Question 1

Public policies

Accepted Answer

A)   may be able to improve either economic efficiency or equality.
B)   may be able to improve economic efficiency but cannot improve equality.
C)   may be able to improve equality but cannot improve economic efficiency.
D)   cannot improve either equality or economic efficiency.

Question 2

A direct or positive relationship exists between a country's

Accepted Answer

A)   productivity and its standard of living.
B)   amount of government spending and its productivity.
C)   total population and its average citizen's income.
D)   rate of population growth and the extent of its trade with other countries.

Question 3

Which of the following principles is not one of the four principles of individual decisionmaking?

Accepted Answer

A)   People face tradeoffs.
B)   Trade can make everyone better off.
C)   People respond to incentives.
D)   Rational people think at the margin.

Question 4

It costs a meat-processing company $50,000 to produce 5,000 pounds of steak. The company's cost will be $50,009 if it produces an additional pound of steak. If the company produces 5,001 pounds of steak then

Accepted Answer

A)   its average cost is greater than its marginal cost.
B)   its average cost and its marginal cost are equal.
C)   its average cost is less than its marginal cost.
D)   there is insufficient information to compute average and marginal costs.

Question 5

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.

Question 6

When the government redistributes income from the wealthy to the poor,

Accepted Answer

A)   efficiency is improved, but equality is not.
B)   equality is improved, but efficiency is not.
C)   both efficiency and equality are improved.
D)   neither efficiency nor equality are improved.

Question 7

Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana

Accepted Answer

A)   can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana.
B)   determines Ashley's marginal cost of the first and second bananas.
C)   does not depend on how many bananas Ashley has already eaten.
D)   cannot be determined unless we know how much she paid for the bananas.

Question 8

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

Accepted Answer

A)   The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise.
B)   The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise.
C)   Only half of the cost of the parking permit is part of the opportunity cost of attending college.
D)   The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances.

Question 9

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

Accepted Answer

A)   a market failure caused by an externality.
B)   a market failure caused by market power.
C)   a market failure caused by equality.
D)   There is no market failure in this case.

Question 10

The invisible hand ensures that economic prosperity is distributed equally.

Accepted Answer

A) True 
 B)False

Question 11

For markets to work well, there must be

Accepted Answer

A)   market power.
B)   a central planner.
C)   property rights.
D)   abundant, not scarce, resources.

Question 12

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. 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)   neither

Question 13

The adage, "There is no such thing as a free lunch," means

Accepted Answer

A)   even people on welfare have to pay for food.
B)   the cost of living is always increasing.
C)   people face tradeoffs.
D)   all costs are included in the price of a product.

Question 14

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.

Question 15

An example of a firm with market power is a

Accepted Answer

A)   delicatessen in New York.
B)   cable TV provider in Tulsa.
C)   clothing store in Chicago.
D)   family farm in Kansas.

Question 16

When the United States trades with China,

Accepted Answer

A)   both countries will likely benefit.
B)   only United States will benefit.
C)   only China will benefit.
D)   neither country will benefit.

Question 17

Rational people make decisions at the margin by

Accepted Answer

A)   following marginal traditions.
B)   behaving in a random fashion.
C)   thinking in black-and-white terms.
D)   comparing marginal costs and marginal benefits.

Question 18

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Accepted Answer

A)   the unexpected repairs and the increase in the price of gas
B)   the unexpected increase for repairs, but not the increase in the price of gas
C)   the increase in the price of gas, but not the unexpected repairs
D)   neither the unexpected increase in the price of gas nor the unexpected repairs

Question 19

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Accepted Answer

A)   the $60 she earns working.
B)   the $60 minus the enjoyment she would have received from going to the park.
C)   the enjoyment she would have received had she gone to the park.
D)   nothing, since she would have received less than $60 worth of enjoyment from going to the park.

Question 20

Economists use the term to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

Accepted Answer

The answer of Economists use the term to refer to...

Exam 1: Ten Principles of Economics

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Correct Answer
verified

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

Correct Answer
verified

The invisible hand ensures that economic prosperity is distributed equally.

Correct Answer
verified

Economists use the term to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

Correct Answer
verified

When the United States trades with China,

Correct Answer
verified

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

Correct Answer
verified

Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana

Correct Answer
verified

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

Correct Answer
verified

For markets to work well, there must be

Correct Answer
verified

When the government redistributes income from the wealthy to the poor,

Correct Answer
verified

A direct or positive relationship exists between a country's

Correct Answer
verified

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit?

Correct Answer
verified

Correct Answer
verified

Public policies

Correct Answer
verified

An example of a firm with market power is a

Correct Answer
verified

Which of the following principles is not one of the four principles of individual decisionmaking?

Correct Answer
verified

It costs a meat-processing company $50,000 to produce 5,000 pounds of steak. The company's cost will be $50,009 if it produces an additional pound of steak. If the company produces 5,001 pounds of steak then

Correct Answer
verified

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Correct Answer
verified

The adage, "There is no such thing as a free lunch," means

Correct Answer
verified

Rational people make decisions at the margin by

Correct Answer
verified

Exam 1: Ten Principles of Economics

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Correct AnswerverifiedShow Answer

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

Correct AnswerverifiedShow Answer

The invisible hand ensures that economic prosperity is distributed equally.

Correct AnswerverifiedShow Answer

Economists use the term to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

Correct AnswerverifiedShow Answer

When the United States trades with China,

Correct AnswerverifiedShow Answer

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

Correct AnswerverifiedShow Answer

Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For markets to work well, there must be

Correct AnswerverifiedShow Answer

When the government redistributes income from the wealthy to the poor,

Correct AnswerverifiedShow Answer

A direct or positive relationship exists between a country's

Correct AnswerverifiedShow Answer

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Public policies

Correct AnswerverifiedShow Answer

An example of a firm with market power is a

Correct AnswerverifiedShow Answer

Which of the following principles is not one of the four principles of individual decisionmaking?

Correct AnswerverifiedShow Answer

It costs a meat-processing company $50,000 to produce 5,000 pounds of steak. The company's cost will be $50,009 if it produces an additional pound of steak. If the company produces 5,001 pounds of steak then

Correct AnswerverifiedShow Answer

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Correct AnswerverifiedShow Answer

The adage, "There is no such thing as a free lunch," means

Correct AnswerverifiedShow Answer

Rational people make decisions at the margin by

Correct AnswerverifiedShow Answer

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