Question 1

Catherine buys and sells real estate.Two weeks ago,she paid $300,000 for a house on Pine Street,intending to spend $50,000 on repairs and then sell the house for $400,000.Last week,the city government announced a plan to build a new landfill on Pine Street just down the street from the house Catherine purchased.As a result of the city's announced plan,Catherine is weighing two alternatives: She can go ahead with the $50,000 in repairs and then sell the house for $290,000,or she can forgo the repairs and sell the house as it is for $250,000.She should

Accepted Answer

A)   keep the house and live in it.
B)   go ahead with the $50,000 in repairs and sell the house for $290,000.
C)   forgo the repairs and sell the house as it is for $250,000.
D)   move the house from Pine Street to a more desirable location, regardless of the cost of doing so.E) A) and C)
F) A) and B)

Question 2

For which of the following problems can well-designed public policy enhance economic efficiency?

Accepted Answer

A)   both externalities and market power
B)   externalities, but not market power
C)   market power, but not externalities
D)   neither externalities nor market powerE) None of the above
F) A) and B)

Question 3

In a particular country in 1999,the average worker had to work 20 hours to produce 55 units of output.In that same country in 2009,the average worker needed to work 28 hours to produce 77 units of output.In that country,the productivity of the average worker

Accepted Answer

A)   increased by 2 percent between 1999 and 2009.
B)   increased by 5 percent between 1999 and 2009.
C)   remained unchanged between 1999 and 2009.
D)   decreased by 3 percent between 1999 and 2009.E) B) and D)
F) All of the above

Question 4

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Accepted Answer

A) True 
 B)False

Question 5

Under what conditions might government intervention in a market economy improve the economy's performance?

Accepted Answer

If there is a market failure,such as an ...

Question 6

The marginal benefit Colin gets from eating a fourth slice of pizza is

Accepted Answer

A)   the total benefit Colin gets from eating four slices of pizza minus the total benefit Colin gets from eating three slices of pizza.
B)   the same as the total benefit of eating four slices of pizza.
C)   less than the marginal cost of eating the fourth slice of pizza since he chose to eat the fourth slice.
D)   the total benefit Colin gets from eating five slices of pizza minus the total benefit Colin gets from eating four slices of pizza.E) A) and B)
F) A) and C)

Question 7

Which of the following is a principle concerning how people interact?

Accepted Answer

A)   Markets are usually a good way to organize economic activity.
B)   Rational people think at the margin.
C)   People respond to incentives.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 8

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

Accepted Answer

A)   government actions that distort prices.
B)   increased competition in markets.
C)   enforcement of property rights.
D)   too much attention paid to efficiency.E) C) and D)
F) None of the above

Question 9

You go to the movieplex where movies ordinarily cost $10.You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time.However,when you get there you see a friend who asks if you would rather see a new release.Both movies start and end at the same time.If you decide to see the new release with your friend,what is your opportunity cost?

Accepted Answer

A)   the amount you value the first movie + $3
B)   the amount you value the first movie + $10
C)   $3
D)   $10E) A) and C)
F) B) and C)

Question 10

US citizens have better nutrition,better healthcare,and a longer life expectancy than citizens of Ghana.Which of the following conclusions can be drawn from this statement?

Accepted Answer

A)   Average income in the US is higher than the average income in Ghana.
B)   The US has a higher standard of living than Ghana.
C)   Productivity in the US is higher than productivity in Ghana.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 11

The government can potentially improve market outcomes if market inequalities or market failure exists.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements exemplifies a principle of individual decisionmaking?

Accepted Answer

A)   Trade can make everyone better off.
B)   Governments can sometimes improve market outcomes.
C)   The cost of something is what you give up to get it.
D)   All of the above are correct.E) None of the above
F) C) and D)

Question 13

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

Question 14

Because resources are scarce,a society cannot give all individuals the standard of living to which each aspires.

Accepted Answer

A) True 
 B)False

Question 15

Government policies resulting in reduced efficiency 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 16

Maureen's college raises the cost of room and board per semester.This increase raises Maureen's opportunity cost of attending college

Accepted Answer

A)   even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost reduces Maureen's incentive to attend college.
B)   even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost increases Maureen's incentive to attend college.
C)   only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Maureen's incentive to attend college.
D)   only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost increases Maureen's incentive to attend college.E) B) and C)
F) All of the above

Question 17

Bill is restoring a car and has already spent $4000 on the restoration.He expects to be able to sell the car for $5800.Bill discovers that he needs to do an additional $2400 of work to make the car worth $5800 to potential buyers.He could also sell the car now,without completing the additional work,for $3800.What should he do?

