Question 1

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Accepted Answer

A) True 
 B)False

Question 2

The term market failure refers to

Accepted Answer

A)   a situation in which the market on its own fails to allocate resources efficiently.
B)   an unsuccessful advertising campaign which reduces demand for a product.
C)   a situation in which competition among firms becomes ruthless.
D)   a firm which is forced out of business because of losses.E) All of the above
F) C) and D)

Question 3

The income of a typical worker in a country is most closely linked to which of the following?

Accepted Answer

A)   population
B)   productivity
C)   market power
D)   government policiesE) A) and B)
F) C) and D)

Question 4

Suppose that you have received $200 as a birthday gift.You can spend it today or you can put the money in a bank account for a year and earn 4 percent interest.The opportunity cost of spending the money today is

Accepted Answer

A)   $0.
B)   $8.
C)   $200.
D)   $208.E) All of the above
F) C) and D)

Question 5

The "invisible hand" refers to

Accepted Answer

A)   the government.
B)   the free market.
C)   central planners.
D)   large businesses.E) C) and D)
F) None of the above

Question 6

If the rent for apartments in New York City were fixed below the current price,then we would expect

Accepted Answer

A)   an increase in the number of people wanting to rent apartments in New York City.
B)   a decrease in the number of people wanting to rent apartments in New York City.
C)   an increase in the number of apartments available for rent in New York City.
D)   None of the above is correct.E) All of the above
F) C) and D)

Question 7

Over the past century,the average income in the United States has risen about

Accepted Answer

A)   twofold.
B)   fivefold.
C)   eightfold.
D)   tenfold.E) A) and D)
F) A) and B)

Question 8

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

Accepted Answer

A)   3 percent per year
B)   5 percent per year
C)   7 percent per year
D)   9 percent per yearE) B) and C)
F) A) and C)

Question 9

The "invisible hand" directs economic activity through

Accepted Answer

A)   advertising.
B)   prices.
C)   central planning.
D)   government regulations.E) B) and C)
F) All of the above

Question 10

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

Question 11

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night,the hotel manager should

Accepted Answer

A)   rent the room because the marginal benefit exceeds the marginal cost.
B)   rent the room because the marginal benefit exceeds the average cost.
C)   not rent the room because the marginal benefit is less than the marginal cost.
D)   not rent the room because the marginal benefit is less than the average cost.E) All of the above
F) C) and D)

Question 12

Market failure is the ability of a single person to have a substantial influence on market prices.

Accepted Answer

A) True 
 B)False

Question 13

The increase in living standards of American workers over the past century is primarily due to

Accepted Answer

A)   the success of labor unions.
B)   minimum-wage laws.
C)   improvements in productivity.
D)   None of the above are correct.E) B) and D)
F) None of the above

Question 14

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

Question 15

In the short-run,society faces a tradeoff between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 16

Market power refers to the

Accepted Answer

A)   power of a single person or small group to influence market prices.
B)   ability of a person or small group to successfully market new products.
C)   power of the government to regulate a market.
D)   importance of a certain market in relation to the overall economy.E) B) and C)
F) A) and C)

Question 17

In an economy in which decisions are guided by prices and individual self-interest,there is

Accepted Answer

A)   the potential to achieve efficiency in production.
B)   a strong need for government intervention in the market.
C)   less efficiency than would be observed in a centrally-planned economy.
D)   more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.E) None of the above
F) All of the above

Question 18

It once took 90 percent of our population to grow our food.It now takes only 3 percent of the population to grow our food.Which of the following statements is true?

Accepted Answer

A)   This loss of jobs has been detrimental to our economy.
B)   The government should provide subsidies to encourage more people to become farmers.
C)   This reduction in the number of farmers explains the increase in the price of food.
D)   This is progress because freed-up labor that is used to produce other goods.E) A) and D)
F) C) and D)

Question 19

Which of the following is correct concerning opportunity cost?

Accepted Answer

A)   Except to the extent that you pay more for them,opportunity costs should not include the cost of things you would have purchased anyway.
B)   To compute opportunity costs,you should subtract benefits from costs.
C)   Opportunity costs and the idea of trade-offs are not closely related.
D)   Rational people should compare various options without considering opportunity costs.E) A) and B)
F) C) and D)

Question 20

Which of the following statements does not apply to a market economy?

Accepted Answer

A)   Firms decide whom to hire and what to produce.
B)   The "invisible hand" usually maximizes the well-being of society as a whole.
C)   Households decide which firms to work for and what to buy with their incomes.
D)   Government policies are the primary forces that guide the decisions of firms and households.E) A) and B)
F) None of the above

Exam 1: Ten Principles of Economics

The "invisible hand" refers to

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Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night,the hotel manager should

Correct AnswerverifiedShow Answer

Suppose that you have received $200 as a birthday gift.You can spend it today or you can put the money in a bank account for a year and earn 4 percent interest.The opportunity cost of spending the money today is

Correct AnswerverifiedShow Answer

In the short-run,society faces a tradeoff between inflation and unemployment.

Correct AnswerverifiedShow Answer

Which of the following is correct concerning opportunity cost?

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The "invisible hand" directs economic activity through

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Over the past century,the average income in the United States has risen about

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

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It once took 90 percent of our population to grow our food.It now takes only 3 percent of the population to grow our food.Which of the following statements is true?

Correct AnswerverifiedShow Answer

The income of a typical worker in a country is most closely linked to which of the following?

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The term market failure refers to

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

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Which of the following statements does not apply to a market economy?

Correct AnswerverifiedShow 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

Market failure is the ability of a single person to have a substantial influence on market prices.

Correct AnswerverifiedShow Answer

The increase in living standards of American workers over the past century is primarily due to

Correct AnswerverifiedShow Answer

If the rent for apartments in New York City were fixed below the current price,then we would expect

Correct AnswerverifiedShow Answer

Market power refers to the

Correct AnswerverifiedShow Answer

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Correct AnswerverifiedShow Answer

In an economy in which decisions are guided by prices and individual self-interest,there is

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