Question 1

Which of the following is an example of an externality?

Accepted Answer

A)   Annie purchases a new dress.
B)   Antonio's dog barks loudly during the night, waking his neighbors.
C)   Harold sells a book to Cathy, who reads the book and then gives it to James as a gift.
D)   Gloria watches a scary movie.E) None of the above
F) A) and B)

Question 2

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Accepted Answer

A)   the $60 she earns working.
B)   the $60 minus the enjoyment she would have received from going to the park.
C)   the enjoyment she would have received had she gone to the park.
D)   nothing, since she would have received less than $60 worth of enjoyment from going to the park.E) None of the above
F) All of the above

Question 3

Germany could have avoided the high inflation that it experienced in the 1920s by

Accepted Answer

A)   not directing so many of its resources toward preparation for World War II.
B)   not increasing taxes so much on the German middle class.
C)   not allowing the quantity of money to increase so rapidly.
D)   using government policies to stimulate the economy more so than what was done.E) None of the above
F) C) and D)

Question 4

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor.

Accepted Answer

A)   Both senators' arguments are primarily about equality.
B)   Both senators' arguments are primarily about efficiency.
C)   Senator Jackson's argument is primarily about equality, while Senator Feldman's argument is primarily about efficiency.
D)   Senator Jackson's argument is primarily about efficiency, while Senator Feldman's argument is primarily about equality.E) C) and D)
F) A) and B)

Question 5

Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper. This scenario is an example of which principle of economics?

Accepted Answer

A)   Trade can make everyone better off.
B)   Markets are usually a good way to organize economic activity.
C)   Governments can sometimes improve market outcomes.
D)   Prices rise when the government prints too much money.E) A) and B)
F) B) and D)

Question 6

Katie is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $2,500 and replacing the roof will cost her $9,000. Katie expects the new carpeting to increase the value of her house by $3,000 and the new roof to increase the value of her house by $7,000.

Accepted Answer

A)   She should make both improvements to her house.
B)   She should replace the carpeting but not replace the roof.
C)   She should replace the roof but not replace the carpeting.
D)   She should not make either improvement to her house.E) All of the above
F) None of the above

Question 7

For which of the following individuals would the opportunity cost of going to college be highest?

Accepted Answer

A)   a promising young mathematician who will command a high salary once she earns her college degree
B)   a student with average grades who has never held a job
C)   a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree
D)   a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketballE) B) and C)
F) A) and D)

Question 8

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

Question 9

Government policies designed to equalize the distribution of economic well-being include
I.the welfare system
Ii. unemployment insurance
Iii. progressive income tax

Accepted Answer

A)   i)  only
B)   ii)  only
C)   i)  and ii)  only
D)   i) , ii) , and iii) E) A) and B)
F) B) and C)

Question 10

Rick buys a 1966 Mustang for $3,000, planning to restore and sell the car. He goes on to spend $9,000 restoring the car. At this point he can sell the car for $10,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $13,000. Rick should

Accepted Answer

A)   complete the repairs and sell the car for $13,000.
B)   sell the car now for $10,000.
C)   never try such an expensive project again.
D)   be indifferent between i)  selling the car now and ii)  replacing the engine and then selling it.E) B) and C)
F) A) and B)

Question 11

Which of the following is an example of something economists study?

Accepted Answer

A)   Mitch chooses to work overtime to earn extra income for his family.
B)   Megan sells her physics textbook from last semester to her roommate for half the price of a new textbook.
C)   The unemployment rate in the United States has fallen by two percentage points in the last few years.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 12

The "invisible hand" works to promote general well­being in the economy primarily through

Accepted Answer

A)   government intervention.
B)   the political process.
C)   people's pursuit of self­interest.
D)   altruism.E) A) and C)
F) All of the above

Question 13

A rational decision maker takes an action only if the

Accepted Answer

A)   marginal benefit is less than the marginal cost.
B)   marginal benefit is greater than the marginal cost.
C)   average benefit is greater than the average cost.
D)   marginal benefit is greater than both the average cost and the marginal cost.E) A) and C)
F) B) and D)

Question 14

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

Accepted Answer

A) True 
 B)False

Question 15

To promote good economic outcomes, policymakers should strive to enact policies that

Accepted Answer

A)   enhance productivity.
B)   enhance individuals' market power.
C)   result in a rapidly-growing quantity of money.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 16

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) A) and C)

Question 17

What are the two short­run effects of increasing the quantity of nation's money?

Accepted Answer

Higher inf...

Question 18

You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should

Accepted Answer

A)   compare the total cost of your education to the total benefits of your education.
B)   compare the total cost of your education to the benefits of staying one more semester.
C)   compare the cost of staying one more semester to the benefits of staying one more semester.
D)   compare the total benefits of your education to the cost of staying one more semester.E) B) and D)
F) A) and D)

Question 19

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) B) and D)
F) B) and C)

Question 20

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Accepted Answer

A)   to produce good quality products so that society would benefit from the resources used
B)   to conserve on costs, so as to maintain efficiency in the economy
C)   to produce enough to meet the output target, without regard for quality or cost
D)   to produce those products that society desires mostE) B) and D)
F) None of the above

Exam 1: Ten Principles of Economics

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor.

Correct Answer
verified

Correct Answer
verified

For which of the following individuals would the opportunity cost of going to college be highest?

Correct Answer
verified

Government policies designed to equalize the distribution of economic well-being include I.the welfare system Ii. unemployment insurance Iii. progressive income tax

Correct Answer
verified

A rational decision maker takes an action only if the

Correct Answer
verified

Which of the following is an example of an externality?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

What are the two shortrun effects of increasing the quantity of nation's money?

Correct Answer
verified
Higher inf...
View Answer

You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should

Correct Answer
verified

Correct Answer
verified

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 Answer
verified

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Correct Answer
verified

Which of the following is an example of something economists study?

Correct Answer
verified

The "invisible hand" works to promote general wellbeing in the economy primarily through

Correct Answer
verified

Correct Answer
verified

To promote good economic outcomes, policymakers should strive to enact policies that

Correct Answer
verified

Germany could have avoided the high inflation that it experienced in the 1920s by

Correct Answer
verified

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Correct Answer
verified

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

Correct Answer
verified

Exam 1: Ten Principles of Economics

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For which of the following individuals would the opportunity cost of going to college be highest?

Correct AnswerverifiedShow Answer

Government policies designed to equalize the distribution of economic well-being include I.the welfare system Ii. unemployment insurance Iii. progressive income tax

Correct AnswerverifiedShow Answer

A rational decision maker takes an action only if the

Correct AnswerverifiedShow Answer

Which of the following is an example of an externality?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What are the two short­run effects of increasing the quantity of nation's money?

Correct AnswerverifiedHigher inf...View AnswerShow Answer

You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should

Correct AnswerverifiedShow Answer

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

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Correct AnswerverifiedShow Answer

Which of the following is an example of something economists study?

Correct AnswerverifiedShow Answer

The "invisible hand" works to promote general well­being in the economy primarily through

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To promote good economic outcomes, policymakers should strive to enact policies that

Correct AnswerverifiedShow Answer

Germany could have avoided the high inflation that it experienced in the 1920s by

Correct AnswerverifiedShow Answer

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Correct AnswerverifiedShow Answer

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

What are the two shortrun effects of increasing the quantity of nation's money?

Correct Answer
verified
Higher inf...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The "invisible hand" works to promote general wellbeing in the economy primarily through

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified