Question 1

Market failure is the ability of a single person to have a substantial influence on market prices.

Accepted Answer

A) True 
 B)False

Question 2

The adage,"There is no such thing as a free lunch," is used to illustrate the principle that

Accepted Answer

A)   goods are scarce.
B)   people face tradeoffs.
C)   income must be earned.
D)   households face many decisions.E) C) and D)
F) B) and D)

Question 3

Which of the following statements best represents the principle represented by the adage,"There is no such thing as a free lunch"?

Accepted Answer

A)   Melissa can attend the concert only if she takes her sister with her.
B)   Greg is hungry and homeless.
C)   Brian must repair the tire on his bike before he can ride it to class.
D)   Kendra must decide between going to Colorado or Cancun for spring break.E) B) and C)
F) A) and B)

Question 4

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) All of the above
F) B) and C)

Question 5

According to Adam Smith,the success of decentralized market economies is primarily due to

Accepted Answer

A)   the basic benevolence of society.
B)   society's legal system.
C)   individuals' pursuit of self-interest.
D)   partnerships that are forged between business and government.E) A) and B)
F) C) and D)

Question 6

Which of the following firms is likely to have the greatest market power?

Accepted Answer

A)   an electric company
B)   a farmer
C)   a grocery store
D)   a local electronics retailerE) A) and B)
F) A) and C)

Question 7

Central planning refers to

Accepted Answer

A)   markets guiding economic activity.Today many countries that had this system have abandoned it.
B)   markets guiding economic activity.Today many countries that did not have this system have implemented it.
C)   government guiding economic activity.Today many countries that had this system have abandoned it.
D)   government guiding economic activity.Today many countries that did not have this system have implemented it.E) B) and D)
F) None of the above

Question 8

The term used to describe a situation in which markets do not allocate resources efficiently is

Accepted Answer

A)   economic meltdown.
B)   market failure.
C)   equilibrium.
D)   the effect of the invisible hand.E) None of the above
F) A) and B)

Question 9

Bill is restoring a car and has already spent $4000 on the restoration.He expects to be able to sell the car for $5800.Bill discovers that he needs to do an additional $2400 of work to make the car worth $5800 to potential buyers.He could also sell the car now,without completing the additional work,for $3800.What should he do?

Accepted Answer

A)   He should sell the car now for $3800.
B)   He should keep the car since it wouldn't be rational to spend $6400 restoring a car and then sell it for only $5800.
C)   He should complete the additional work and sell the car for $5800.
D)   It does not matter which action he takes since the outcome will be the same either way.E) C) and D)
F) B) and C)

Question 10

The "invisible hand" directs economic activity through

Accepted Answer

A)   advertising.
B)   prices.
C)   central planning.
D)   government regulations.E) A) and B)
F) A) and C)

Question 11

Caroline eats two bananas during a particular day.The marginal benefit she enjoys from eating the second banana

Accepted Answer

A)   can be thought of as the total benefit Caroline enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana.
B)   determines Caroline's marginal cost of the first and second bananas.
C)   does not depend on how many bananas Caroline has already eaten.
D)   All of the above are correct.E) B) and D)
F) All of the above

Question 12

To promote good economic outcomes,policymakers should strive to enact policies that

Accepted Answer

A)   enhance productivity.
B)   enhance individuals' market power.
C)   result in a rapidly-growing quantity of money.
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 13

Sophia is planning her activities for a hot summer day.She would like to go to the local swimming pool and see the latest blockbuster movie,but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity.This illustrates the basic principle that

Accepted Answer

A)   people respond to incentives.
B)   rational people think at the margin.
C)   people face tradeoffs.
D)   improvements in efficiency sometimes come at the expense of equality.E) A) and B)
F) A) and C)

Question 14

The opportunity cost of going to college is

Accepted Answer

A)   the total spent on food,clothing,books,transportation,tuition,lodging,and other expenses.
B)   the value of the best opportunity a student gives up to attend college.
C)   zero for students who are fortunate enough to have all of their college expenses paid by someone else.
D)   zero,since a college education will allow a student to earn a larger income after graduation.E) B) and C)
F) A) and C)

Question 15

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others.This extra benefit society gets from vaccinating its citizens is known as

Accepted Answer

A)   productivity.
B)   an externality.
C)   market power.
D)   property rights.E) B) and C)
F) A) and D)

Question 16

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) C) and D)
F) A) and D)

Question 17

Which of the following is an example of something economists study?

