Question 1

The word that comes from the Greek word for "one who manages a household" is

Accepted Answer

A)   market.
B)   consumer.
C)   producer.
D)   economy.E) A) and B)
F) B) and D)

Question 2

Which of these consumption activities will most likely impose an external cost?

Accepted Answer

A)   An athlete works out at a gym.
B)   A secretary smokes a cigarette in a crowded break room.
C)   A young mother pushes her baby in a stroller.
D)   A construction worker eats a hotdog during his lunch break.E) C) and D)
F) A) and C)

Question 3

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Accepted Answer

A) True 
 B)False

Question 4

Senator Smith argues that replacing the income tax with a national sales tax would increase the level of output.Senator Wells objects that this policy would benefit the rich at the expense of the poor.

Accepted Answer

A)   Both Senators' arguments are primarily about equality.
B)   Both Senators' arguments are primarily about efficiency.
C)   Senator Smith's argument is primarily about equality,while Senator Well's argument is primarily about efficiency.
D)   Senator Smith's argument is primarily about efficiency,while Senator Well's argument is primarily about equality.E) C) and D)
F) All of the above

Question 5

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 C)
F) A) and B)

Question 6

The average cost per seat on the 50-passenger Floating-On-Air Bus company's trip from Kansas City to St.Louis,on which no refreshments are served,is $45.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 $15 for each of the three remaining seats.
C)   charged at least $45 for each of the three remaining seats.
D)   paid three people to occupy the three remaining seats.E) A) and C)
F) A) and B)

Question 7

The business cycle is measured by the

Accepted Answer

A)   production of goods and services.
B)   number of people employed.
C)   the interest rate.
D)   both a and bE) A) and B)
F) B) and D)

Question 8

To increase living standards,public policy should

Accepted Answer

A)   ensure that workers are well educated and have the necessary tools and technology.
B)   make unemployment benefits more generous.
C)   move workers into jobs directly from high school.
D)   ensure a greater degree of equality,taking all income-earners into account.E) All of the above
F) A) and C)

Question 9

Which of the following claims is consistent with the views of mainstream economists?

Accepted Answer

A)   If we increase the rate of inflation from 3 percent to 6 percent,then the rate of unemployment will temporarily fall.
B)   If we increase the rate of inflation from 3 percent to 6 percent,then the rate of unemployment will temporarily rise.
C)   If we increase the rate of inflation from 3 percent to 6 percent,then the rate of unemployment will permanently fall.
D)   If we increase the rate of inflation from 3 percent to 6 percent,then the rate of unemployment will permanently rise.E) B) and C)
F) A) and D)

Question 10

A construction company has built 50 houses so far this year at a total cost to the company of $8 million.If the company builds a 51st house,its total cost will increase to $8.18 million.Which of the following statements is correct?

Accepted Answer

A)   For the first 50 houses,the average cost per house was $160,000.
B)   The marginal cost of the 51st house,if it is built,will be $180,000.
C)   If the company can experience a marginal benefit of $190,000 by building the 51st house,then the company should build it.
D)   All of the above are correct.E) C) and D)
F) A) and B)

Question 11

Prices direct economic activity in a market economy by

Accepted Answer

A)   influencing the actions of buyers and sellers.
B)   reducing scarcity of the goods and services produced.
C)   eliminating the need for government intervention.
D)   allocating goods and services in the most equitable way.E) A) and B)
F) B) and C)

Question 12

Senator Smart,who understands economic principles,is trying to convince workers in her district that trade with other countries is beneficial.Senator Smart should argue that trade can be beneficial

Accepted Answer

A)   only if it allows us to obtain things that we couldn't make for ourselves.
B)   because it allows specialization,which increases total output.
C)   to us if we can gain and the others involved in the trade lose.
D)   in only a limited number of circumstances because others are typically self-interested.E) B) and C)
F) A) and C)

Question 13

Which of the following statements about trade is false?