Accepted Answer

A)   He should sell the car now for $3800.
B)   He should keep the car since it wouldn't be rational to spend $6400 restoring a car and then sell it for only $5800.
C)   He should complete the additional work and sell the car for $5800.
D)   It does not matter which action he takes since the outcome will be the same either way.E) A) and B)
F) C) and D)

Question 18

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) None of the above

Question 19

Senator Green argues that replacing the income tax with a national sales tax would increase the level of output.Senator Brown 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 Green's argument is primarily about equality, while Senator Brown's argument is primarily about efficiency.
D)   Senator Green's argument is primarily about efficiency, while Senator Brown's argument is primarily about equality.E) A) and B)
F) C) and D)

Question 20

An example of an externality is the impact of

Accepted Answer

A)   bad weather on the income of farmers.
B)   the personal income tax on a person's ability to purchase goods and services.
C)   pollution from a factory on the health of people in the vicinity of the factory.
D)   increases in health care costs on the health of individuals in society.E) A) and D)
F) B) and C)

Exam 1: Ten Principles of Economics.

Because resources are scarce,a society cannot give all individuals the standard of living to which each aspires.

Correct Answer
verified

Which of the following statements exemplifies a principle of individual decisionmaking?

Correct Answer
verified

Government policies resulting in reduced efficiency include (i) the welfare system (ii) unemployment insurance (iii) progressive income tax

Correct Answer
verified

For which of the following problems can well-designed public policy enhance economic efficiency?

Correct Answer
verified

Correct Answer
verified

The government can potentially improve market outcomes if market inequalities or market failure exists.

Correct Answer
verified

Which of the following is a principle concerning how people interact?

Correct Answer
verified

An example of an externality is the impact of

Correct Answer
verified

In a particular country in 1999,the average worker had to work 20 hours to produce 55 units of output.In that same country in 2009,the average worker needed to work 28 hours to produce 77 units of output.In that country,the productivity of the average worker

Correct Answer
verified

Correct Answer
verified

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

Correct Answer
verified

Under what conditions might government intervention in a market economy improve the economy's performance?

Correct Answer
verified
If there is a market failure,such as an ...
View 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 Answer
verified

What you give up to obtain an item is called your

Correct Answer
verified

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Correct Answer
verified

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

Correct Answer
verified

The marginal benefit Colin gets from eating a fourth slice of pizza is

Correct Answer
verified

Maureen's college raises the cost of room and board per semester.This increase raises Maureen's opportunity cost of attending college

Correct Answer
verified

Correct Answer
verified

US citizens have better nutrition,better healthcare,and a longer life expectancy than citizens of Ghana.Which of the following conclusions can be drawn from this statement?

Correct Answer
verified

Exam 1: Ten Principles of Economics.

Because resources are scarce,a society cannot give all individuals the standard of living to which each aspires.

Correct AnswerverifiedShow Answer

Which of the following statements exemplifies a principle of individual decisionmaking?

Correct AnswerverifiedShow Answer

Government policies resulting in reduced efficiency include (i) the welfare system (ii) unemployment insurance (iii) progressive income tax

Correct AnswerverifiedShow Answer

For which of the following problems can well-designed public policy enhance economic efficiency?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The government can potentially improve market outcomes if market inequalities or market failure exists.

Correct AnswerverifiedShow Answer

Which of the following is a principle concerning how people interact?

Correct AnswerverifiedShow Answer

An example of an externality is the impact of

Correct AnswerverifiedShow Answer

In a particular country in 1999,the average worker had to work 20 hours to produce 55 units of output.In that same country in 2009,the average worker needed to work 28 hours to produce 77 units of output.In that country,the productivity of the average worker

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

Correct AnswerverifiedShow Answer

Under what conditions might government intervention in a market economy improve the economy's performance?

Correct AnswerverifiedIf there is a market failure,such as an ...View AnswerShow 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

What you give up to obtain an item is called your

Correct AnswerverifiedShow Answer

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The marginal benefit Colin gets from eating a fourth slice of pizza is

Correct AnswerverifiedShow Answer

Maureen's college raises the cost of room and board per semester.This increase raises Maureen's opportunity cost of attending college

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

US citizens have better nutrition,better healthcare,and a longer life expectancy than citizens of Ghana.Which of the following conclusions can be drawn from this statement?

Correct AnswerverifiedShow Answer

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If there is a market failure,such as an ...
View Answer

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