Question 1

Which of these activities will most likely result in an external benefit?

Accepted Answer

A)  A college student buys a deck of cards to play solitaire in her dorm room.
B)  An elderly woman plants a flower garden on the vacant lot next to her house.
C)  An executive purchases a book to read on a business trip.
D)  A ten-year-old uses his allowance to buy new Nike shoes.

Question 2

Trade

Accepted Answer

A)  allows specialization, which increases costs.
B)  allows specialization, which reduces costs.
C)  reduces specialization, which increases costs.
D)  reduces specialization, which reduces costs.

Question 3

Most economists believe that an increase in the quantity of money results in

Accepted Answer

A)  an increase in the demand for goods and services.
B)  lower unemployment in the short run.
C)  higher inflation in the long run.
D)  All of the above are correct.

Question 4

Ramona decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

Accepted Answer

A)  the value of the knowledge she would have received had she attended class.
B)  the $24 she could have earned if she had worked at her job for those two hours.
C)  the value of her nap minus the value of attending class.
D)  nothing, since she valued sleep more than attendance at class.

Question 5

One of the 20th century's worst episodes of inflation occurred in

Accepted Answer

A)  the United States in the 1960s.
B)  Italy in the 1950s.
C)  Russia in the 1930s.
D)  Germany in the 1920s.

Question 6

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."

Question 7

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Accepted Answer

In Germany. Almost all variati...

Question 8

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Accepted Answer

Whatever must be given up to obtain some...

Question 9

In the United States, incomes have historically grown

Accepted Answer

A)  about 0.5 percent per year.
B)  about 2 percent per year.
C)  about 4 percent per year.
D)  about 6 percent per year.

Question 10

What does the term "marginal change" mean?

Accepted Answer

A small incremental ...

Question 11

For markets to work well, there must be

Accepted Answer

A)  market power.
B)  a central planner.
C)  property rights.
D)  abundant, not scarce, resources.

Question 12

Which of the following is the primary cause of inflation?

Accepted Answer

A)  an increase in the quantity of money
B)  an increase in government spending
C)  an increase in unemployment
D)  an increase in productivity

Question 13

Economists use the word equality to describe a situation in which

Accepted Answer

A)  each member of society has the same income.
B)  each member of society has access to abundant quantities of goods and services, regardless of his or her income.
C)  society is getting the maximum benefits from its scarce resources.
D)  society's resources are used efficiently.

Question 14

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Accepted Answer

A)  For the first 24 houses, the average cost per house was $205,000.
B)  The marginal cost of the 25th house, if it is built, will equal $250,000.
C)  If the company can sell the 25th house for at least $202,000, then it should build it.
D)  All of the above are correct.

Question 15

Which of the following is a decision that economists study?

Accepted Answer

A)  how much people work
B)  what people buy
C)  how much money people save
D)  All of the above are correct.

Question 16

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.

Question 17

The government enforces property rights by

Accepted Answer

A)  requiring property owners to pay property taxes.
B)  providing police and courts.
C)  forcing people to own property.
D)  providing public parks and recreation facilities.

Question 18

The economy of the former Soviet Union is best described as a

Accepted Answer

A)  primitive economy.
B)  market economy.
C)  hybrid economy.
D)  centrally-planned economy.

Question 19

Rational people make decisions "at the margin" by comparing ______.

Accepted Answer

marginal c...

Question 20

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

Most economists believe that an increase in the quantity of money results in

Correct AnswerverifiedShow Answer

Which of the following is the primary cause of inflation?

Correct AnswerverifiedShow Answer

Economists use the word equality to describe a situation in which

Correct AnswerverifiedShow Answer

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Correct AnswerverifiedIn Germany. Almost all variati...View AnswerShow Answer

For markets to work well, there must be

Correct AnswerverifiedShow Answer

What does the term "marginal change" mean?

Correct AnswerverifiedA small incremental ...View AnswerShow Answer

In the United States, incomes have historically grown

Correct AnswerverifiedShow Answer

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Trade

Correct AnswerverifiedShow Answer

Which of these activities will most likely result in an external benefit?

Correct AnswerverifiedShow Answer

Which of the following is a decision that economists study?

Correct AnswerverifiedShow Answer

The government enforces property rights by

Correct AnswerverifiedShow Answer

One of the 20th century's worst episodes of inflation occurred in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Correct AnswerverifiedWhatever must be given up to obtain some...View AnswerShow Answer

The economy of the former Soviet Union is best described as a

Correct AnswerverifiedShow Answer

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

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

Rational people make decisions "at the margin" by comparing ______.

Correct Answerverifiedmarginal c...View AnswerShow Answer

Ramona decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

Correct AnswerverifiedShow Answer

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In Germany. Almost all variati...
View Answer

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A small incremental ...
View Answer

Correct Answer
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Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25^th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Correct Answer
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Whatever must be given up to obtain some...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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marginal c...
View Answer

Correct Answer
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