Accepted Answer

A)   Trade increases competition.
B)   With trade,one country wins and one country loses.
C)   Bulgaria can benefit,potentially,from trade with any other country.
D)   Trade allows people to buy a greater variety of goods and services at lower cost.E) B) and D)
F) A) and C)

Question 14

The marginal benefit John gets from eating a fourth cheeseburger at a picnic is

Accepted Answer

A)   the total benefit John gets from eating four cheeseburgers minus the total benefit John gets from eating three cheeseburgers.
B)   the same as the total benefit of eating four cheeseburgers.
C)   less than the marginal cost of eating the fourth cheeseburger since he chose to eat the fourth cheeseburger.
D)   the total benefit John gets from eating five cheeseburgers minus the total benefit John gets from eating four cheeseburgers.E) A) and D)
F) None of the above

Question 15

In most societies,resources are allocated by

Accepted Answer

A)   a single central planner.
B)   a small number of central planners.
C)   those firms that use resources to provide goods and services.
D)   the combined actions of millions of households and firms.E) B) and D)
F) A) and B)

Question 16

Which of the following is an important cause of inflation in an economy?

Accepted Answer

A)   increases in productivity in the economy
B)   the influence of positive externalities on the economy
C)   lack of property rights in the economy
D)   growth in the quantity of money in the economyE) All of the above
F) C) and D)

Question 17

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) All of the above
F) A) and C)

Question 18

Equality refers to how the pie is divided,and efficiency refers to the size of the economic pie.

Accepted Answer

A) True 
 B)False

Question 19

When the government attempts to improve equality in an economy the result is often

Accepted Answer

A)   an increase in overall output in the economy.
B)   additional government revenue since overall income will increase.
C)   a reduction in equality.
D)   a reduction in efficiency.E) None of the above
F) All of the above

Question 20

The relatively low inflation experienced in the United States in the 1990s is attributable to

Accepted Answer

A)   slow growth of U.S.productivity during the 1990s.
B)   slow growth of the quantity of money in the U.S.in the 1990s.
C)   low levels of government spending in the U.S.in the 1980s and 1990s.
D)   the eight-year presidency of William Jefferson Clinton during the 1990s.E) C) and D)
F) B) and D)

Exam 1: Ten Principles of Economics

To increase living standards,public policy should

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

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The business cycle is measured by the

Correct AnswerverifiedShow Answer

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Correct AnswerverifiedShow Answer

Which of these consumption activities will most likely impose an external cost?

Correct AnswerverifiedShow Answer

A construction company has built 50 houses so far this year at a total cost to the company of $8 million.If the company builds a 51st house,its total cost will increase to $8.18 million.Which of the following statements is correct?

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Which of the following claims is consistent with the views of mainstream economists?

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Which of the following statements about trade is false?

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Which of the following is correct concerning opportunity cost?

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In most societies,resources are allocated by

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The average cost per seat on the 50-passenger Floating-On-Air Bus company's trip from Kansas City to St.Louis,on which no refreshments are served,is $45.In advance of a particular trip,three seats remain unsold.The bus company could increase its profit only if it

Correct AnswerverifiedShow Answer

Senator Smart,who understands economic principles,is trying to convince workers in her district that trade with other countries is beneficial.Senator Smart should argue that trade can be beneficial

Correct AnswerverifiedShow Answer

Senator Smith argues that replacing the income tax with a national sales tax would increase the level of output.Senator Wells objects that this policy would benefit the rich at the expense of the poor.

Correct AnswerverifiedShow Answer

Equality refers to how the pie is divided,and efficiency refers to the size of the economic pie.

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The word that comes from the Greek word for "one who manages a household" is

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When the government attempts to improve equality in an economy the result is often

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The marginal benefit John gets from eating a fourth cheeseburger at a picnic is

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The relatively low inflation experienced in the United States in the 1990s is attributable to

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Which of the following is an important cause of inflation in an economy?

Correct AnswerverifiedShow Answer

Prices direct economic activity in a market economy by

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A construction company has built 50 houses so far this year at a total cost to the company of $8 million.If the company builds a 51^st house,its total cost will increase to $8.18 million.Which of the following statements is correct?

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