Question 1

In the short-run, society faces a tradeoff between inflation and unemployment.

Accepted Answer

A) True 
 B)False

Question 2

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 3

To raise productivity, policymakers could

Accepted Answer

A)  increase spending on education.
B)  provide tax credits to firms for capital improvements.
C)  fund research and development.
D)  All of the above are correct.E) A) and D)
F) None of the above

Question 4

When government policies are enacted,

Accepted Answer

A)  equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality.
B)  efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss.
C)  it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished.
D)  None of the above are correct.E) A) and B)
F) None of the above

Question 5

U.S. laws requiring that drivers wear seat belts have resulted in

Accepted Answer

A)  a reduction in both driver deaths and pedestrian deaths.
B)  fewer accidents and fewer deaths per accident.
C)  fewer driver deaths, fewer accidents and fewer pedestrian deaths.
D)  little change in the number of driver deaths, but more accidents and more pedestrian deaths.E) All of the above
F) C) and D)

Question 6

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 7

In economics, the cost of something is

Accepted Answer

A)  the dollar amount of obtaining it.
B)  always measured in units of time given up to get it.
C)  what you give up to get it.
D)  often impossible to quantify, even in principle.E) None of the above
F) B) and C)

Question 8

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 C)
F) All of the above

Question 9

Which of the following can lead to market failure?

Accepted Answer

A)  externalities and market power
B)  externalities but not market power
C)  market power but not externalities
D)  neither externalities nor market powerE) A) and B)
F) A) and C)

Question 10

Melinda quits her job at a bank, which pays $30,000 a year, to enroll in a two-year graduate program. Her annual school expenses are $22,000 for tuition and fees and $2,000 for books. What is her opportunity cost of attending the two-year graduate program?

Accepted Answer

The answer of Melinda quits her job at a bank,...

Question 11

Productivity is defined as the

Accepted Answer

A)  amount of goods and services produced from each unit of labor input.
B)  number of workers required to produce a given amount of goods and services.
C)  amount of labor that can be saved by replacing workers with machines.
D)  actual amount of effort workers put into an hour of working time.E) C) and D)
F) A) and D)

Question 12

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

A)  the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water.
B)  the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.
C)  producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices.
D)  water prices are held artificially low by governments, since water is necessary for life.E) B) and C)
F) All of the above

Question 13

Which of the following can policy do?

Accepted Answer

A)  alter incentives
B)  alter trade-offs
C)  change opportunity costs
D)  All of the above are correct.E) None of the above
F) B) and D)

Question 14

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) B) and D)
F) All of the above

Question 15

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) None of the above

Question 16

The irregular and largely unpredictable fluctuations in economic activity are called

Accepted Answer

A)  market failure.
B)  business cycle.
C)  inflation.
D)  unemployment.E) B) and D)
F) A) and B)

Question 17

The opportunity cost of going to college is

Accepted Answer

A)  the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses.
B)  the value of the best opportunity a student gives up to attend college.
C)  zero for students who are fortunate enough to have all of their college expenses paid by someone else.
D)  zero, since a college education will allow a student to earn a larger income after graduation.E) All of the above
F) A) and C)

Question 18

The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

Accepted Answer

A)  equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
B)  equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits.
C)  equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits.
D)  equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.E) All of the above
F) A) and B)

Question 19

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Accepted Answer

A) True 
 B)False

Question 20

People are likely to respond to a policy change

Accepted Answer

A)  only if they think the policy is a good one.
B)  only if the policy change changes the costs of their behavior.
C)  only if the policy change changes the benefits of their behavior.
D)  if the policy changes either the costs or benefits of their behavior.E) B) and D)
F) A) and C)

Exam 1: Ten Principles of Economics

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

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Which of the following can policy do?

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People are willing to pay more for a diamond than for a bottle of water because

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U.S. laws requiring that drivers wear seat belts have resulted in

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

Correct AnswerverifiedShow Answer

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

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Which of the following can lead to market failure?

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The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

Correct AnswerverifiedShow Answer

To raise productivity, policymakers could

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In the short-run, society faces a tradeoff between inflation and unemployment.

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

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

Melinda quits her job at a bank, which pays $30,000 a year, to enroll in a two-year graduate program. Her annual school expenses are $22,000 for tuition and fees and $2,000 for books. What is her opportunity cost of attending the two-year graduate program?

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People are likely to respond to a policy change

Correct AnswerverifiedShow Answer

The opportunity cost of going to college is

Correct AnswerverifiedShow Answer

In economics, the cost of something is

Correct AnswerverifiedShow Answer

The irregular and largely unpredictable fluctuations in economic activity are called

Correct AnswerverifiedShow Answer

Productivity is defined as the

Correct AnswerverifiedShow Answer

When society requires that firms reduce pollution, there is

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When government policies are enacted,

Correct AnswerverifiedShow Answer

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