Question 1

For most students, the largest single cost of a college education is

Accepted Answer

A)  the wages given up to attend school.
B)  tuition, fees, and books.
C)  room and board.
D)  transportation, parking, and entertainment.

Question 2

A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?

Accepted Answer

A)  Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.
B)  Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen.
C)  Throw the bagels away and produce 8 fewer dozen bagels tomorrow.
D)   Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day.

Question 3

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.

Question 4

In a centrally-planned economy, economic activity is guided by ______.

Accepted Answer

The answer of In a centrally-planned economy, economic activity is...

Question 5

In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy?

Accepted Answer

A)  1 percent per year
B)  2 percent per year
C)  3 percent per year
D)  4 percent per year

Question 6

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

Accepted Answer

A)  we should agree with Senator Brown.
B)  we should agree with Senator Johnson.
C)  a good decision requires that we recognize both viewpoints.
D)  there are no tradeoffs between equity and efficiency.

Question 7

A marginal change is a small incremental adjustment to an existing plan of action.

Accepted Answer

A) True 
 B)False

Question 8

The English word that comes from the Greek word for "one who manages a household" is

Accepted Answer

A)  market.
B)  consumer.
C)  producer.
D)  economy.

Question 9

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.

Question 10

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Accepted Answer

A)  U.S. textile workers belong to a union, whereas Vietnamese textile workers do not belong to a union.
B)  There is little demand for cotton cloth in Vietnam and great demand in the U.S.
C)  Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.
D)  Vietnam has a low-wage policy to make its textile industry more competitive in world markets.

Question 11

Yvette buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city government announced a plan to build a new landfill on Pine Street just down the street from the house Yvette purchased. As a result of the city's announced plan, Yvette is weighing two alternatives: She can go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs and sell the house as it is for $250,000. She should

Accepted Answer

A)  keep the house and live in it.
B)  go ahead with the $50,000 in repairs and sell the house for $290,000.
C)  forgo the repairs and sell the house as it is for $250,000.
D)  move the house from Pine Street to a more desirable location, regardless of the cost of doing so.

Question 12

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.

Question 13

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Accepted Answer

A)  the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs.
B)  the benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs.
C)  the benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs.
D)  the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs.

Question 14

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 c...

Question 15

Inflation is defined as

Accepted Answer

A)  a period of rising productivity in the economy.
B)  a period of rising income in the economy.
C)  an increase in the overall level of output in the economy.
D)  an increase in the overall level of prices in the economy.

Question 16

The cost of an action is measured in terms of foregone opportunities.

Accepted Answer

A) True 
 B)False

Question 17

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Accepted Answer

A)  People face tradeoffs.
B)  The cost of something is what you give up to get it.
C)  Rational people think at the margin.
D)  People respond to incentives.

Question 18

Market failure occurs when no individual has the ability to substantially influence market prices.

Accepted Answer

A) True 
 B)False

Question 19

Large or persistent inflation is almost always caused by

Accepted Answer

A)  excessive government spending.
B)  excessive growth in the quantity of money.
C)  foreign competition.
D)  higher-than-normal levels of productivity.

Question 20

An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Correct Answer
verified

Inflation is defined as

Correct Answer
verified

The cost of an action is measured in terms of foregone opportunities.

Correct Answer
verified

Correct Answer
verified

Large or persistent inflation is almost always caused by

Correct Answer
verified

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

Correct Answer
verified
To lower inflation, the government may c...
View Answer

In a centrally-planned economy, economic activity is guided by ______.

Correct Answer
verified

Economists are particularly adept at understanding that people respond to

Correct Answer
verified

A marginal change is a small incremental adjustment to an existing plan of action.

Correct Answer
verified

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Correct Answer
verified

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

Correct Answer
verified

The English word that comes from the Greek word for "one who manages a household" is

Correct Answer
verified

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

An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.

Correct Answer
verified

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Correct Answer
verified

Market failure occurs when no individual has the ability to substantially influence market prices.

Correct Answer
verified

In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy?

Correct Answer
verified

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Correct Answer
verified

For most students, the largest single cost of a college education is

Correct Answer
verified

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

Correct Answer
verified

Exam 1: Ten Principles of Economics

Correct AnswerverifiedShow Answer

Inflation is defined as

Correct AnswerverifiedShow Answer

The cost of an action is measured in terms of foregone opportunities.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Large or persistent inflation is almost always caused by

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 c...View AnswerShow Answer

In a centrally-planned economy, economic activity is guided by ______.

Correct AnswerverifiedShow Answer

Economists are particularly adept at understanding that people respond to

Correct AnswerverifiedShow Answer

A marginal change is a small incremental adjustment to an existing plan of action.

Correct AnswerverifiedShow Answer

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The English word that comes from the Greek word for "one who manages a household" is

Correct AnswerverifiedShow 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

An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.

Correct AnswerverifiedShow Answer

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

Correct AnswerverifiedShow Answer

Market failure occurs when no individual has the ability to substantially influence market prices.

Correct AnswerverifiedShow Answer

In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy?

Correct AnswerverifiedShow Answer

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Correct AnswerverifiedShow Answer

For most students, the largest single cost of a college education is

Correct AnswerverifiedShow Answer

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
To lower inflation, the government may c...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified