Question 1

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

Accepted Answer

They reduce the reward for wor...

Question 2

In most societies, resources are allocated by

Accepted Answer

A)  a single central planner.
B)  a small number of central planners.
C)  those firms that use resources to provide goods and services.
D)  the combined actions of millions of households and firms.E) B) and D)
F) A) and B)

Question 3

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

Accepted Answer

A)  Equality is increased and efficiency is increased.
B)  Equality is increased and efficiency is decreased.
C)  Equality is decreased and efficiency is increased.
D)  Equality is decreased and efficiency is decreased.E) B) and C)
F) All of the above

Question 4

If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be irrational for the railroad to allow any passenger to ride for less than $75.

Accepted Answer

A) True 
 B)False

Question 5

When computing the opportunity cost of attending a professional football game as a spectator, you should include

Accepted Answer

A)  the price you pay for the ticket and the value of your time.
B)  the price you pay for the ticket, but not the value of your time.
C)  the value of your time, but not the price you pay for the ticket.
D)  neither the price of the ticket nor the value of your time.E) None of the above
F) All of the above

Question 6

Market failure refers to a situation in which the market does not allocate resources efficiently.

Accepted Answer

A) True 
 B)False

Question 7

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

Accepted Answer

A)  trade can make everyone better off.
B)  rational people think at the margin.
C)  people face tradeoffs.
D)  people respond to incentives.E) B) and D)
F) None of the above

Question 8

Give an example of government intervention that is intended to reduce an externality.

Accepted Answer

Laws that restrict t...

Question 9

With careful planning, we can usually get something that we like without having to give up something else that we like.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an example of an externality?

Accepted Answer

A)  Zima purchases a new pants suit.
B)  Malik's bird chirps loudly during the night, waking his neighbors.
C)  Roberto sells a book to Kevin, who uses the book and then gives it to Lee as a gift.
D)  Kalene watches a scary movie.E) B) and C)
F) A) and D)

Question 11

The phenomenon of scarcity stems from the fact that

Accepted Answer

A)  most economies' production methods are not very good.
B)  in most economies, wealthy people consume disproportionate quantities of goods and services.
C)  governments restrict production of too many goods and services.
D)  resources are limited.E) A) and B)
F) None of the above

Question 12

Scarcity means that there is less of a good or resource available than people wish to have.

Accepted Answer

A) True 
 B)False

Question 13

In a market economy, who makes the decisions that guide most economic activity?

Accepted Answer

A)  Firms only
B)  Households only
C)  Firms and households
D)  GovernmentE) All of the above
F) B) and D)

Question 14

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

Question 15

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Accepted Answer

A) True 
 B)False

Question 16

Invisible hand is a term used by the economist ______ in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.

Accepted Answer

The answer of Invisible hand is a term used by...

Question 17

Give an example of a trade-off faced by society.

Accepted Answer

Efficiency and equality; a cle...

Question 18

Which of the following is the most correct statement about the relationship between inflation and unemployment?

Accepted Answer

A)  In the short run, falling inflation is associated with falling unemployment.
B)  In the short run, falling inflation is associated with rising unemployment.
C)  In the long run, falling inflation is associated with falling unemployment.
D)  In the long run, falling inflation is associated with rising unemployment.E) None of the above
F) A) and B)

Question 19

If China decides to trade with France, we know that

Accepted Answer

A)  France will benefit, but trade with a less developed country could not benefit China.
B)  it will not benefit France because workers in China are more productive.
C)  France and China can both benefit.
D)  it will not benefit either country because their cultural differences are too vast.E) A) and B)
F) B) and D)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

Correct AnswerverifiedThey reduce the reward for wor...View AnswerShow Answer

If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be irrational for the railroad to allow any passenger to ride for less than $75.

Correct AnswerverifiedShow Answer

Give an example of a trade-off faced by society.

Correct AnswerverifiedEfficiency and equality; a cle...View AnswerShow Answer

Market failure refers to a situation in which the market does not allocate resources efficiently.

Correct AnswerverifiedShow Answer

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Correct AnswerverifiedShow Answer

Which of the following is the most correct statement about the relationship between inflation and unemployment?

Correct AnswerverifiedShow Answer

Scarcity means that there is less of a good or resource available than people wish to have.

Correct AnswerverifiedShow Answer

In most societies, resources are allocated by

Correct AnswerverifiedShow Answer

In a market economy, who makes the decisions that guide most economic activity?

Correct AnswerverifiedShow Answer

If China decides to trade with France, we know that

Correct AnswerverifiedShow Answer

Which of the following is an example of an externality?

Correct AnswerverifiedShow Answer

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

Correct AnswerverifiedShow Answer

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

With careful planning, we can usually get something that we like without having to give up something else that we like.

Correct AnswerverifiedShow Answer

When computing the opportunity cost of attending a professional football game as a spectator, you should include

Correct AnswerverifiedShow Answer

Invisible hand is a term used by the economist ______ in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.

Correct AnswerverifiedShow Answer

The phenomenon of scarcity stems from the fact that

Correct AnswerverifiedShow Answer

Give an example of government intervention that is intended to reduce an externality.

Correct AnswerverifiedLaws that restrict t...View AnswerShow Answer

Correct Answer
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They reduce the reward for wor...
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Efficiency and equality; a cle...
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Laws that restrict t...
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