Question 1

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

Accepted Answer

A)   Melissa needs to pay her rent and her electric bill.
B)   Kevin must choose between buying a new flat screen television and buying his textbooks for this semester.
C)   Robert must decide between studying for his psychology exam and working at his part-time job.
D)   Lisa can spend her money on a new smart phone or on a weekend trip.E) None of the above
F) All of the above

Question 2

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.E) None of the above
F) All of the above

Question 3

When the government attempts to improve equality in an economy the result is often

Accepted Answer

A)   an increase in overall output in the economy.
B)   additional government revenue since overall income will increase.
C)   a reduction in equality.
D)   a reduction in efficiency.E) All of the above
F) B) and D)

Question 4

One of the 20th century's worst episodes of inflation occurred in

Accepted Answer

A)   the United States in the 1960s.
B)   Italy in the 1950s.
C)   Russia in the 1930s.
D)   Germany in the 1920s.E) None of the above
F) A) and B)

Question 5

Explain how trade with other countries is beneficial.

Accepted Answer

Trade allows countri...

Question 6

In an economy in which decisions are guided by prices and individual self-interest, there is

Accepted Answer

A)   the potential to achieve efficiency in production.
B)   a strong need for government intervention in the market.
C)   less efficiency than would be observed in a centrally-planned economy.
D)   more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.E) A) and B)
F) A) and C)

Question 7

Which of these activities will most likely impose an external cost?

Accepted Answer

A)   An athlete works out at a gym.
B)   A secretary smokes a cigarette in a crowded break room.
C)   A young mother pushes her baby in a stroller.
D)   A construction worker eats a hotdog during his lunch break.E) A) and B)
F) A) and C)

Question 8

Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person. Which country can benefit?

Accepted Answer

A)   only the one with a low level of output per person.
B)   only the one with a high level of output per person.
C)   both
D)   neitherE) All of the above
F) A) and C)

Question 9

Economics is the study of how evenly goods and services are distributed within society.

Accepted Answer

A) True 
 B)False

Question 10

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

Accepted Answer

A)   Your full room-and-board expenses should always be included.
B)   None of your room-and-board expenses should ever be included.
C)   You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college.
D)   You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college.E) A) and C)
F) All of the above

Question 11

When computing the opportunity cost of attending a basketball game you should include

Accepted Answer

A)   the price you pay for the ticket and the value of your time.
B)   the price you pay for the ticket, but not the value of your time.
C)   the value of your time, but not the price you pay for the ticket.
D)   neither the price of the ticket nor the value of your time.E) A) and B)
F) C) and D)

Question 12

Which of the following is not an example of scarcity?

Accepted Answer

A)   Only some people can afford to buy a BMW automobile.
B)   Every individual in society cannot attain the highest standard of living to which he or she might aspire.
C)   Miranda has an unlimited supply of oranges in her orchard.
D)   Each member of a household cannot get everything he or she wants.E) B) and C)
F) A) and B)

Question 13

One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

Accepted Answer

Efficiency is the property of society ge...

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

Accepted Answer

A)   is $40.
B)   is $80.
C)   is $120.
D)   cannot be determined from the information given.E) B) and D)
F) B) and C)

Question 16

In communism, central planners decide which of the following?

Accepted Answer

A)   what goods and services will be produced
B)   how much will be produced
C)   who produced and consumed the goods and services
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 17

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred?

Accepted Answer

A)   An individual's probability of surviving an auto accident rose.
B)   There was an increase in pedestrian deaths.
C)   There was an increase in automobile accidents.
D)   All of the above are correct.E) A) and C)
F) All of the above

Question 18

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Accepted Answer

A)   is more efficient and more equal for society.
B)   is more efficient but less equal for society.
C)   is more equal but less efficient for society.
D)   is less equal and less efficient for society.E) C) and D)
F) A) and B)

Question 19

In a market economy, economic activity is guided by

Accepted Answer

A)   the government.
B)   central planners.
C)   large businesses.
D)   prices and self-interest.E) B) and C)
F) A) and B)

Question 20

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A)   There is no such thing as a free lunch.
B)   People buy more when prices are low than when prices are high.
C)   No matter how much people earn, they tend to spend more than they earn.
D)   Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.E) A) and B)
F) B) and C)

Exam 1: Ten Principles of Economics

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Correct AnswerverifiedShow Answer

Economics is the study of how evenly goods and services are distributed within society.

Correct AnswerverifiedShow Answer

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

Correct AnswerverifiedShow Answer

Following the implementation of laws requiring automobiles to have seat belts, which of the following occurred?

Correct AnswerverifiedShow Answer

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

Correct AnswerverifiedShow Answer

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

Correct AnswerverifiedShow Answer

When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

Correct AnswerverifiedEfficiency is the property of society ge...View AnswerShow Answer

In communism, central planners decide which of the following?

Correct AnswerverifiedShow Answer

Which of these activities will most likely impose an external cost?

Correct AnswerverifiedShow Answer

Which of the following is not an example of scarcity?

Correct AnswerverifiedShow Answer

One of the 20th century's worst episodes of inflation occurred in

Correct AnswerverifiedShow Answer

Explain how trade with other countries is beneficial.

Correct AnswerverifiedTrade allows countri...View AnswerShow Answer

Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person. Which country can benefit?

Correct AnswerverifiedShow Answer

When the government attempts to improve equality in an economy the result is often

Correct AnswerverifiedShow Answer

In a market economy, economic activity is guided by

Correct AnswerverifiedShow Answer

When computing the opportunity cost of attending a basketball game you should include

Correct AnswerverifiedShow Answer

In an economy in which decisions are guided by prices and individual self-interest, there is

Correct AnswerverifiedShow Answer

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Efficiency is the property of society ge...
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Trade allows countri...
View Answer

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