Question 1

The business cycle is the

Accepted Answer

A)  relationship between unemployment and inflation.
B)  irregular fluctuations in economic activity.
C)  positive relationship between the quantity of money in an economy and inflation.
D)  predictable changes in economic activity due to changes in government spending and taxes.E) B) and D)
F) B) and C)

Question 2

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) A) and D)
F) All of the above

Question 3

A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company. This instance serves as an example of

Accepted Answer

A)  market power.
B)  inefficient trade.
C)  inadequate enforcement of property rights.
D)  the invisible hand at work.E) A) and B)
F) None of the above

Question 4

When the government redistributes income from the wealthy to the poor,

Accepted Answer

A)  efficiency is improved, but equality is not.
B)  both wealthy people and poor people benefit directly.
C)  people work less and produce fewer goods and services.
D)  the government collects more revenue in total.E) A) and D)
F) B) and C)

Question 5

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Accepted Answer

A)  the pie gets larger, and there will be more pie overall.
B)  the pie gets smaller, and there will be less pie overall.
C)  it increases the reward for working hard, resulting in people producing more goods and services.
D)  those who earn more income pay less in taxes.E) B) and C)
F) A) and D)

Question 6

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.E) C) and D)
F) B) and C)

Question 7

If Faith attends college, it will take her four years, during which time she will earn no income. She will pay $50,000 for tuition, $12,000 for room and board, and $5,000 for books. If she spends the four years working rather than attending college, she will pay $18,000 for room and board, pay no intuition, and buy no books. Based on this information, Faith's economic cost of attending college would be $67,000 if, over the four years, she could earn

Accepted Answer

A)  $12,000 instead of attending college.
B)  $14,000 instead of attending college.
C)  $16,000 instead of attending college.
D)  $18,000 instead of attending college.E) A) and B)
F) All of the above

Question 8

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Accepted Answer

A) True 
 B)False

Question 9

Almost all variation in living standards is attributable to differences in countries'

Accepted Answer

A)  population growth rates.
B)  productivity.
C)  systems of public education.
D)  taxes.E) A) and C)
F) B) and C)

Question 10

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

Question 11

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

Accepted Answer

A)  the United Kingdom has a better education system than Turkey.
B)  the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey.
C)  workers in Turkey are more productive than workers in the United Kingdom.
D)  there are more instances of market power in Turkey than in the United Kingdom.E) C) and D)
F) All of the above

Question 12

A marginal change is a

Accepted Answer

A)  change that involves little, if anything, that is important.
B)  large, significant adjustment.
C)  change for the worse, and so it is usually a short-term change.
D)  small, incremental adjustment.E) None of the above
F) B) and D)

Question 13

Both The Wealth of Nations and the Declaration of Independence share the point of view that

Accepted Answer

A)  every person is entitled to life, liberty, and the pursuit of happiness.
B)  individuals are best left to their own devices without the government guiding their actions.
C)  the government plays a central role in organizing a market economy.
D)  because of human nature a strong legal system is necessary for a market system to survive.E) None of the above
F) All of the above

Question 14

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Accepted Answer

A)  the unexpected repairs and the increase in the price of gas
B)  the unexpected increase for repairs, but not the increase in the price of gas
C)  the increase in the price of gas, but not the unexpected repairs
D)  neither the unexpected increase in the price of gas nor the unexpected repairsE) B) and D)
F) C) and D)

Question 15

Rational people make decisions at the margin by

Accepted Answer

A)  following marginal traditions.
B)  behaving in a random fashion.
C)  thinking in black-and-white terms.
D)  comparing marginal costs and marginal benefits.E) A) and B)
F) A) and C)

Question 16

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) None of the above
F) A) and B)

Question 17

Coal is considered to be a non-renewable energy source. Which of the following statements is correct?

Accepted Answer

A)  Coal is an unlimited resource.
B)  Coal is a scarce resource.
C)  Coal is a non-scarce resource.
D)  Coal is not a resource.E) None of the above
F) A) and B)

Question 18

If Jane attends graduate school, it will take her two years, during which time she will earn no income. She will pay a total of $100,000 for tuition, $20,000 for room and board, and $2,000 for books. If she spends the two years working rather than attending college, she will pay a total of $18,000 for room and board, pay no intuition, and buy no books. Based on this information, Jane's economic cost of attending graduate school would be $175,000 if, over the two years, she could earn a total of

Accepted Answer

A)  $53,000 instead of attending graduate school.
B)  $55,000 instead of attending graduate school.
C)  $71,000 instead of attending graduate school.
D)  $73,000 instead of attending graduate school.E) None of the above
F) B) and C)

Question 19

Productivity is defined as the quantity of goods and services produced from each unit of labor input.

Accepted Answer

A) True 
 B)False

Question 20

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Central planning refers to

Correct Answer
verified

Almost all variation in living standards is attributable to differences in countries'

Correct Answer
verified

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Correct Answer
verified

Coal is considered to be a non-renewable energy source. Which of the following statements is correct?

Correct Answer
verified

Both The Wealth of Nations and the Declaration of Independence share the point of view that

Correct Answer
verified

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Correct Answer
verified

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Correct Answer
verified

When the government redistributes income from the wealthy to the poor,

Correct Answer
verified

A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company. This instance serves as an example of

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

Productivity is defined as the quantity of goods and services produced from each unit of labor input.

Correct Answer
verified

Correct Answer
verified

The business cycle is the

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

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

Correct Answer
verified

Rational people make decisions at the margin by

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Correct Answer
verified

A marginal change is a

Correct Answer
verified

Exam 1: Ten Principles of Economics

Central planning refers to

Correct AnswerverifiedShow Answer

Almost all variation in living standards is attributable to differences in countries'

Correct AnswerverifiedShow Answer

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Correct AnswerverifiedShow Answer

Coal is considered to be a non-renewable energy source. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Both The Wealth of Nations and the Declaration of Independence share the point of view that

Correct AnswerverifiedShow Answer

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Correct AnswerverifiedShow Answer

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Correct AnswerverifiedShow Answer

When the government redistributes income from the wealthy to the poor,

Correct AnswerverifiedShow Answer

A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company. This instance serves as an example of

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

Productivity is defined as the quantity of goods and services produced from each unit of labor input.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The business cycle is the

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

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

Correct AnswerverifiedShow Answer

Rational people make decisions at the margin by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Correct AnswerverifiedShow Answer

A marginal change is a

Correct AnswerverifiedShow Answer

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