Question 1

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) None of the above

Question 2

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

Question 3

Causes of market failure include

Accepted Answer

A)   externalities and market power.
B)   market power and incorrect forecasts of consumer demand.
C)   externalities and foreign competition.
D)   incorrect forecasts of consumer demand and foreign competition.E) B) and C)
F) None of the above

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

Large or persistent inflation is almost always caused by

Accepted Answer

A)   excessive government spending.
B)   excessive growth in the quantity of money.
C)   foreign competition.
D)   higher-than-normal levels of productivity.E) A) and B)
F) B) and C)

Question 7

Pete receives $50 as a birthday gift.In deciding how to spend the money,he narrows his options down to four choices: Option A,Option B,Option C,and Option D.Each option costs $50.Finally he decides on Option B.The opportunity cost of this decision is

Accepted Answer

A)   the value to Pete of the option he would have chosen had Option B not been available.
B)   the value to Pete of Options A,C and D combined.
C)   $50.
D)   $100.E) B) and C)
F) A) and D)

Question 8

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Accepted Answer

A)   inflation
B)   unemployment
C)   both inflation and unemployment
D)   neither inflation nor unemploymentE) A) and C)
F) All of the above

Question 9

Communist countries worked under the premise that

Accepted Answer

A)   markets were the best way to organize economic activity.
B)   central planners were in the best position to determine the allocation of scarce resources in the economy.
C)   households and firms,guided by an "invisible hand," could achieve the most efficient allocation of scarce resources.
D)   allowing the market forces of supply and demand to operate with no government intervention would acheive the most efficient allocation of scarce resources.E) A) and B)
F) C) and D)

Question 10

One effect of the government-imposed seat belt law in the U.S.has been

Accepted Answer

A)   a dramatic decrease in the number of pedestrian deaths.
B)   safer driving.
C)   an increase in the number of accidents.
D)   a dramatic decrease in the number of driver deaths.E) A) and B)
F) A) and D)

Question 11

When calculating the cost of college,which of the following should you probably include?

Accepted Answer

A)   The cost of your meal plan for the cafeteria.
B)   The cost of books required for college classes
C)   The income you earn at your part-time job.
D)   The cost of living in the dormitory.E) B) and C)
F) None of the above

Question 12

When a single person (or small group) has the ability to influence market prices,there is

Accepted Answer

A)   competition.
B)   market power.
C)   an externality.
D)   a lack of property rights.E) A) and B)
F) None of the above

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The term market failure refers to

Accepted Answer

A)   a situation in which the market on its own fails to allocate resources efficiently.
B)   an unsuccessful advertising campaign which reduces demand for a product.
C)   a situation in which competition among firms becomes ruthless.
D)   a firm which is forced out of business because of losses.E) B) and C)
F) C) and D)

Question 15

When calculating the cost of college,which of the following should you probably not include?

Accepted Answer

A)   The cost of tuition
B)   The cost of books required for college classes
C)   The income you would have earned had you not gone to college
D)   The cost of rent for your off-campus apartment.E) B) and D)
F) C) and D)

Question 16

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

Accepted Answer

A)   to promote efficiency
B)   to promote equality
C)   to enforce property rights
D)   to protect an industry from foreign competitionE) None of the above
F) B) and D)

Question 17

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 C)
F) All of the above

Question 20

Canada can benefit from trade

Accepted Answer

A)   only with nations that can produce goods Canada cannot produce.
B)   only with less developed nations.
C)   only with nations outside of North America.
D)   with any nation.E) A) and B)
F) A) and C)

Exam 1: Ten Principles of Economics

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Correct Answer
verified

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

Correct Answer
verified

When calculating the cost of college,which of the following should you probably not include?

Correct Answer
verified

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Correct Answer
verified

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

Correct Answer
verified

Canada can benefit from trade

Correct Answer
verified

Causes of market failure include

Correct Answer
verified

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

Correct Answer
verified

When calculating the cost of college,which of the following should you probably include?

Correct Answer
verified

Correct Answer
verified

Pete receives $50 as a birthday gift.In deciding how to spend the money,he narrows his options down to four choices: Option A,Option B,Option C,and Option D.Each option costs $50.Finally he decides on Option B.The opportunity cost of this decision is

Correct Answer
verified

The term market failure refers to

Correct Answer
verified

Communist countries worked under the premise that

Correct Answer
verified

When a single person (or small group) has the ability to influence market prices,there is

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

One effect of the government-imposed seat belt law in the U.S.has been

Correct Answer
verified

High-school athletes who skip college to become professional athletes

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

Large or persistent inflation is almost always caused by

Correct Answer
verified

Exam 1: Ten Principles of Economics

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When calculating the cost of college,which of the following should you probably not include?

Correct AnswerverifiedShow Answer

Which of the following would a permanent increase in the growth rate of the money supply change permanently?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Canada can benefit from trade

Correct AnswerverifiedShow Answer

Causes of market failure include

Correct AnswerverifiedShow Answer

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

Correct AnswerverifiedShow Answer

When calculating the cost of college,which of the following should you probably include?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Pete receives $50 as a birthday gift.In deciding how to spend the money,he narrows his options down to four choices: Option A,Option B,Option C,and Option D.Each option costs $50.Finally he decides on Option B.The opportunity cost of this decision is

Correct AnswerverifiedShow Answer

The term market failure refers to

Correct AnswerverifiedShow Answer

Communist countries worked under the premise that

Correct AnswerverifiedShow Answer

When a single person (or small group) has the ability to influence market prices,there is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One effect of the government-imposed seat belt law in the U.S.has been

Correct AnswerverifiedShow Answer

High-school athletes who skip college to become professional athletes

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

Large or persistent inflation is almost always caused by

Correct AnswerverifiedShow Answer

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