximum benefits from its scarce resources.
D)   society's resources are used efficiently.E) B) and D)
F) A) and C)

Question 18

When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing

Accepted Answer

A)   scarcity.
B)   surpluses.
C)   inefficiencies.
D)   inequalities.E) A) and C)
F) A) and D)

Question 19

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred?

Accepted Answer

A)   An individual's probability of surviving an auto accident rose.
B)   There was an increase in pedestrian deaths.
C)   There was an increase in automobile accidents.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 20

Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city government announced a plan to build a new landfill on Pine Street just down the street from the house Yvette purchased. As a result of the city's announced plan, Yvette is weighing two alternatives: She can go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs and sell the house as it is for $250,000. She should

Accepted Answer

A)   keep the house and live in it.
B)   go ahead with the $50,000 in repairs and sell the house for $290,000.
C)   forgo the repairs and sell the house as it is for $250,000.
D)   move the house from Pine Street to a more desirable location, regardless of the cost of doing so.E) A) and B)
F) A) and C)

Exam 1: Ten Principles of Economics

Correct Answer
verified

Both the production of goods and services and the unemployment rate are used to measure

Correct Answer
verified

Approximately what percentage of the world's economies experience scarcity?

Correct Answer
verified

Annie is an excellent baker and Sam has a plentiful farm. If Sam trades eggs and butter to Annie for some of Annie's bread and pastries,

Correct Answer
verified

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Correct Answer
verified

Economists use the word equality to describe a situation in which

Correct Answer
verified

Correct Answer
verified

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Correct Answer
verified

The decisions of firms and households are guided by prices and self-interest in a

Correct Answer
verified

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred?

Correct Answer
verified

Tracy quits her job, which pays $25,000 a year, to finish her college degree. Her annual college expenses are $12,000 for tuition and fees and $1,000 for books. What is her opportunity cost of attending college for the year?

Correct Answer
verified

People are willing to pay more for a diamond than for a bottle of water because

Correct Answer
verified

With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year.

Correct Answer
verified
The concept of working longer per year w...
View Answer

When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing

Correct Answer
verified

England can benefit from trade

Correct Answer
verified

Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by

Correct Answer
verified

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is

Correct Answer
verified

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

Correct Answer
verified

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Correct Answer
verified

The "invisible hand" refers to

Correct Answer
verified

Exam 1: Ten Principles of Economics

Correct AnswerverifiedShow Answer

Both the production of goods and services and the unemployment rate are used to measure

Correct AnswerverifiedShow Answer

Approximately what percentage of the world's economies experience scarcity?

Correct AnswerverifiedShow Answer

Annie is an excellent baker and Sam has a plentiful farm. If Sam trades eggs and butter to Annie for some of Annie's bread and pastries,

Correct AnswerverifiedShow Answer

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Correct AnswerverifiedShow Answer

Economists use the word equality to describe a situation in which

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Correct AnswerverifiedShow Answer

The decisions of firms and households are guided by prices and self-interest in a

Correct AnswerverifiedShow Answer

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred?

Correct AnswerverifiedShow Answer

Tracy quits her job, which pays $25,000 a year, to finish her college degree. Her annual college expenses are $12,000 for tuition and fees and $1,000 for books. What is her opportunity cost of attending college for the year?

Correct AnswerverifiedShow Answer

People are willing to pay more for a diamond than for a bottle of water because

Correct AnswerverifiedShow Answer

With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year.

Correct AnswerverifiedThe concept of working longer per year w...View AnswerShow Answer

When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing

Correct AnswerverifiedShow Answer

England can benefit from trade

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

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is

Correct AnswerverifiedShow Answer

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

Correct AnswerverifiedShow Answer

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Correct AnswerverifiedShow Answer

The "invisible hand" refers to

Correct AnswerverifiedShow 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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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
verified

Correct Answer
verified
The concept of working longer per year w...
View Answer

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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