Question 1

Over the past century, the average income in the United States has risen about

Accepted Answer

A)   twofold.
B)   fivefold.
C)   eightfold.
D)   tenfold.E) C) and D)
F) A) and B)

Question 2

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

Question 3

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

Question 4

The invisible hand refers to

Accepted Answer

A)   how central planners made economic decisions.
B)   how the decisions of households and firms lead to desirable market outcomes.
C)   the control that large firms have over the economy.
D)   government regulations without which the economy would be less efficient.E) A) and B)
F) A) and C)

Question 5

Market economies are distinguished from other types of economies largely on the basis of

Accepted Answer

A)   the political affiliations of government officials.
B)   the process by which government officials are elected or appointed.
C)   the ways in which scarce resources are allocated.
D)   the number of retail outlets available to consumers.E) A) and D)
F) C) and D)

Question 6

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Accepted Answer

A)   the pie gets larger, and there will be more pie overall.
B)   the pie gets smaller, and there will be less pie overall.
C)   it increases the reward for working hard, resulting in people producing more goods and services.
D)   those who earn more income pay less in taxes.E) A) and B)
F) C) and D)

Question 7

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

Question 8

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A)   There is no such thing as a free lunch.
B)   People buy more when prices are low than when prices are high.
C)   No matter how much people earn, they tend to spend more than they earn.
D)   Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.E) None of the above
F) B) and C)

Question 9

An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following principles is not one of the four principles of individual decisionmaking?

Accepted Answer

A)   People face tradeoffs.
B)   Trade can make everyone better off.
C)   People respond to incentives.
D)   Rational people think at the margin.E) A) and D)
F) A) and C)

Question 11

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

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 B)
F) A) and C)

Question 13

Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.

Accepted Answer

A) True 
 B)False

Question 14

Approximately what percentage of the world's economies experience scarcity?

Accepted Answer

A)   10%
B)   40%
C)   85%
D)   100%E) A) and B)
F) A) and C)

Question 15

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

Accepted Answer

A)   intended to reduce unemployment.
B)   may lead to excessive inflation over time.
C)   resulted in higher taxes and an increased supply of money.
D)   Both a and b are correct.E) A) and B)
F) None of the above

Question 16

To improve living standards, policymakers should

Accepted Answer

A)   impose restrictions on foreign competition.
B)   formulate policies designed to increase productivity.
C)   impose tougher immigration policies.
D)   provide tax breaks for the middle class.E) A) and C)
F) A) and B)

Question 17

Penny is piano teacher and Dan is a tile layer. If Penny teaches Dan's daughter to play the piano in exchange for Dan tiling her kitchen floor,

Accepted Answer

A)   only Penny is made better off by trade.
B)   only Dan is made better off by trade.
C)   both Penny and Dan are made better off by trade.
D)   neither Penny nor Dan are made better off by trade.E) C) and D)
F) B) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

In the short run, which of the following is not correct?

Accepted Answer

A)   Increasing the money supply increases the demand for goods and services.
B)   Increasing the money supply encourages firms to hire more workers.
C)   Lowering the money supply leads to a higher level of unemployment.
D)   Policies that encourage higher employment will also induce a lower rate of inflation.E) None of the above
F) All of the above

Question 20

The ability of an individual to own and exercise control over scarce resources is called

Accepted Answer

A)   market failure.
B)   property rights.
C)   externality.
D)   market power.E) B) and C)
F) C) and D)

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 Answer
verified

Correct Answer
verified

In the short run, which of the following is not correct?

Correct Answer
verified

An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.

Correct Answer
verified

Correct Answer
verified

Which of the following principles is not one of the four principles of individual decisionmaking?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The ability of an individual to own and exercise control over scarce resources is called

Correct Answer
verified

Penny is piano teacher and Dan is a tile layer. If Penny teaches Dan's daughter to play the piano in exchange for Dan tiling her kitchen floor,

Correct Answer
verified

The invisible hand refers to

Correct Answer
verified

Market economies are distinguished from other types of economies largely on the basis of

Correct Answer
verified

Approximately what percentage of the world's economies experience scarcity?

Correct Answer
verified

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Correct Answer
verified

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Correct Answer
verified

Over the past century, the average income in the United States has risen about

Correct Answer
verified

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 Answer
verified

In a market economy,

Correct Answer
verified

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

Correct Answer
verified

To improve living standards, policymakers should

Correct Answer
verified

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

Correct AnswerverifiedShow Answer

In the short run, which of the following is not correct?

Correct AnswerverifiedShow Answer

An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following principles is not one of the four principles of individual decisionmaking?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The ability of an individual to own and exercise control over scarce resources is called

Correct AnswerverifiedShow Answer

Penny is piano teacher and Dan is a tile layer. If Penny teaches Dan's daughter to play the piano in exchange for Dan tiling her kitchen floor,

Correct AnswerverifiedShow Answer

The invisible hand refers to

Correct AnswerverifiedShow Answer

Market economies are distinguished from other types of economies largely on the basis of

Correct AnswerverifiedShow Answer

Approximately what percentage of the world's economies experience scarcity?

Correct AnswerverifiedShow Answer

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Correct AnswerverifiedShow Answer

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Correct AnswerverifiedShow Answer

Over the past century, the average income in the United States has risen about

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

In a market economy,

Correct AnswerverifiedShow Answer

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

Correct AnswerverifiedShow Answer

To improve living standards, policymakers should

Correct AnswerverifiedShow Answer

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