Question 1

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 2

Which of the following is correct?

Accepted Answer

A)  The word economy comes from the Greek word for "rational thinker."
B)  Economists study the management of scarce resources.
C)  Because economists believe that people pursue their best interests, they are not interested in how people interact.
D)  All of the above are correct.E) A) and B)
F) B) and D)

Question 3

How does the study of economics depend upon the phenomenon of scarcity?

Accepted Answer

Because economics is the study of how so...

Question 4

Market power and externalities are two possible causes of market failure.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

In the broadest sense, economics is the study of

Accepted Answer

A)  production methods.
B)  how society manages its scarce resources.
C)  how households decide who performs which tasks.
D)  the interaction of business and government.E) None of the above
F) All of the above

Question 7

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

Question 8

You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

Accepted Answer

A)  both the cost of driving the first 800 miles and the next 15 miles.
B)  the cost of driving the first 800 miles, but not the cost of driving the next 15 miles.
C)  the cost of driving the next 15 miles, but not the cost of driving the first 800 miles.
D)  neither the cost of driving the first 800 miles nor the cost of driving the next 15 miles.E) None of the above
F) All of the above

Question 9

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

Question 10

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) A) and B)
F) A) and C)

Question 11

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

Accepted Answer

A) True 
 B)False

Question 12

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Accepted Answer

A)  only Dale is made better off by trade.
B)  only Terrence is made better off by trade.
C)  both Dale and Terrence are made better off by trade.
D)  neither Dale nor Terrence are made better off by trade.E) B) and D)
F) All of the above

Question 13

Both the production of goods and services and the unemployment rate are used to measure

Accepted Answer

A)  the business cycle.
B)  productivity.
C)  the interest rate.
D)  inflation.E) A) and D)
F) All of the above

Question 14

The "invisible hand" refers to

Accepted Answer

A)  how central planners made economic decisions.
B)  how the decisions of households and firms lead to desirable market outcomes.
C)  the control that large firms have over the economy.
D)  government regulations without which the economy would be less efficient.E) A) and B)
F) C) and D)

Question 15

Economists use the term ______ to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

Accepted Answer

The answer of Economists use the term ______ to refer...

Question 16

A certain state legislature is considering an increase in the state gasoline tax. Representative Campbell argues that an increase in the gasoline tax would harm low-income drivers disproportionately. Representative Richards responds by saying that low-income drivers own smaller cars that use less gasoline, and that low-income drivers therefore would not be harmed disproportionately.

Accepted Answer

A)  Representative Campbell's argument is based primarily on efficiency, while Representative Richards' argument is based primarily on equality.
B)  Representative Campbell's argument is based primarily on equality, while Representative Richards' argument is based primarily on efficiency.
C)  Both representatives' arguments are based primarily on efficiency.
D)  Both representatives' arguments are based primarily on equality.E) A) and B)
F) A) and C)

Question 17

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) None of the above

Question 18

A tradeoff exists between a clean environment and a higher level of income in that

Accepted Answer

A)  studies show that individuals with higher levels of income pollute less than low-income individuals.
B)  efforts to reduce pollution typically are not completely successful.
C)  laws that reduce pollution raise costs of production and reduce incomes.
D)  employing individuals to clean up pollution causes increases in employment and income.E) A) and D)
F) A) and B)

Question 19

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A)  command economy.
B)  centrally-planned economy.
C)  market economy.
D)  All of the above are correct.E) B) and C)
F) A) and C)

Question 20

An example of an externality is the impact of

Accepted Answer

A)  bad weather on the income of farmers.
B)  the personal income tax on a person's ability to purchase goods and services.
C)  pollution from a factory on the health of people in the vicinity of the factory.
D)  increases in health care costs on the health of individuals in society.E) C) and D)
F) A) and D)

Exam 1: Ten Principles of Economics

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 Answer
verified
Efficiency is the property of society ge...
View Answer

Market power and externalities are two possible causes of market failure.

Correct Answer
verified

You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

Correct Answer
verified

The term "invisible hand" was coined by

Correct Answer
verified

The "invisible hand" refers to

Correct Answer
verified

Economists use the term ______ to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

Correct Answer
verified

How does the study of economics depend upon the phenomenon of scarcity?

Correct Answer
verified
Because economics is the study of how so...
View Answer

Both the production of goods and services and the unemployment rate are used to measure

Correct Answer
verified

In the broadest sense, economics is the study of

Correct Answer
verified

The decisions of firms and households are guided by prices and self-interest in a

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

An example of an externality is the impact of

Correct Answer
verified

High-school athletes who skip college to become professional athletes

Correct Answer
verified

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

Correct Answer
verified

Correct Answer
verified

A tradeoff exists between a clean environment and a higher level of income in that

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Correct Answer
verified

Exam 1: Ten Principles of Economics

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

Market power and externalities are two possible causes of market failure.

Correct AnswerverifiedShow Answer

You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

Correct AnswerverifiedShow Answer

The term "invisible hand" was coined by

Correct AnswerverifiedShow Answer

The "invisible hand" refers to

Correct AnswerverifiedShow Answer

Economists use the term ______ to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

Correct AnswerverifiedShow Answer

How does the study of economics depend upon the phenomenon of scarcity?

Correct AnswerverifiedBecause economics is the study of how so...View AnswerShow Answer

Both the production of goods and services and the unemployment rate are used to measure

Correct AnswerverifiedShow Answer

In the broadest sense, economics is the study of

Correct AnswerverifiedShow Answer

The decisions of firms and households are guided by prices and self-interest in a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An example of an externality is the impact of

Correct AnswerverifiedShow Answer

High-school athletes who skip college to become professional athletes

Correct AnswerverifiedShow Answer

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A tradeoff exists between a clean environment and a higher level of income in that

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Correct AnswerverifiedShow Answer

Correct Answer
verified
Efficiency is the property of society ge...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Because economics is the study of how so...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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