Question 1

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.

Question 2

The basic principles of economics suggest that

Accepted Answer

A)  markets are seldom, if ever, a good way to organize economic activity.
B)  government should become involved in markets when trade between countries is involved.
C)  government should become involved in markets when those markets fail to produce efficient or fair outcomes.
D)  All of the above are correct.

Question 3

Communist countries worked under the premise that

Accepted Answer

A)  people, when left on their own without government intervention, will find the best use of available resources
B)  central planners were in the best position to determine the allocation of scarce resources in the economy.
C)  households and firms, guided by an "invisible hand," could achieve the most efficient allocation of scarce resources.
D)  allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources.

Question 4

In response to the deep economic downturn in the US in 2008 and 2009, the US

Accepted Answer

A)  reduced taxes.
B)  increased government spending.
C)  increased the supply of money.
D)  All of the above are correct.

Question 5

Adam Smith's book The Wealth of Nations was published in

Accepted Answer

A)  1692.
B)  1776.
C)  1816.
D)  1936.

Question 6

Which of the following is a subject that economists study?

Accepted Answer

A)  the growth in average income
B)  the fraction of the population that cannot find work
C)  the rate at which prices are rising
D)  All of the above are correct.

Question 7

The term "productivity"

Accepted Answer

A)  means the same thing as "efficiency."
B)  is seldom used by economists, as its meaning is not precise.
C)  refers to the quantity of goods and services produced from each unit of labor input.
D)  refers to the variety of goods and services from which households can choose when they shop.

Question 8

Economics is the study of ______ .

Accepted Answer

how societ...

Question 9

A species of snakes became extinct due to pollution in a river where the snakes once lived. 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.

Question 10

In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker

Accepted Answer

A)  decreased by 1.7 percent between 1998 and 2008.
B)  remained unchanged between 1998 and 2008.
C)  increased by 4.75 percent between 1998 and 2008.
D)  increased by 6.25 percent between 1998 and 2008.

Question 11

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.

Question 12

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements exemplifies a principle of individual decisionmaking?

Accepted Answer

A)  Trade can make everyone better off.
B)  Governments can sometimes improve market outcomes.
C)  The cost of something is what you give up to get it.
D)  All of the above are correct.

Question 14

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Accepted Answer

A)  The marginal benefit of going to Spain increases.
B)  The marginal cost of going to Spain increases.
C)  The marginal benefit of going to Ireland increases.
D)  The marginal cost of going to Ireland decreases.

Question 15

An example of a firm with market power is a

Accepted Answer

A)  delicatessen in New York.
B)  cable TV provider in Tulsa.
C)  clothing store in Chicago.
D)  family farm in Kansas.

Question 16

The term "market failure"

Accepted Answer

A)  means the same thing as "market power."
B)  refers to the dissolution of a market when firms decide to quit producing a certain product.
C)  refers to the failure of a market to produce an efficient allocation of resources.
D)  refers to government's failure to enforce the property rights of households or firms that participate in a certain market.

Question 17

Explain the concept of market failure.

Accepted Answer

Market failure is a situation ...

Question 18

Which of the following claims is consistent with the views of mainstream economists?

Accepted Answer

A)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall.
B)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily rise.
C)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently fall.
D)  If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently rise.

Question 19

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

Accepted Answer

A) True 
 B)False

Question 20

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Accepted Answer

A)  safety glass in all new cars.
B)  seat belts in all new cars.
C)  air bags in all new cars.
D)  stricter drunk driving laws in all states.

Exam 1: Ten Principles of Economics

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

Correct AnswerverifiedShow Answer

Economics is the study of ______ .

Correct Answerverifiedhow societ...View AnswerShow Answer

Communist countries worked under the premise that

Correct AnswerverifiedShow Answer

The term "productivity"

Correct AnswerverifiedShow Answer

Which of the following claims is consistent with the views of mainstream economists?

Correct AnswerverifiedShow Answer

The term "market failure"

Correct AnswerverifiedShow Answer

An example of a firm with market power is a

Correct AnswerverifiedShow Answer

A species of snakes became extinct due to pollution in a river where the snakes once lived. This is an example of

Correct AnswerverifiedShow Answer

Ralph Nader's book Unsafe at Any Speed caused Congress to require

Correct AnswerverifiedShow Answer

Adam Smith's book The Wealth of Nations was published in

Correct AnswerverifiedShow Answer

Explain the concept of market failure.

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

Which of the following statements exemplifies a principle of individual decisionmaking?

Correct AnswerverifiedShow Answer

In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker

Correct AnswerverifiedShow Answer

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

In response to the deep economic downturn in the US in 2008 and 2009, the US

Correct AnswerverifiedShow Answer

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

Correct AnswerverifiedShow Answer

The basic principles of economics suggest that

Correct AnswerverifiedShow Answer

Which of the following is a subject that economists study?

Correct AnswerverifiedShow Answer

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how societ...
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Market failure is a situation ...
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