Question 1

Trade can make everyone better off except in the case where one person is better at doing everything.

Accepted Answer

A) True 
 B)False

Question 2

In the early 1920s,

Accepted Answer

A)   Germany experienced a very high rate of inflation.
B)   the quantity of German money was declining rapidly.
C)   the value of German money remained almost constant.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Question 3

For which of the following problems can well-designed public policy enhance economic efficiency?

Accepted Answer

A)   both externalities and market power
B)   externalities,but not market power
C)   market power,but not externalities
D)   neither externalities nor market powerE) C) and D)
F) All of the above

Question 4

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke.This is an example of

Accepted Answer

A)   a market failure caused by an externality.
B)   a market failure caused by market power.
C)   a market failure caused by equality.
D)   There is no market failure in this case.E) B) and C)
F) B) and D)

Question 5

Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time.

Accepted Answer

A) True 
 B)False

Question 6

High-school athletes who skip college to become professional athletes

Accepted Answer

A)   obviously do not understand the value of a college education.
B)   usually do so because they cannot get into college.
C)   understand that the opportunity cost of attending college is very high.
D)   are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes.E) A) and C)
F) A) and D)

Question 7

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it,the regulations come at the cost of reducing the incomes of the regulated firms' owners,workers,and customers.This statement illustrates the principle that

Accepted Answer

A)   trade can make everyone better off.
B)   rational people think at the margin.
C)   people face tradeoffs.
D)   people respond to incentives.E) All of the above
F) B) and C)

Question 8

An increase in the overall level of prices in an economy is referred to as

Accepted Answer

A)   the income effect.
B)   inflation.
C)   deflation.
D)   the substitution effect.E) B) and D)
F) B) and C)

Question 9

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Accepted Answer

A)   David Ricardo
B)   Thorstein Veblen
C)   John Maynard Keynes
D)   Adam SmithE) B) and C)
F) All of the above

Question 10

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

Question 11

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

Accepted Answer

A)   government actions that distort prices.
B)   increased competition in markets.
C)   enforcement of property rights.
D)   too much attention paid to efficiency.E) A) and B)
F) A) and C)

Question 12

Under what conditions might government intervention in a market economy improve the economy's performance?

Accepted Answer

If there is a market failure,such as an ...

Question 13

The ability of an individual to own and exercise control over scarce resources is called

Accepted Answer

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

Question 14

Prior to the collapse of communism,communist countries worked on the premise that economic well-being could be best attained by

Accepted Answer

A)   a market economy.
B)   a strong reliance on prices and individuals' self-interests.
C)   a system of large privately-owned firms.
D)   the actions of government central planners.E) A) and B)
F) All of the above

Question 15

The term "invisible hand" was coined by

Accepted Answer

A)   Adam Smith.
B)   David Ricardo.
C)   Karl Marx.
D)   Benjamin Franklin.E) A) and B)
F) A) and C)

Question 16

Which of the following statements best characterizes a basic difference between market economies and centrally-planned economies?

Accepted Answer

A)   Society relies more upon prices to allocate resources when the economy is centrally-planned than when it is market-based.
B)   The self-interest of households is reflected more fully in the outcome of a centrally-planned economy than in the outcome of a market economy.
C)   Government plays a larger role in the economic affairs of a market economy than in the economic affairs of a centrally-planned economy.
D)   None of the above are correct.E) B) and D)
F) A) and D)

Question 17

Irregular fluctuations in economic activity are known as the

Accepted Answer

A)   business cycle.
B)   broken window fallacy.
C)   tradeoff between inflation and unemployment.
D)   ten principles of economics.E) All of the above
F) B) and D)

Question 18

Penny is piano teacher and Dan is a tile layer.If Penny teaches Dan's daughter to play the piano in exchange for Dan tiling her kitchen floor,

Accepted Answer

A)   only Penny is made better off by trade.
B)   only Dan is made better off by trade.
C)   both Penny and Dan are made better off by trade.
D)   neither Penny nor Dan are made better off by trade.E) B) and D)
F) C) and D)

Question 19

Efficiency

Accepted Answer

A)   and equality both refer to how much a society can produce with its resources.
B)   and equality both refer to how fairly the benefits from using resources are distributed between members of a society.
C)   refers to how much a society can produce with its resources.Equality refers to how evenly the benefits from using resources are distributed among members of society.
D)   refers to how evenly the benefits from using resources are distributed between members of society.Equality refers to how much a society can produce with its resourcesE) A) and B)
F) All of the above C

Question 20

In which of the following decades was there both high inflation and rapid money supply growth in the US?

Accepted Answer

A)   the 1970's and the 1990's
B)   the 1970's but not the 1990's
C)   the 1990's but not the 1970's
D)   neither the 1970's nor the 1990'sE) A) and B)
F) All of the above

Exam 1: Ten Principles of Economics

Trade can make everyone better off except in the case where one person is better at doing everything.

Correct AnswerverifiedShow Answer

In the early 1920s,

Correct AnswerverifiedShow Answer

For which of the following problems can well-designed public policy enhance economic efficiency?

Correct AnswerverifiedShow Answer

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke.This is an example of

Correct AnswerverifiedShow Answer

Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time.

Correct AnswerverifiedShow Answer

High-school athletes who skip college to become professional athletes

Correct AnswerverifiedShow Answer

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it,the regulations come at the cost of reducing the incomes of the regulated firms' owners,workers,and customers.This statement illustrates the principle that

Correct AnswerverifiedShow Answer

An increase in the overall level of prices in an economy is referred to as

Correct AnswerverifiedShow Answer

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

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 AnswerverifiedC

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

Correct AnswerverifiedShow Answer

Under what conditions might government intervention in a market economy improve the economy's performance?

Correct AnswerverifiedIf there is a market failure,such as an ...View AnswerShow Answer

The ability of an individual to own and exercise control over scarce resources is called

Correct AnswerverifiedB

Prior to the collapse of communism,communist countries worked on the premise that economic well-being could be best attained by

Correct AnswerverifiedShow Answer

The term "invisible hand" was coined by

Correct AnswerverifiedShow Answer

Which of the following statements best characterizes a basic difference between market economies and centrally-planned economies?

Correct AnswerverifiedShow Answer

Irregular fluctuations in economic activity are known as the

Correct AnswerverifiedShow Answer

Penny is piano teacher and Dan is a tile layer.If Penny teaches Dan's daughter to play the piano in exchange for Dan tiling her kitchen floor,

Correct AnswerverifiedShow Answer

Efficiency

Correct AnswerverifiedC

In which of the following decades was there both high inflation and rapid money supply growth in the US?

Correct AnswerverifiedShow Answer

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C

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If there is a market failure,such as an ...
View Answer

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B

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C

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