Question 1

The principle that trade can make everyone better off applies to

Accepted Answer

A)   individuals.
B)   families.
C)   countries.
D)   All of the above

Question 2

The government enforces property rights by

Accepted Answer

A)   requiring property owners to pay property taxes.
B)   providing police and courts.
C)   forcing people to own property.
D)   providing public parks and recreation facilities.

Question 3

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents.As a student of economics,you know that

Accepted Answer

A)   this is a case of the "broken window fallacy."
B)   this is a great use of taxpayer dollars.
C)   this policy diverts money from spending somewhere else in the economy.
D)   Both a and c are correct.

Question 4

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.

Question 5

High-school athletes who skip college to become professional athletes

Accepted Answer

A)   obviously do not understand the value of a college education.
B)   usually do so because they cannot get into college.
C)   understand that the opportunity cost of attending college is very high.
D)   are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes.

Question 6

The marginal benefit Claire gets from purchasing a third pair of flip-flops is

Accepted Answer

A)   the same as the total benefit of purchasing three pairs of flip-flops.
B)   more than the marginal cost of purchasing the third pair of flip-flops.
C)   the total benefit Claire gets from purchasing three pairs of flip-flops minus the total benefit she gets from purchasing two pairs of flip-flops.
D)   the total benefit Claire gets from purchasing four pairs of flip-flops minus the total benefit she gets from purchasing three pairs of flip-flops.

Question 7

Which of the following is an important cause of inflation in an economy?

Accepted Answer

A)   increases in productivity in the economy
B)   the influence of positive externalities on the economy
C)   lack of property rights in the economy
D)   growth in the quantity of money in the economy

Question 8

The invisible hand ensures that economic prosperity is distributed equally.

Accepted Answer

A) True 
 B)False

Question 9

If Germany chooses to engage in trade,it

Accepted Answer

A)   will only benefit if it trades with countries that produce goods Germany cannot produce.
B)   cannot benefit if it trades with less developed countries.
C)   should first attempt to produce the good itself.
D)   can benefit by trading with any other country.

Question 10

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A)   command economy.
B)   centrally-planned economy.
C)   market economy.
D)   All of the above are correct.

Question 11

Which of the following could reduce economic efficiency?

Accepted Answer

A)   laws that encourage lawsuits
B)   policies that redistribute income
C)   policies that impose significant restrictions on international trade
D)   All of the above are correct

Question 12

In the long run the primary effect of increasing the quantity of money is higher prices.

Accepted Answer

A) True 
 B)False

Question 13

A rational decision maker takes an action only if the

Accepted Answer

A)   marginal benefit is less than the marginal cost.
B)   marginal benefit is greater than the marginal cost.
C)   average benefit is greater than the average cost.
D)   marginal benefit is greater than both the average cost and the marginal cost.

Question 14

In a particular country in 1998,the average worker needed to work 40 hours to produce 100 units of output.In that same country in 2008,the average worker needed to work 36 hours to produce 72 units of output.In that country,the productivity of the average worker

Accepted Answer

A)   decreased between 1998 and 2008,so we would expect the standard of living to have decreased accordingly.
B)   increased between 1998 and 2008,so we would expect the standard of living to have increased accordingly.
C)   decreased between 1998 and 2008,so we would expect inflation to have decreased accordingly.
D)   increased between 1998 and 2008,so we would expect inflation to have increased accordingly.

Question 15

Suppose that the average income of a Costa Rican is higher than the average income of a Guatemalan.You might conclude that

Accepted Answer

A)   Costa Rican firms are faced with stricter government regulations than Guatemalan firms.
B)   total income is divided among fewer workers in Costa Rica since it has a smaller labor force than Guatemala.
C)   Guatemala's climate allows for longer growing seasons and therefore Guatemala can produce large quantities of grain and other crops.
D)   productivity in Costa Rica is higher than in Guatemala.

Question 16

The phrase "no such thing as a free lunch" means

Accepted Answer

A)   people must face tradeoffs.
B)   rational people think at the margin.
C)   people respond to incentives.
D)   trade can make everyone better off.

Question 17

An increase in the overall level of prices in an economy is referred to as

Accepted Answer

A)   the income effect.
B)   inflation.
C)   deflation.
D)   the substitution effect.

Question 18

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

Accepted Answer

To lower inflation,the government may ch...

Question 19

Ed spends an hour studying instead of watching tv with his friends.The opportunity cost to him of studying is

Accepted Answer

A)   the improvement in his grades from studying for the hour.
B)   the improvement in his grades from studying minus the enjoyment of watching tv.
C)   the enjoyment he would have received if he had watched tv with his friends.
D)   zero.Since Ed chose to study rather than to watch tv,the value of studying must have been greater than the value of watching tv.

Question 20

Something that induces a person to act is called

Accepted Answer

A)   a trade-off.
B)   a policy.
C)   an incentive.
D)   an opportunity cost.

Exam 1: Ten Principles of Economics

If Germany chooses to engage in trade,it

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In a particular country in 1998,the average worker needed to work 40 hours to produce 100 units of output.In that same country in 2008,the average worker needed to work 36 hours to produce 72 units of output.In that country,the productivity of the average worker

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The invisible hand ensures that economic prosperity is distributed equally.

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A rational decision maker takes an action only if the

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The marginal benefit Claire gets from purchasing a third pair of flip-flops is

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The government enforces property rights by

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Something that induces a person to act is called

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Trade between countries tends to

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The principle that trade can make everyone better off applies to

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The phrase "no such thing as a free lunch" means

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The decisions of firms and households are guided by prices and self-interest in a

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Which of the following could reduce economic efficiency?

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An increase in the overall level of prices in an economy is referred to as

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Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents.As a student of economics,you know that

Correct AnswerverifiedShow Answer

In the long run the primary effect of increasing the quantity of money is higher prices.

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Which of the following is an important cause of inflation in an economy?

Correct AnswerverifiedShow Answer

Suppose that the average income of a Costa Rican is higher than the average income of a Guatemalan.You might conclude that

Correct AnswerverifiedShow Answer

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

Correct AnswerverifiedTo lower inflation,the government may ch...View AnswerShow Answer

High-school athletes who skip college to become professional athletes

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Ed spends an hour studying instead of watching tv with his friends.The opportunity cost to him of studying is

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To lower inflation,the government may ch...
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