Question 1

President Gerald Ford referred to inflation as

Accepted Answer

A)  a blight on our nation's economy.
B)  a necessary evil to combat high unemployment.
C)  public enemy number one.
D)  a fly in the ointment.E) A) and D)
F) None of the above

Question 2

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

Question 3

What are the two possible causes of market failure?

Accepted Answer

Externalit...

Question 4

Explain the concept of market failure.

Accepted Answer

Market failure is a situation ...

Question 5

Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the principle that

Accepted Answer

A)  trade can make everyone better off.
B)  people face trade-offs.
C)  rational people think at the margin.
D)  people respond to incentives.E) A) and B)
F) A) and C)

Question 6

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

Question 7

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Accepted Answer

A)  is a basic principle regarding individual decisionmaking.
B)  amounts to a denial of one of the basic principles regarding interactions among people.
C)  supports the idea that the "invisible hand" should guide economic activity.
D)  was promoted by the economist Adam Smith in a well-known 1776 book.E) None of the above
F) A) and D)

Question 8

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

Question 9

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 10

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

Accepted Answer

A) True 
 B)False

Question 11

The failure of communism in a large number of countries is at least partly explained by

Accepted Answer

A)  the fact that those countries relied absolutely on the invisible hand.
B)  the fact that those countries did little or nothing to restrict trade with other countries.
C)  the lack of information, on the part of central planners in those countries, about tastes and preferences in their economies.
D)  the lack of information, on the part of central planners in those countries, about how much authority the government had in affecting economic outcomes.E) A) and B)
F) C) and D)

Question 12

Government policies designed to equalize the distribution of economic well-being include
(i) the welfare system
(ii) unemployment insurance
(iii) progressive income tax

Accepted Answer

A)  (i)  only
B)  (ii)  only
C)  (i)  and (ii)  only
D)  (i) , (ii) , and (iii) E) A) and D)
F) A) and B)

Question 13

Which of the following is not one of the four principles of individual decision making?

Accepted Answer

A)  People face trade-offs.
B)  Trade can make everyone better off.
C)  People respond to incentives.
D)  Rational people think at the margin.E) A) and B)
F) B) and C)

Question 14

Trade between the United States and Guatemala

Accepted Answer

A)  benefits both the United States and Guatemala.
B)  is a losing proposition for the United States because Guatemalan labor is less expensive than U.S. labor.
C)  is a losing proposition for Guatemala because capital is much more abundant in the U.S. than in Guatemala.
D)  is a losing proposition for Guatemala because U.S. workers are more productive than Guatemalan workers.E) C) and D)
F) None of the above

Question 15

To say that government intervenes in the economy to promote equality is to say that government is aiming to

Accepted Answer

A)  create a more fair distribution of income.
B)  change the ingredients that are used to "bake" the economic pie.
C)  enlarge the economic pie.
D)  All of the above are correct.E) None of the above
F) A) and B)

Question 16

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

Accepted Answer

A)  goods are scarce.
B)  people face tradeoffs.
C)  income must be earned.
D)  households face many decisions.E) B) and C)
F) A) and B)

Question 17

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

Accepted Answer

A)  automakers
B)  pedestrians
C)  drivers
D)  owners of collision-repair shopsE) A) and B)
F) None of the above

Question 18

Which is the most accurate statement about trade?

Accepted Answer

A)  Trade can make every nation better off.
B)  Trade makes some nations better off and others worse off.
C)  Trading for a good can make a nation better off only if the nation cannot produce that good itself.
D)  Trade helps rich nations and hurts poor nations.E) A) and C)
F) None of the above

Question 19

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) C) and D)

Question 20

Over the past century, the average income in the United States has risen about

Accepted Answer

A)  twofold.
B)  fivefold.
C)  eightfold.
D)  tenfold.E) A) and D)
F) None of the above

Exam 1: Ten Principles of Economics

Government policies designed to equalize the distribution of economic well-being include (i) the welfare system (ii) unemployment insurance (iii) progressive income tax

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Over the past century, the average income in the United States has risen about

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

Correct AnswerverifiedShow Answer

To say that government intervenes in the economy to promote equality is to say that government is aiming to

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The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not one of the four principles of individual decision making?

Correct AnswerverifiedShow Answer

Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the principle that

Correct AnswerverifiedShow Answer

The opportunity cost of going to college is

Correct AnswerverifiedShow Answer

Which is the most accurate statement about trade?

Correct AnswerverifiedShow Answer

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

Correct AnswerverifiedShow Answer

The failure of communism in a large number of countries is at least partly explained by

Correct AnswerverifiedShow Answer

What are the two possible causes of market failure?

Correct AnswerverifiedExternalit...View AnswerShow Answer

The phenomenon of scarcity stems from the fact that

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

President Gerald Ford referred to inflation as

Correct AnswerverifiedShow Answer

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

Correct AnswerverifiedShow Answer

Explain the concept of market failure.

Correct AnswerverifiedMarket failure is a situation ...View AnswerShow Answer

Trade between the United States and Guatemala

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Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

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Externalit...
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Market failure is a situation ...
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