Question 1

Which of the following phrases best captures the notion of efficiency?

Accepted Answer

A)   absolute fairness
B)   equal distribution
C)   minimum waste
D)   equitable outcomeE) A) and C)
F) A) and B)

Question 2

A direct or positive relationship exists between a country's

Accepted Answer

A)   productivity and its standard of living.
B)   amount of government spending and its productivity.
C)   total population and its average citizen's income.
D)   rate of population growth and the extent of its trade with other countries.E) C) and D)
F) All of the above

Question 3

To raise productivity,policymakers could

Accepted Answer

A)   increase spending on education.
B)   provide tax credits to firms for capital improvements.
C)   fund research and development.
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 4

A company that formerly produced software went out of business because too many potential customers bought illegally-produced copies of the software 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 C)
F) B) and D)

Question 5

If wages for accountants rose,then accountants' leisure time would have a lower opportunity cost.

Accepted Answer

A) True 
 B)False

Question 6

It once took 90 percent of our population to grow our food.It now takes only 3 percent of the population to grow our food.Which of the following statements is true?

Accepted Answer

A)   This loss of jobs has been detrimental to our economy.
B)   The government should provide subsidies to encourage more people to become farmers.
C)   This reduction in the number of farmers explains the increase in the price of food.
D)   This is progress because freed-up labor that is used to produce other goods.E) None of the above
F) A) and C)

Question 7

The invisible hand works to promote general well-being in the economy primarily through

Accepted Answer

A)   government intervention.
B)   the political process.
C)   people's pursuit of self-interest.
D)   altruism.E) None of the above
F) C) and D)

Question 8

The economy of the former Soviet Union is best described as a

Accepted Answer

A)   primitive economy.
B)   market economy.
C)   hybrid economy.
D)   centrally-planned economy.E) B) and D)
F) C) and D)

Question 9

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

Question 10

When you calculate your true costs of going to college,what portion of your room-and-board expenses should be included?

Accepted Answer

A)   Your full room-and-board expenses should always be included.
B)   None of your room-and-board expenses should ever be included.
C)   You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college.
D)   You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college.E) A) and B)
F) B) and D)

Question 11

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Accepted Answer

A) True 
 B)False

Question 12

One advantage market economies have over centrally-planned economies is that market economies

Accepted Answer

A)   provide an equal distribution of goods and services to households.
B)   establish a significant role for government in the allocation of resources.
C)   solve the problem of scarcity.
D)   are more efficient.E) A) and D)
F) All of the above

Question 13

Bridget drinks three sodas during a particular day.The marginal benefit she enjoys from drinking the third soda

Accepted Answer

A)   can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas.
B)   determines Bridget's willingness to pay for the third soda.
C)   is likely different from the marginal benefit provided to Bridget by the second soda.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 14

A friend of yours asks you why market prices are better than government-determined prices.Because you understand economic principles,you say that market-determined prices are better because they generally reflect

Accepted Answer

A)   the value of a good to society,but not the cost of making it.
B)   the cost of making a good to society,but not its value.
C)   both the value of a good to society and the cost of making it.
D)   neither the value of a good to society nor the cost of making it.E) A) and C)
F) A) and B)

Question 15

Suppose the state of Illinois passes a law that bans smoking in restaurants.As a result,residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there.Which of the following principles does this best illustrate?

Accepted Answer

A)   People respond to incentives
B)   Rational people think at the margin
C)   Trade can make everyone better off
D)   Markets are usually a good way to organize economic activityE) B) and D)
F) C) and D)

Question 16

Prices direct economic activity in a market economy by

Accepted Answer

A)   influencing the actions of buyers and sellers.
B)   reducing scarcity of the goods and services produced.
C)   eliminating the need for government intervention.
D)   allocating goods and services in the most equitable way.E) A) and C)
F) A) and B)

Question 17

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $40,the hotel manager should rent one of the empty rooms only if a customer is willing to pay

Accepted Answer

A)   more than $40,as the average benefit will exceed the marginal cost.
B)   more than $40,as the marginal benefit will exceed the marginal cost.
C)   more than $80,as the average benefit will exceed the marginal cost.
D)   more than $80,as the marginal benefit will exceed the marginal cost.E) C) and D)
F) B) and C)

Question 18

Economists are particularly adept at understanding that people respond to

Accepted Answer

A)   laws.
B)   incentives.
C)   punishments more than rewards.
D)   rewards more than punishments.E) A) and C)
F) B) and C)

Question 19

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.He has decided to take the job.For him,the marginal

Accepted Answer

A)   cost of leaving was greater than the marginal benefit.
B)   benefit of leaving was greater than the marginal cost.
C)   benefit of teaching was greater than the marginal cost.
D)   All of the above are correct.E) B) and C)
F) A) and C)

Question 20

Economics is the study of how evenly goods and services are distributed within society.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.He has decided to take the job.For him,the marginal

Correct AnswerverifiedShow Answer

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight.If the marginal cost of operating one room for one night is $40,the hotel manager should rent one of the empty rooms only if a customer is willing to pay

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economics is the study of how evenly goods and services are distributed within society.

Correct AnswerverifiedShow Answer

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Correct AnswerverifiedShow Answer

The economy of the former Soviet Union is best described as a

Correct AnswerverifiedShow Answer

To raise productivity,policymakers could

Correct AnswerverifiedShow Answer

Which of the following phrases best captures the notion of efficiency?

Correct AnswerverifiedShow Answer

It once took 90 percent of our population to grow our food.It now takes only 3 percent of the population to grow our food.Which of the following statements is true?

Correct AnswerverifiedShow Answer

One advantage market economies have over centrally-planned economies is that market economies

Correct AnswerverifiedShow Answer

Economists are particularly adept at understanding that people respond to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A direct or positive relationship exists between a country's

Correct AnswerverifiedShow Answer

A friend of yours asks you why market prices are better than government-determined prices.Because you understand economic principles,you say that market-determined prices are better because they generally reflect

Correct AnswerverifiedShow Answer

When you calculate your true costs of going to college,what portion of your room-and-board expenses should be included?

Correct AnswerverifiedShow Answer

Suppose the state of Illinois passes a law that bans smoking in restaurants.As a result,residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there.Which of the following principles does this best illustrate?

Correct AnswerverifiedShow Answer

Bridget drinks three sodas during a particular day.The marginal benefit she enjoys from drinking the third soda

Correct AnswerverifiedShow Answer

If wages for accountants rose,then accountants' leisure time would have a lower opportunity cost.

Correct AnswerverifiedShow Answer

Prices direct economic activity in a market economy by

Correct AnswerverifiedShow Answer

The invisible hand works to promote general well-being in the economy primarily through

Correct AnswerverifiedShow Answer

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