Question 1

Denise decides to spend three hours working overtime rather than watching a video with her friends. She earns $10 an hour. Her opportunity cost of working is

Accepted Answer

A)  the $30 she earns working.
B)  the $30 minus the enjoyment she would have received from watching the video.
C)  the enjoyment she would have received had she watched the video.
D)  nothing, since she would have received less than $30 of enjoyment from the video.E) All of the above
F) None of the above

Question 2

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) A) and B)
F) None of the above

Question 3

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

Accepted Answer

A)  1960s.
B)  1970s.
C)  1980s.
D)  1990s.E) A) and D)
F) B) and D)

Question 4

In a market economy,

Accepted Answer

A)  households decide which firms to work for and what to buy with their incomes.
B)  firms decide whom to hire and what to make.
C)  a central planner makes decisions about production and consumption.
D)  Both a and b are correct.E) A) and D)
F) B) and C)

Question 5

The marginal benefit Colin gets from eating a fourth slice of pizza is

Accepted Answer

A)  the total benefit Colin gets from eating four slices of pizza minus the total benefit Colin gets from eating three slices of pizza.
B)  the same as the total benefit of eating four slices of pizza.
C)  less than the marginal cost of eating the fourth slice of pizza since he chose to eat the fourth slice.
D)  the total benefit Colin gets from eating five slices of pizza minus the total benefit Colin gets from eating four slices of pizza.E) A) and D)
F) A) and B)

Question 6

If a paper factory does not bear the entire cost of the pollution it emits, it will

Accepted Answer

A)  not emit any pollution so as to avoid the entire cost of the pollution.
B)  emit lower levels of pollution.
C)  emit an acceptable level of pollution.
D)  emit too much pollution.E) None of the above
F) All of the above

Question 7

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) None of the above
F) All of the above

Question 8

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

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The invisible hand refers to

Accepted Answer

A)  how central planners made economic decisions.
B)  how the decisions of households and firms lead to desirable market outcomes.
C)  the control that large firms have over the economy.
D)  government regulations without which the economy would be less efficient.E) All of the above
F) A) and B)

Question 11

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) None of the above
F) A) and B)

Question 12

A rational decisionmaker takes an action if and only if

Accepted Answer

A)  the marginal benefit of the action exceeds the marginal cost of the action.
B)  the marginal cost of the action exceeds the marginal benefit of the action.
C)  the marginal cost of the action is zero.
D)  the opportunity cost of the action is zero.E) B) and D)
F) C) and D)

Question 13

Prices usually reflect

Accepted Answer

A)  only the value of a good to society.
B)  only the cost to society of making a good.
C)  both the value of a good to society and the cost to society of making the good.
D)  neither the value of a good to society nor the cost to society of making the good.E) A) and B)
F) A) and C)

Question 14

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break 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 Cancun increases.
B)  The marginal cost of going to Cancun decreases.
C)  The marginal benefit of going to Ft. Lauderdale decreases.
D)  The marginal cost of going to Ft. Lauderdale decreases.E) A) and B)
F) All of the above

Question 15

In less than two years in the early 1920s, the cost of a German newspaper rose from 0.30 marks to 70,000,000 marks. This is a spectacular example of

Accepted Answer

A)  market power caused by a change in the country's standard of living.
B)  market power caused by a single firm controlling the newspaper production.
C)  inflation caused by increased productivity in the economy.
D)  inflation caused by an increase in the quantity of money in the economy.E) A) and B)
F) All of the above

Question 16

Economists are particularly adept at understanding that people respond to

Accepted Answer

A)  laws.
B)  incentives.
C)  punishments more than rewards.
D)  rewards more than punishments.E) A) and B)
F) C) and D)

Question 17

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.E) All of the above
F) A) and B)

Question 18

The "broken window fallacy"

Accepted Answer

A)  explains why inflation is so high.
B)  is a justification for the government to print more money.
C)  is illustrated when a government program is justified not on its merits but on the number of jobs it will create.
D)  has nothing to do with public policy.E) B) and C)
F) None of the above

Question 19

For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%. Country B had inflation of 4% for many years, but very recently inflation unexpectedly rose to 9%. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

Accepted Answer

A)  both country A and country B
B)  neither country A nor country B
C)  country A but not country B
D)  country B but not country AE) B) and C)
F) A) and D)

Question 20

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Accepted Answer

A)  15 years.
B)  25 years.
C)  35 years.
D)  45 years.E) A) and B)
F) All of the above

Exam 1: Ten Principles of Economics

The marginal benefit Colin gets from eating a fourth slice of pizza is

Correct Answer
verified

When society requires that firms reduce pollution, there is

Correct Answer
verified

For markets to work well, there must be

Correct Answer
verified

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

Correct Answer
verified

A rational decisionmaker takes an action if and only if

Correct Answer
verified

The invisible hand refers to

Correct Answer
verified

If a paper factory does not bear the entire cost of the pollution it emits, it will

Correct Answer
verified

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Correct Answer
verified

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Correct Answer
verified

Prices usually reflect

Correct Answer
verified

The "broken window fallacy"

Correct Answer
verified

Denise decides to spend three hours working overtime rather than watching a video with her friends. She earns $10 an hour. Her opportunity cost of working is

Correct Answer
verified

In less than two years in the early 1920s, the cost of a German newspaper rose from 0.30 marks to 70,000,000 marks. This is a spectacular example of

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

In a market economy,

Correct Answer
verified

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

Correct Answer
verified

Economists are particularly adept at understanding that people respond to

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements about trade is false?

Correct Answer
verified

Exam 1: Ten Principles of Economics

The marginal benefit Colin gets from eating a fourth slice of pizza is

Correct AnswerverifiedShow Answer

When society requires that firms reduce pollution, there is

Correct AnswerverifiedShow Answer

For markets to work well, there must be

Correct AnswerverifiedShow Answer

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

Correct AnswerverifiedShow Answer

A rational decisionmaker takes an action if and only if

Correct AnswerverifiedShow Answer

The invisible hand refers to

Correct AnswerverifiedShow Answer

If a paper factory does not bear the entire cost of the pollution it emits, it will

Correct AnswerverifiedShow Answer

After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break 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

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Correct AnswerverifiedShow Answer

Prices usually reflect

Correct AnswerverifiedShow Answer

The "broken window fallacy"

Correct AnswerverifiedShow Answer

Denise decides to spend three hours working overtime rather than watching a video with her friends. She earns $10 an hour. Her opportunity cost of working is

Correct AnswerverifiedShow Answer

In less than two years in the early 1920s, the cost of a German newspaper rose from 0.30 marks to 70,000,000 marks. This is a spectacular example of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a market economy,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economists are particularly adept at understanding that people respond to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements about trade is false?

Correct AnswerverifiedShow Answer

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