Question 1

College-age athletes who drop out of college to play professional sports

Accepted Answer

A)   are not rational decision makers.
B)   are well aware that their opportunity cost of attending college is very high.
C)   are concerned more about present circumstances than their future.
D)   underestimate the value of a college education.E) B) and C)
F) A) and D)

Question 2

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) All of the above
F) None of the above

Question 3

Evidence indicates that seat belt laws have led to

Accepted Answer

A)   fewer pedestrian deaths.
B)   fewer automobile accidents.
C)   fewer deaths per automobile accident.
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 4

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

Question 5

Inflation increases the value of money.

Accepted Answer

A) True 
 B)False

Question 6

Suppose the state of Iowa passes a law that increases the price of cigarettes by $1 per pack.As a result,residents in Iowa start purchasing their cigarettes in surrounding states.Which of the following principles does this best illustrate?

Accepted Answer

A)   People respond to incentives
B)   Rational people think at the margin
C)   Trade can make everyone better off
D)   Markets are usually a good way to organize economic activityE) A) and D)
F) A) and C)

Question 7

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 B)
F) B) and D)

Question 8

Which of the following statements exemplifies a principle of individual decisionmaking?

Accepted Answer

A)   Trade can make everyone better off.
B)   Governments can sometimes improve market outcomes.
C)   The cost of something is what you give up to get it.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 9

Which of the following products would be considered scarce?

Accepted Answer

A)   golf clubs
B)   Picasso paintings
C)   apples
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 10

Which of the following is true?

Accepted Answer

A)   Efficiency refers to the size of the economic pie;equality refers to how the pie is divided.
B)   Government policies usually improve upon both equality and efficiency.
C)   As long as the economic pie continually gets larger,no one will have to go hungry.
D)   Efficiency and equality can both be achieved if the economic pie is cut into equal pieces.E) B) and C)
F) B) and D)

Question 11

Bill's Bakery bakes fresh bread every morning.Any bread not sold by the end of the day is thrown away.A loaf of bread costs Bill $1.50 to produce,and he prices loaves of bread at $4 per loaf.Suppose near the end of one day Bill still has 12 loaves of bread on hand.Which of the following is correct?

Accepted Answer

A)   Bill should only sell the remaining bread for $4 per loaf since that is the regular price.
B)   Bill should only sell the remaining bread for $1.50 per loaf or more since that is what the bread costs to make.
C)   Bill should be willing to sell the remaining bread for any price above $0 per loaf since he will have to throw it away if he does not sell it for something.
D)   Bill should just throw the bread away and change the price of his bread starting tomorrow to make sure he sells all of his bread each day.E) C) and D)
F) B) and D)

Question 12

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

Question 13

The principle that "people face tradeoffs" applies to

Accepted Answer

A)   individuals.
B)   families.
C)   societies.
D)   All of the above are correct.E) C) and D)
F) A) and D)

Question 14

Suppose that in Chile total annual output is worth $600 million and people work 70 million hours.In Argentina total annual output is worth $450 million and people work 40 million hours.Productivity is higher

Accepted Answer

A)   in Chile.Most variation in the standard of living across countries is due to differences in productivity.
B)   in Chile.Differences in productivity explain very little of the variation in the standard of living across countries.
C)   in Argentina.Most variation in the standard of living across countries is due to differences in productivity.
D)   in Argentina.Differences in productivity explain very little of the variation in the standard of living across countries.E) B) and C)
F) A) and B)

Question 15

Making rational decisions "at the margin" means that people

Accepted Answer

A)   make those decisions that do not impose a marginal cost.
B)   evaluate how easily a decision can be reversed if problems arise.
C)   compare the marginal costs and marginal benefits of each decision.
D)   always calculate the marginal dollar costs for each decision.E) None of the above
F) A) and B)

Question 16

For most students,the largest single cost of a college education is

Accepted Answer

A)   the wages given up to attend school.
B)   tuition,fees,and books.
C)   room and board.
D)   transportation,parking,and entertainment.E) A) and B)
F) A) and D)

Question 17

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

Accepted Answer

A) True 
 B)False

Question 18

The phenomenon of scarcity stems from the fact that

Accepted Answer

A)   most economies' production methods are not very good.
B)   in most economies,wealthy people consume disproportionate quantities of goods and services.
C)   governments restrict production of too many goods and services.
D)   resources are limited.E) All of the above
F) None of the above

Question 19

Which of the following is a principle concerning how people interact?

Accepted Answer

A)   Markets are usually a good way to organize economic activity.
B)   Rational people think at the margin.
C)   People respond to incentives.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 20

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) B) and C)

Exam 1: Ten Principles of Economics

Prices usually reflect

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Making rational decisions "at the margin" means that people

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Suppose the state of Iowa passes a law that increases the price of cigarettes by $1 per pack.As a result,residents in Iowa start purchasing their cigarettes in surrounding states.Which of the following principles does this best illustrate?

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Which of the following is true?

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For most students,the largest single cost of a college education is

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Evidence indicates that seat belt laws have led to

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Which of the following is a principle concerning how people interact?

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A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

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College-age athletes who drop out of college to play professional sports

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Resources are

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The phenomenon of scarcity stems from the fact that

Correct AnswerverifiedShow Answer

Bill's Bakery bakes fresh bread every morning.Any bread not sold by the end of the day is thrown away.A loaf of bread costs Bill $1.50 to produce,and he prices loaves of bread at $4 per loaf.Suppose near the end of one day Bill still has 12 loaves of bread on hand.Which of the following is correct?

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

The principle that "people face tradeoffs" applies to

Correct AnswerverifiedShow Answer

Inflation increases the value of money.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements exemplifies a principle of individual decisionmaking?

Correct AnswerverifiedShow Answer

Trade between countries tends to

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Which of the following products would be considered scarce?

Correct AnswerverifiedShow Answer

Suppose that in Chile total annual output is worth $600 million and people work 70 million hours.In Argentina total annual output is worth $450 million and people work 40 million hours.Productivity is higher

Correct AnswerverifiedShow Answer

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