Question 1

A rational decisionmaker

Accepted Answer

A)   ignores marginal changes and focuses instead on "the big picture."
B)   ignores the likely effects of government policies when he or she makes choices.
C)   takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.
D)   takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.E) A) and B)
F) None of the above

Question 2

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) All of the above
F) None of the above

Question 3

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

Question 4

The principle that "people face tradeoffs" applies to

Accepted Answer

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

Question 5

Suppose after graduating from college you get a job working at a bank earning $30,000 per year. After two years of working at the bank earning the same salary, you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank. Which of the following should not be included in a calculation of your opportunity cost?

Accepted Answer

A)   the cost of tuition and books to attend the graduate program
B)   the $30,000 salary that you could have earned if you retained your job at the bank
C)   the $45,000 salary that you will be able to earn after having completed your graduate program
D)   the value of insurance coverage and other employee benefits you would have received if you retained your job at the bankE) B) and C)
F) A) and D)

Question 6

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort. This law is likely to

Accepted Answer

A)   increase efficiency and increase equality.
B)   increase efficiency but decrease equality.
C)   decrease efficiency but increase equality.
D)   decrease efficiency and decrease equality.E) B) and C)
F) A) and C)

Question 7

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) B) and D)
F) A) and B)

Question 8

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Accepted Answer

In Germany. Almost all variati...

Question 9

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that

Accepted Answer

A)   trade can make everyone better off.
B)   people face trade-offs.
C)   rational people think at the margin.
D)   decisions made at the margin are not particularly important.E) None of the above
F) A) and D)

Question 10

When computing the opportunity cost of attending a basketball game you should include

Accepted Answer

A)   the price you pay for the ticket and the value of your time.
B)   the price you pay for the ticket, but not the value of your time.
C)   the value of your time, but not the price you pay for the ticket.
D)   neither the price of the ticket nor the value of your time.E) B) and D)
F) A) and D)

Question 11

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Accepted Answer

A)   only Dale is made better off by trade.
B)   only Terrence is made better off by trade.
C)   both Dale and Terrence are made better off by trade.
D)   neither Dale nor Terrence are made better off by trade.E) C) and D)
F) A) and C)

Question 12

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

Question 13

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Accepted Answer

A) True 
 B)False

Question 14

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) B) and D)
F) B) and C)

Question 15

Scenario 1-4 You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $12.00 on a ticket and $4.75 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 15 points.
-What is another word for "marginal"?

Accepted Answer

incrementa...

Question 16

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Accepted Answer

A)   the pie gets larger, and there will be more pie overall.
B)   the pie gets smaller, and there will be less pie overall.
C)   it increases the reward for working hard, resulting in people producing more goods and services.
D)   those who earn more income pay less in taxes.E) A) and C)
F) All of the above

Question 17

For most students, the earnings they give up to attend college are

Accepted Answer

A)   a minor cost when compared to the costs of tuition, room and board, and the like.
B)   the single largest cost of their education.
C)   about equal to the costs of room and board at college.
D)   not considered true costs by an economist.E) All of the above
F) A) and C)

Question 18

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 19

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

Question 20

Which of the following statements about market economies is correct?

Accepted Answer

A)   In a market economy, no one is looking out for the economic well-being of society as a whole.
B)   Market economies are characterized by decentralized decision making and self-interested decision makers.
C)   Market economies have proven remarkably successful in promoting overall economic well-being.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Exam 1: Ten Principles of Economics

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that

Correct Answer
verified

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

Correct Answer
verified

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Correct Answer
verified
In Germany. Almost all variati...
View Answer

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Correct Answer
verified

A rational decisionmaker

Correct Answer
verified

Correct Answer
verified
incrementa...
View Answer

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort. This law is likely to

Correct Answer
verified

The principle that "people face tradeoffs" applies to

Correct Answer
verified

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Correct Answer
verified

For most students, the earnings they give up to attend college are

Correct Answer
verified

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Correct Answer
verified

Which of the following statements about market economies is correct?

Correct Answer
verified

Rational people make decisions at the margin by

Correct Answer
verified

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

Correct Answer
verified

Economists are particularly adept at understanding that people respond to

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

When society requires that firms reduce pollution, there is

Correct Answer
verified

The "invisible hand" refers to

Correct Answer
verified

Correct Answer
verified

When computing the opportunity cost of attending a basketball game you should include

Correct Answer
verified

Exam 1: Ten Principles of Economics

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Correct AnswerverifiedIn Germany. Almost all variati...View AnswerShow Answer

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Correct AnswerverifiedShow Answer

A rational decisionmaker

Correct AnswerverifiedShow Answer

Correct Answerverifiedincrementa...View AnswerShow Answer

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort. This law is likely to

Correct AnswerverifiedShow Answer

The principle that "people face tradeoffs" applies to

Correct AnswerverifiedShow Answer

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Correct AnswerverifiedShow Answer

For most students, the earnings they give up to attend college are

Correct AnswerverifiedShow Answer

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Correct AnswerverifiedShow Answer

Which of the following statements about market economies is correct?

Correct AnswerverifiedShow Answer

Rational people make decisions at the margin by

Correct AnswerverifiedShow Answer

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

Economists are particularly adept at understanding that people respond to

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

When society requires that firms reduce pollution, there is

Correct AnswerverifiedShow Answer

The "invisible hand" refers to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When computing the opportunity cost of attending a basketball game you should include

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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In Germany. Almost all variati...
View Answer

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incrementa...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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