Question 1

Suppose Country A has a high average wage level and a high level of output per person,while Country B has a low average wage level and a low level of output per person.Which country can benefit from trade?

Accepted Answer

A)   Only Country A can benefit.
B)   Only Country B can benefit.
C)   Both Country A and Country B can benefit.
D)   Neither Country A nor Country B can benefit.E) A) and D)
F) A) and C)

Question 2

Which of the following is not an example of the opportunity cost of going to school?

Accepted Answer

A)   The money a student could have earned by working if he had not gone to college.
B)   The nap a student could have enjoyed if he had not attended class.
C)   The party a student could have enjoyed if he had not stayed in to study for his exam.
D)   The money a student spends on rent for his apartment while attending school.E) A) and D)
F) All of the above

Question 3

An example of an externality is the impact of

Accepted Answer

A)   bad weather on the income of farmers.
B)   the personal income tax on a person's ability to purchase goods and services.
C)   pollution from a factory on the health of people in the vicinity of the factory.
D)   increases in health care costs on the health of individuals in society.E) All of the above
F) None of the above

Question 4

Communist countries worked under the premise that

Accepted Answer

A)   markets were the best way to organize economic activity.
B)   central planners were in the best position to determine the allocation of scarce resources in the economy.
C)   households and firms,guided by an "invisible hand," could achieve the most efficient allocation of scarce resources.
D)   allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources.E) All of the above
F) None of the above

Question 5

Resources are

Accepted Answer

A)   scarce for households but plentiful for economies.
B)   plentiful for households but scarce for economies.
C)   scarce for households and scarce for economies.
D)   plentiful for households and plentiful for economies.E) C) and D)
F) B) and D)

Question 6

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort.This law is likely to

Accepted Answer

A)   increase efficiency and increase equality.
B)   increase efficiency but decrease equality.
C)   decrease efficiency but increase equality.
D)   decrease efficiency and decrease equality.E) B) and D)
F) All of the above

Question 7

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

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Incomes of U.S.households in the 1970s and 1980s

Accepted Answer

A)   grew rapidly,due to the widespread success of labor unions in pushing up wages during those decades.
B)   grew rapidly,due to several increases in the minimum wage during those decades.
C)   grew rapidly,due to government policies that discouraged the importation of foreign products during those decades.
D)   grew slowly,due to slow growth of the output of goods and services per hour of U.S.workers' time during those decades.E) B) and D)
F) B) and C)

Question 10

What you give up to obtain an item is called your

Accepted Answer

A)   opportunity cost.
B)   explicit cost.
C)   monetary cost.
D)   direct cost.E) A) and B)
F) B) and D)

Question 11

When calculating the cost of college,which of the following should you probably include?

Accepted Answer

A)   The cost of your meal plan for the cafeteria.
B)   The cost of books required for college classes
C)   The income you earn at your part-time job.
D)   The cost of living in the dormitory.E) A) and D)
F) A) and C)

Question 12

If Germany chooses to engage in trade,it

Accepted Answer

A)   will only benefit if it trades with countries that produce goods Germany cannot produce.
B)   cannot benefit if it trades with less developed countries.
C)   should first attempt to produce the good itself.
D)   can benefit by trading with any other country.E) C) and D)
F) A) and D)

Question 13

The overriding reason why households and societies face many decisions is that

Accepted Answer

A)   resources are scarce.
B)   goods and services are not scarce.
C)   incomes fluctuate with business cycles.
D)   people,by nature,tend to disagree.E) All of the above
F) None of the above

Question 14

Market economies are distinguished from other types of economies largely on the basis of

Accepted Answer

A)   the political affiliations of government officials.
B)   the process by which government officials are elected or appointed.
C)   the ways in which scarce resources are allocated.
D)   the number of retail outlets available to consumers.E) A) and B)
F) All of the above

Question 15

A worker in Equador can earn $3 per day making cotton cloth on a hand loom.A worker in the United States can earn $70 per day making cotton cloth with a mechanical loom.What accounts for the difference in wages?

Accepted Answer

A)   U.S.textile workers belong to a union.
B)   There is little demand for cotton cloth in Equador and great demand in the U.S.
C)   Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.
D)   Equador has a low-wage policy to make its textile industry more competitive in world markets.E) A) and B)
F) A) and C)

Question 16

Ellie decides to spend two hours taking a nap rather than attending her classes.Her opportunity cost of napping is

Accepted Answer

A)   the value of the knowledge she would have received had she attended class.
B)   the $24 she could have earned if she had worked at her job for those two hours.
C)   the value of her nap less the value of attending class.
D)   nothing,since she valued sleep more than attendance at class.E) A) and D)
F) B) and C)

Question 17

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

Accepted Answer

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

Question 18

The government can potentially improve market outcomes if market inequalities or market failure exists.

Accepted Answer

A) True 
 B)False

Question 19

What is the most important factor that explains differences in living standards across countries?

Accepted Answer

A)   the quantity of money
B)   the level of unemployment
C)   productivity
D)   equalityE) None of the above
F) A) and B)

Question 20

Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person.Which country can benefit?

Accepted Answer

A)   only the one with a low level of output per person.
B)   only the one with a high level of output per person.
C)   both
D)   neitherE) A) and B)
F) B) and D)

Exam 1: Ten Principles of Economics

Suppose Country A has a high average wage level and a high level of output per person,while Country B has a low average wage level and a low level of output per person.Which country can benefit from trade?

Correct AnswerverifiedShow Answer

Ellie decides to spend two hours taking a nap rather than attending her classes.Her opportunity cost of napping is

Correct AnswerverifiedShow Answer

The overriding reason why households and societies face many decisions is that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Resources are

Correct AnswerverifiedShow Answer

An example of an externality is the impact of

Correct AnswerverifiedShow Answer

If Germany chooses to engage in trade,it

Correct AnswerverifiedShow Answer

Communist countries worked under the premise that

Correct AnswerverifiedShow Answer

Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person.Which country can benefit?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What you give up to obtain an item is called your

Correct AnswerverifiedShow Answer

Which of the following is not an example of the opportunity cost of going to school?

Correct AnswerverifiedShow Answer

When society requires that firms reduce pollution,there is

Correct AnswerverifiedShow Answer

The government can potentially improve market outcomes if market inequalities or market failure exists.

Correct AnswerverifiedShow Answer

What is the most important factor that explains differences in living standards across countries?

Correct AnswerverifiedShow Answer

Market economies are distinguished from other types of economies largely on the basis of

Correct AnswerverifiedShow Answer

A worker in Equador can earn $3 per day making cotton cloth on a hand loom.A worker in the United States can earn $70 per day making cotton cloth with a mechanical loom.What accounts for the difference in wages?

Correct AnswerverifiedShow Answer

When calculating the cost of college,which of the following should you probably include?

Correct AnswerverifiedShow Answer

Incomes of U.S.households in the 1970s and 1980s

Correct AnswerverifiedShow Answer

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort.This law is likely to

Correct AnswerverifiedShow Answer

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