Accepted Answer

A)   Kate chooses to work overtime to earn extra income for her family.
B)   Ryan sells his economics textbook from last semester to his roommate for half the price of a new textbook.
C)   The unemployment rate in the United States is at its highest level in over fifty years.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 18

Bill is restoring a car and has already spent $4000 on the restoration.He expects to be able to sell the car for $6200.Bill discovers that he needs to do an additional $2400 of work to make the car worth $6200 to potential buyers.He could also sell the car now,without completing the additional work,for $3800.What should he do?

Accepted Answer

A)   He should sell the car now for $3800.
B)   He should keep the car since it wouldn't be rational to spend $6400 restoring a car and then sell it for only $6200.
C)   He should complete the additional work and sell the car for $6200.
D)   It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same either way.E) All of the above
F) A) and C)

Question 19

Slow growth in US incomes during the 1970s and 1980s was primarily due to

Accepted Answer

A)   slow productivity growth in the US.
B)   increased competition from Japan.
C)   increased competition from European countries.
D)   a rapid decrease in the quantity of money in the economy.E) C) and D)
F) B) and C)

Question 20

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.E) B) and D)
F) A) and B)

Exam 1: Ten Principles of Economics

In communism,central planners decide which of the following?

Correct Answer
verified

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

Correct Answer
verified

Central planning refers to

Correct Answer
verified

Slow growth in US incomes during the 1970s and 1980s was primarily due to

Correct Answer
verified

The opportunity cost of going to college is

Correct Answer
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To promote good economic outcomes,policymakers should strive to enact policies that

Correct Answer
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Which of the following firms is likely to have the greatest market power?

Correct Answer
verified

Market failure is the ability of a single person to have a substantial influence on market prices.

Correct Answer
verified

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others.This extra benefit society gets from vaccinating its citizens is known as

Correct Answer
verified

According to Adam Smith,the success of decentralized market economies is primarily due to

Correct Answer
verified

Correct Answer
verified

The term used to describe a situation in which markets do not allocate resources efficiently is

Correct Answer
verified

Which of the following statements best represents the principle represented by the adage,"There is no such thing as a free lunch"?

Correct Answer
verified

Caroline eats two bananas during a particular day.The marginal benefit she enjoys from eating the second banana

Correct Answer
verified

Correct Answer
verified

The adage,"There is no such thing as a free lunch," is used to illustrate the principle that

Correct Answer
verified

The "invisible hand" directs economic activity through

Correct Answer
verified

The basic principles of economics suggest that

Correct Answer
verified

Correct Answer
verified

Which of the following is an example of something economists study?

Correct Answer
verified

Exam 1: Ten Principles of Economics

In communism,central planners decide which of the following?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Central planning refers to

Correct AnswerverifiedShow Answer

Slow growth in US incomes during the 1970s and 1980s was primarily due to

Correct AnswerverifiedShow Answer

The opportunity cost of going to college is

Correct AnswerverifiedShow Answer

To promote good economic outcomes,policymakers should strive to enact policies that

Correct AnswerverifiedShow Answer

Which of the following firms is likely to have the greatest market power?

Correct AnswerverifiedShow Answer

Market failure is the ability of a single person to have a substantial influence on market prices.

Correct AnswerverifiedShow Answer

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others.This extra benefit society gets from vaccinating its citizens is known as

Correct AnswerverifiedShow Answer

According to Adam Smith,the success of decentralized market economies is primarily due to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The term used to describe a situation in which markets do not allocate resources efficiently is

Correct AnswerverifiedShow Answer

Which of the following statements best represents the principle represented by the adage,"There is no such thing as a free lunch"?

Correct AnswerverifiedShow Answer

Caroline eats two bananas during a particular day.The marginal benefit she enjoys from eating the second banana

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The adage,"There is no such thing as a free lunch," is used to illustrate the principle that

Correct AnswerverifiedShow Answer

The "invisible hand" directs economic activity through

Correct AnswerverifiedShow Answer

The basic principles of economics suggest that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an example of something economists study?

Correct AnswerverifiedShow Answer

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