Question 1

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 2

When calculating the cost of college,which of the following should you probably not include?

Accepted Answer

A)   The cost of tuition
B)   The cost of books required for college classes
C)   The income you would have earned had you not gone to college
D)   The cost of rent for your off-campus apartment.E) C) and D)
F) A) and C)

Question 3

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce

Accepted Answer

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

Question 4

Which of these activities will most likely result in an external benefit?

Accepted Answer

A)   Jake purchases a dilapidated house and cleans up the yard and exterior of the house.
B)   John purchases an iPhone and downloads new apps.
C)   Jack purchases a new SUV and drives it to work every day.
D)   Joe purchases a suit and wears it on his interviews.E) A) and C)
F) A) and B)

Question 5

After much consideration,you have chosen Ireland over Spain for your Study Abroad program next year.However,the deadline for your final decision 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 Spain increases.
B)   The marginal cost of going to Spain increases.
C)   The marginal benefit of going to Ireland increases.
D)   The marginal cost of going to Ireland decreases.E) None of the above
F) All of the above

Question 6

Government policies that improve equality usually increase efficiency at the same time.

Accepted Answer

A) True 
 B)False

Question 7

One of the 20th century's worst episodes of inflation occurred in

Accepted Answer

A)   the United States in the 1960s.
B)   Italy in the 1950s.
C)   Russia in the 1930s.
D)   Germany in the 1920s.E) B) and D)
F) B) and C)

Question 8

Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out.Both the amplifier and the mp3 player cost $100,so he can only buy one.This illustrates the basic concept that

Accepted Answer

A)   trade can make everyone better off.
B)   people face trade-offs
C)   rational people think at the margin.
D)   people respond to incentives.E) All of the above
F) None of the above

Question 9

The adage,"There is no such thing as a free lunch," is used to illustrate the principle that

Accepted Answer

A)   goods are scarce.
B)   people face tradeoffs.
C)   income must be earned.
D)   households face many decisions.E) B) and D)
F) None of the above

Question 10

Trade between countries tends to

Accepted Answer

A)   reduce both competition and specialization.
B)   reduce competition and increase specialization.
C)   increase competition and reduce specialization.
D)   increase both competition and specialization.E) A) and C)
F) B) and C)

Question 11

Equality means distributing society's resources in the most efficient manner.

Accepted Answer

A) True 
 B)False

Question 12

A friend of yours asks you why market prices are better than government-determined prices.Because you understand economic principles,you say that market-determined prices are better because they generally reflect

Accepted Answer

A)   the value of a good to society, but not the cost of making it.
B)   the cost of making a good to society, but not its value.
C)   both the value of a good to society and the cost of making it.
D)   neither the value of a good to society nor the cost of making it.E) B) and D)
F) All of the above

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Penny is piano teacher and Dan is a tile layer.If Penny teaches Dan's daughter to play the piano in exchange for Dan tiling her kitchen floor,

Accepted Answer

A)   only Penny is made better off by trade.
B)   only Dan is made better off by trade.
C)   both Penny and Dan are made better off by trade.
D)   neither Penny nor Dan are made better off by trade.E) None of the above
F) C) and D)

Question 15

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents.As a student of economics,you know that

Accepted Answer

A)   this is a case of the "broken window fallacy."
B)   this is a great use of taxpayer dollars.
C)   this policy diverts money from spending somewhere else in the economy.
D)   Both a and c are correct.E) C) and D)
F) All of the above

Question 16

One reason we need government,even in a market economy,is that

Accepted Answer

A)   there is insufficient market power in the absence of government.
B)   property rights are too strong in the absence of government.
C)   the invisible hand is not perfect.
D)   Both a and b are correct.E) All of the above
F) A) and C)

Question 17

The invisible hand works to promote general well-being in the economy primarily through

Accepted Answer

A)   government intervention.
B)   the political process.
C)   people's pursuit of self-interest.
D)   altruism.E) C) and D)
F) B) and D)

Question 18

According to a recent study of Chilean bus drivers,drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour.This result is an example of which principle of economics?

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

Question 19

The average cost per seat on the 75-passenger Get-There-Safe Bus company's trip from Milwaukee to Minneapolis,on which no refreshments are served,is $37.In advance of a particular trip,three seats remain unsold.The bus company could increase its profit only if it

Accepted Answer

A)   charged any ticket price above $0 for the three remaining seats.
B)   charged at least $18.50 for each of the three remaining seats.
C)   charged at least $37 for each of the three remaining seats.
D)   paid three people to occupy the three remaining seats.E) A) and C)
F) B) and C)

Question 20

Government policies designed to equalize the distribution of economic well-being include
(i) the welfare system
(ii) unemployment insurance
(iii) progressive income tax

Accepted Answer

A)   (i)  only
B)   (ii)  only
C)   (i)  and (ii)  only
D)   (i) , (ii) , and (iii) E) A) and B)
F) All of the above

Exam 1: Ten Principles of Economics.

Government policies that improve equality usually increase efficiency at the same time.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The invisible hand works to promote general well-being in the economy primarily through

Correct AnswerverifiedShow Answer

According to a recent study of Chilean bus drivers,drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour.This result is an example of which principle of economics?

Correct AnswerverifiedShow Answer

Which of these activities will most likely result in an external benefit?

Correct AnswerverifiedShow Answer

When calculating the cost of college,which of the following should you probably not include?

Correct AnswerverifiedShow Answer

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce

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

A friend of yours asks you why market prices are better than government-determined prices.Because you understand economic principles,you say that market-determined prices are better because they generally reflect

Correct AnswerverifiedShow Answer

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents.As a student of economics,you know that

Correct AnswerverifiedShow Answer

Penny is piano teacher and Dan is a tile layer.If Penny teaches Dan's daughter to play the piano in exchange for Dan tiling her kitchen floor,

Correct AnswerverifiedShow Answer

Trade between countries tends to

Correct AnswerverifiedShow Answer

One reason we need government,even in a market economy,is that

Correct AnswerverifiedShow Answer

One of the 20th century's worst episodes of inflation occurred in

Correct AnswerverifiedShow Answer

Equality means distributing society's resources in the most efficient manner.

Correct AnswerverifiedShow Answer

Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out.Both the amplifier and the mp3 player cost $100,so he can only buy one.This illustrates the basic concept that

Correct AnswerverifiedShow Answer

The adage,"There is no such thing as a free lunch," is used to illustrate the principle that

Correct AnswerverifiedShow Answer

Government policies designed to equalize the distribution of economic well-being include (i) the welfare system (ii) unemployment insurance (iii) progressive income tax

Correct AnswerverifiedShow Answer

The average cost per seat on the 75-passenger Get-There-Safe Bus company's trip from Milwaukee to Minneapolis,on which no refreshments are served,is $37.In advance of a particular trip,three seats remain unsold.The bus company could increase its profit only if it

Correct AnswerverifiedShow Answer

After much consideration,you have chosen Ireland over Spain for your Study Abroad program next year.However,the deadline for your final decision 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

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