Question 1

Equality means distributing society's resources in the most efficient manner.

Accepted Answer

A) True 
 B)False

Question 2

Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information it follows that

Accepted Answer

A)   they should leave the price at $10.
B)   it does not matter if they charge $10 or $15.
C)   they would do better charging $15 than $10.
D)   they should raise the price even more.E) B) and C)
F) All of the above

Question 3

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 4

A rational decision maker takes an action if and only if

Accepted Answer

A)   the average benefit of the action exceeds the average cost.
B)   the average cost of the action exceeds the average benefit.
C)   the marginal benefit of the action exceeds the marginal cost.
D)   the marginal cost of the action exceeds the marginal benefit.E) A) and C)
F) B) and C)

Question 5

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Accepted Answer

A)   Yes, because cutting hair is profitable.
B)   No, because he may not be able to sell more services.
C)   It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients.
D)   It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.E) A) and D)
F) C) and D)

Question 6

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. 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 activity.E) A) and D)
F) A) and B)

Question 7

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 D)
F) B) and C)

Question 8

What you give up to obtain an item is called your

Accepted Answer

A)   opportunity cost.
B)   explicit cost.
C)   monetary cost.
D)   direct cost.E) B) and C)
F) A) and B)

Question 9

Variations in the standard of living across countries are due almost entirely to differences in each nation's total output of goods and services.

Accepted Answer

A) True 
 B)False

Question 10

The irregular and largely unpredictable fluctuations in economic activity are called

Accepted Answer

A)   market failure.
B)   business cycle.
C)   inflation.
D)   unemployment.E) B) and C)
F) All of the above

Question 11

Government policies designed to equalize the distribution of economic well-being include

Accepted Answer

A)   (i)  only
B)   (ii)  only
C)   (i)  and (ii)  only
D)   (i) , (ii) , and (iii) E) All of the above
F) None of the above

Question 12

Scenario 1-6
It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors.
-Refer to Scenario 1-6. A customer is willing to pay $60 for the 601st heart rate monitor. Should the company produce and sell it? Explain.

Accepted Answer

No, because the marg...

Question 13

Rational people make decisions "at the margin" by comparing

Accepted Answer

A)   average costs and benefits.
B)   total costs and benefits.
C)   additional costs and benefits.
D)   opportunity costs and benefits.E) A) and D)
F) None of the above

Question 14

In a market economy,

Accepted Answer

A)   households decide which firms to work for and what to buy with their incomes.
B)   firms decide whom to hire and what to make.
C)   a central planner makes decisions about production and consumption.
D)   Both a and b are correct.E) None of the above
F) B) and C)

Question 15

The word "economy" comes from the Greek word oikonomos, which means

Accepted Answer

A)   "environment."
B)   "production."
C)   "one who manages a household."
D)   "one who makes decisions."E) B) and C)
F) B) and D)

Question 16

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Accepted Answer

A)   is a basic principle regarding individual decisionmaking.
B)   amounts to a denial of one of the basic principles regarding interactions among people.
C)   supports the idea that the "invisible hand" should guide economic activity.
D)   was promoted by the economist Adam Smith in a well-known 1776 book.E) B) and C)
F) None of the above

Question 17

Inflation is the primary determinant of a country's living standards.

Accepted Answer

A) True 
 B)False

Question 18

Market power refers to the

Accepted Answer

A)   power of a single person or small group to influence market prices.
B)   ability of a person or small group to successfully market new products.
C)   power of the government to regulate a market.
D)   importance of a certain market in relation to the overall economy.E) None of the above
F) B) and D)

Question 19

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

Question 20

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) B) and D)
F) A) and B)

Exam 1: Ten Principles of Economics

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

Correct Answer
verified

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

Correct Answer
verified

Equality means distributing society's resources in the most efficient manner.

Correct Answer
verified

Variations in the standard of living across countries are due almost entirely to differences in each nation's total output of goods and services.

Correct Answer
verified

In a market economy,

Correct Answer
verified

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

Correct Answer
verified

Rational people make decisions "at the margin" by comparing

Correct Answer
verified

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Correct Answer
verified

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 Answer
verified

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Correct Answer
verified

Inflation is the primary determinant of a country's living standards.

Correct Answer
verified

Correct Answer
verified
No, because the marg...
View Answer

Market power refers to the

Correct Answer
verified

Government policies designed to equalize the distribution of economic well-being include

Correct Answer
verified

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate?

Correct Answer
verified

The word "economy" comes from the Greek word oikonomos, which means

Correct Answer
verified

The irregular and largely unpredictable fluctuations in economic activity are called

Correct Answer
verified

What you give up to obtain an item is called your

Correct Answer
verified

Correct Answer
verified

A rational decision maker takes an action if and only if

Correct Answer
verified

Exam 1: Ten Principles of Economics

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Equality means distributing society's resources in the most efficient manner.

Correct AnswerverifiedShow Answer

Variations in the standard of living across countries are due almost entirely to differences in each nation's total output of goods and services.

Correct AnswerverifiedShow Answer

In a market economy,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Rational people make decisions "at the margin" by comparing

Correct AnswerverifiedShow Answer

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

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

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Correct AnswerverifiedShow Answer

Inflation is the primary determinant of a country's living standards.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNo, because the marg...View AnswerShow Answer

Market power refers to the

Correct AnswerverifiedShow Answer

Government policies designed to equalize the distribution of economic well-being include

Correct AnswerverifiedShow Answer

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate?

Correct AnswerverifiedShow Answer

The word "economy" comes from the Greek word oikonomos, which means

Correct AnswerverifiedShow Answer

The irregular and largely unpredictable fluctuations in economic activity are called

Correct AnswerverifiedShow Answer

What you give up to obtain an item is called your

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A rational decision maker takes an action if and only if

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
No, because the marg...
View 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