Question 1

Institutions that support economic growth are the ones that:

Accepted Answer

A)   encourage consumption and discourage savings.
B)   give the government more control over what is produced and how it is produced.
C)   require companies to act in the social interest.
D)   provide incentives for entrepreneurs to take risks and innovate.

Question 2

Two people can benefit from trade if they both live in the same country,but not if they live in different countries.

Accepted Answer

A) True 
 B)False

Question 3

In The Economics of Nonhuman Societies,economist Gordon Tullock describes the economics hidden in biology (e.g. ,ants and bees) .One of the lessons of the book is opportunity cost.In what way does an animal,such as an ant,face opportunity costs?

Accepted Answer

A)   An ant suffers a large initial cost to find food.
B)   Because an ant starves if it does not find food,it has a strong incentive to search.
C)   Ants face increasing marginal costs while searching for food in one direction as they get farther from the anthill.
D)   Searching for food in one direction means an ant cannot search in another direction.

Question 4

Monetary and fiscal policy:

Accepted Answer

A)   can make matters worse if poorly used.
B)   are useless.
C)   can prevent all recessions.
D)   are all-powerful.

Question 5

Ideas:

Accepted Answer

A)   will run out some day.
B)   are not depleted when they are used.
C)   are not an important factor in economic growth.
D)   occur at the same rate no matter what.

Question 6

With careful planning,we can usually get something that we like without having to give up something else that we like.

Accepted Answer

A) True 
 B)False

Question 7

What is meant by the term "marginal revolution"?

Accepted Answer

A)   the public disdain at the institution of marginal tax rates
B)   the transformation in economic thought that occurred with the discovery of marginal thinking
C)   the institution of the death penalty for drug dealers
D)   the effect of policies on crime

Question 8

Why might the FDA err on the side of "overtesting" pharmaceutical drugs compared with the level of testing that is economically efficient?

Accepted Answer

A)   Dangerous side effects are more important than drug loss and drug lag.
B)   Dangerous side effects are less important than drug loss and drug lag.
C)   Drug lag and drug loss are not significant concerns in the case of most pharmaceutical drugs.
D)   Dangerous side effects are not relevant in most pharmaceutical drug cases.

Question 9

Inflation increases the value of money by increasing the purchasing power of money.

Accepted Answer

A) True 
 B)False

Question 10

Monetary and fiscal policies have the potential to improve unemployment and GDP during a recession.

Accepted Answer

A) True 
 B)False

Question 11

Recall Chapter 1's opening story about the British sea captains and the convicted felons.In what way were incentives used to solve the problem of the high mortality rate on board the ships?

Accepted Answer

A)   Payment (to ship captains) was to be offered for each prisoner that was taken aboard the ships.
B)   Payment (to ship captains) was made independent of the regulations passed for prisoner welfare.
C)   Regulations were passed so that prisoners could get better food,water,and medical care.
D)   Payment (to ship captains) was made dependent on the survival rate of prisoners.

Question 12

For countries to be wealthy,they need lots of physical and human capital per worker,which,in turn,depends on a system of private property rights,political stability,a just legal system,honest government,and competitive and open markets.

Accepted Answer

A) True 
 B)False

Question 13

The theory of comparative advantage concludes that people can produce more by specializing than by doing everything themselves.

Accepted Answer

A) True 
 B)False

Question 14

What is one cause of inflation?

Accepted Answer

A)   the persistent rise in prices in the economy
B)   the inability of production to keep up with spending in the economy
C)   increased spending by people and the government.
D)   economic growth without money growth

Question 15

Which of the following statements is TRUE about trade?

Accepted Answer

A)   Everyone can benefit from trade,even people who trade with someone from a foreign country.
B)   Comparative advantage is based on specializing in products that have a high opportunity cost of production.
C)   If a person can do everything better than anyone else,there is no reason for that person to trade with others.
D)   Trade makes one party better off but the other party worse off,so there is no net gain to society.

Question 16

Trade increases production partly by taking advantage of:

Accepted Answer

A)   specialization.
B)   mercantilism.
C)   idealism.
D)   internalization.

Question 17

Using the thinking at the margin concept,explain a student's decision to wake up and attend an 8 AM class in the winter (the student is already registered for the class).

Accepted Answer

On the one hand,the student will stand t...

Question 18

South Korea is an example of a country that has adopted good institutions for promoting economic growth.

Accepted Answer

A) True 
 B)False

Question 19

What is the "invisible hand"?

Accepted Answer

A)   The idea that government economic planning tends to benefit not only the individual but also all of society.
B)   The principle that most people avoid economic transactions with so-called "outsiders."
C)   The idea that people pursuing their own self-interest actually benefit the public at large.
D)   The notion that the pursuit of profit leads to the exploitation of consumers.

Question 20

All booms and busts:

Accepted Answer

A)   are part of an economy's normal response to changing economic conditions.
B)   are avoidable.
C)   are caused by the weather.
D)   affect the rate of economic growth.

Exam 1: The Big Ideas

Which of the following statements is TRUE about trade?

Correct AnswerverifiedShow Answer

What is meant by the term "marginal revolution"?

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With careful planning,we can usually get something that we like without having to give up something else that we like.

Correct AnswerverifiedShow Answer

Inflation increases the value of money by increasing the purchasing power of money.

Correct AnswerverifiedShow Answer

Two people can benefit from trade if they both live in the same country,but not if they live in different countries.

Correct AnswerverifiedShow Answer

Why might the FDA err on the side of "overtesting" pharmaceutical drugs compared with the level of testing that is economically efficient?

Correct AnswerverifiedShow Answer

Trade increases production partly by taking advantage of:

Correct AnswerverifiedShow Answer

The theory of comparative advantage concludes that people can produce more by specializing than by doing everything themselves.

Correct AnswerverifiedShow Answer

For countries to be wealthy,they need lots of physical and human capital per worker,which,in turn,depends on a system of private property rights,political stability,a just legal system,honest government,and competitive and open markets.

Correct AnswerverifiedShow Answer

What is one cause of inflation?

Correct AnswerverifiedShow Answer

What is the "invisible hand"?

Correct AnswerverifiedShow Answer

Recall Chapter 1's opening story about the British sea captains and the convicted felons.In what way were incentives used to solve the problem of the high mortality rate on board the ships?

Correct AnswerverifiedShow Answer

All booms and busts:

Correct AnswerverifiedShow Answer

Monetary and fiscal policy:

Correct AnswerverifiedShow Answer

Monetary and fiscal policies have the potential to improve unemployment and GDP during a recession.

Correct AnswerverifiedShow Answer

Ideas:

Correct AnswerverifiedShow Answer

Using the thinking at the margin concept,explain a student's decision to wake up and attend an 8 AM class in the winter (the student is already registered for the class).

Correct AnswerverifiedOn the one hand,the student will stand t...View AnswerShow Answer

South Korea is an example of a country that has adopted good institutions for promoting economic growth.

Correct AnswerverifiedShow Answer

Institutions that support economic growth are the ones that:

Correct AnswerverifiedShow Answer

In The Economics of Nonhuman Societies,economist Gordon Tullock describes the economics hidden in biology (e.g. ,ants and bees) .One of the lessons of the book is opportunity cost.In what way does an animal,such as an ant,face opportunity costs?

Correct AnswerverifiedShow Answer

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On the one hand,the student will stand t...
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