Question 1

In the 1990s, inflation in the United States was

Accepted Answer

A)  very close to zero.
B)  about 3 percent per year.
C)  about 6 percent per year.
D)  commonly referred to as "public enemy number one."E) A) and B)
F) None of the above

Question 2

Water pollution from pulp and paper mills harms plants, animals, and humans. 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.E) A) and B)
F) B) and D)

Question 3

Which of the following is not an example of a group responding to an incentive?

Accepted Answer

A)  Students attend class because of an attendance policy that reduces their grade for absences.
B)  Consumers buy more of a product when it is on sale at a reduced price.
C)  Universities offer fewer online classes when they generate more revenue than traditional classes.
D)  Employees work harder to earn higher commissions.E) A) and B)
F) A) and C)

Question 4

Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. 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) None of the above
F) B) and C)

Question 5

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.E) B) and C)
F) A) and D)

Question 6

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

Accepted Answer

A)  should be counted in full, regardless of the costs of eating and sleeping elsewhere.
B)  should be counted only to the extent that they are more expensive at college than elsewhere.
C)  usually exceed the opportunity cost of going to college.
D)  plus the cost of tuition, equals the opportunity cost of going to college.E) All of the above
F) B) and C)

Question 7

When calculating the cost of college, which of the following should you probably include?

Accepted Answer

A)  The cost of your meal plan for the cafeteria.
B)  The cost of books required for college classes
C)  The income you earn at your part-time job.
D)  The cost of living in the dormitory.E) A) and B)
F) None of the above

Question 8

In an economy in which decisions are guided by prices and individual self-interest, there is

Accepted Answer

A)  the potential to achieve efficiency in production.
B)  a strong need for government intervention in the market.
C)  less efficiency than would be observed in a centrally-planned economy.
D)  more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.E) A) and D)
F) B) and C)

Question 9

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Accepted Answer

Whatever must be given up to obtain some...

Question 10

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The average cost per seat is

Accepted Answer

A)  $50.
B)  $500.
C)  $50,000.
D)  This cannot be determined from the information given.E) C) and D)
F) B) and C)

Question 11

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

Accepted Answer

A)  $50.
B)  $500.
C)  $50,000.
D)  This cannot be determined from the information given.E) A) and B)
F) None of the above

Question 12

The short-run tradeoff between inflation and unemployment implies that, in the short run,

Accepted Answer

A)  a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate.
B)  an increase in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate.
C)  policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate.
D)  policymakers can influence the inflation rate, but not the unemployment rate.E) None of the above
F) All of the above

Question 13

You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should

Accepted Answer

A)  compare the total cost of your education to the total benefits of your education.
B)  compare the total cost of your education to the benefits of staying one more semester.
C)  compare the cost of staying one more semester to the benefits of staying one more semester.
D)  compare the total benefits of your education to the cost of staying one more semester.E) B) and D)
F) A) and D)

Question 14

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Accepted Answer

A)  enhance equality.
B)  enhance efficiency.
C)  increase the reward for working hard.
D)  All of the above are correct.E) C) and D)
F) A) and D)

Question 15

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) None of the above

Question 16

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

Question 17

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

Accepted Answer

A)  guns and butter.
B)  efficiency and equality.
C)  inflation and unemployment.
D)  work and leisure.E) B) and C)
F) A) and C)

Question 18

Jane decides to spend four hours working overtime rather than going to a family gathering. She earns $12.50 per hour for overtime work. Her opportunity cost of working is

Accepted Answer

A)  the $50 she earns working.
B)  the $50 minus the enjoyment she would have received from going to the family gathering.
C)  the enjoyment she would have received had she gone to the family gathering
D)  nothing, since she wanted to work more than she wanted to attend the family gatheringE) A) and D)
F) A) and C)

Question 19

Which of the following is an example of an externality?

Accepted Answer

A)  Annie purchases a new dress.
B)  Antonio's dog barks loudly during the night, waking his neighbors.
C)  Harold sells a book to Cathy, who reads the book and then gives it to James as a gift.
D)  Gloria watches a scary movie.E) A) and B)
F) B) and C)

Question 20

Which of the following is a decision that economists study?

Accepted Answer

A)  how much people work
B)  what people buy
C)  how much money people save
D)  All of the above are correct.E) A) and D)
F) None of the above

Exam 1: Ten Principles of Economics

You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should

Correct AnswerverifiedShow Answer

Which of the following is an example of an externality?

Correct AnswerverifiedShow Answer

Jane decides to spend four hours working overtime rather than going to a family gathering. She earns $12.50 per hour for overtime work. Her opportunity cost of working is

Correct AnswerverifiedShow Answer

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Correct AnswerverifiedShow Answer

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

Correct AnswerverifiedShow Answer

Which of the following is a decision that economists study?

Correct AnswerverifiedShow Answer

In the 1990s, inflation in the United States was

Correct AnswerverifiedShow Answer

Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?

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

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

Correct AnswerverifiedShow Answer

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between

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

Water pollution from pulp and paper mills harms plants, animals, and humans. This is an example of

Correct AnswerverifiedShow Answer

Which of the following is not an example of a group responding to an incentive?

Correct AnswerverifiedShow Answer

In an economy in which decisions are guided by prices and individual self-interest, there is

Correct AnswerverifiedShow Answer

The short-run tradeoff between inflation and unemployment implies that, in the short run,

Correct AnswerverifiedShow Answer

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Correct AnswerverifiedWhatever must be given up to obtain some...View AnswerShow Answer

When calculating the cost of college, which of the following should you probably include?

Correct AnswerverifiedShow Answer

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The average cost per seat is

Correct AnswerverifiedShow Answer

For a college student who wishes to calculate the true costs of going to college, the costs of room and board

Correct AnswerverifiedShow Answer

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Whatever must be given up to obtain some...
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