Question 1

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Accepted Answer

A)  the $60 she earns working.
B)  the $60 minus the enjoyment she would have received from going to the park.
C)  the enjoyment she would have received had she gone to the park.
D)  nothing, since she would have received less than $60 worth of enjoyment from going to the park.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Michael is a college student. He can either buy a textbook for $100 or save up for a road trip he wants to take during the summer. This illustrates the principle that

Accepted Answer

A)  trade can make everyone better off.
B)  people face trade-offs.
C)  rational people think at the margin.
D)  people respond to incentives.

Question 4

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

Question 5

If Jane attends graduate school, it will take her two years, during which time she will earn no income. She will pay a total of $100,000 for tuition, $20,000 for room and board, and $2,000 for books. If she spends the two years working rather than attending college, she will pay a total of $18,000 for room and board, pay no intuition, and buy no books. Based on this information, Jane's economic cost of attending graduate school would be $175,000 if, over the two years, she could earn a total of

Accepted Answer

A)  $53,000 instead of attending graduate school.
B)  $55,000 instead of attending graduate school.
C)  $71,000 instead of attending graduate school.
D)  $73,000 instead of attending graduate school.

Question 6

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should

Accepted Answer

A)  rent the room because the marginal benefit exceeds the marginal cost.
B)  rent the room because the marginal benefit exceeds the average cost.
C)  not rent the room because the marginal benefit is less than the marginal cost.
D)  not rent the room because the marginal benefit is less than the average cost.

Question 7

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman 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 Jackson's argument is primarily about equality, while Senator Feldman's argument is primarily about efficiency.
D)  Senator Jackson's argument is primarily about efficiency, while Senator Feldman's argument is primarily about equality.

Question 8

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

Accepted Answer

A)  in Brazil. Most variation in the standard of living across countries is due to differences in productivity.
B)  in Brazil. Differences in productivity explain very little of the variation in the standard of living across countries.
C)  in Peru. Most variation in the standard of living across countries is due to differences in productivity.
D)  in Peru. Differences in productivity explain very little of the variation in the standard of living across countries.

Question 9

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to decrease the money supply. This is likely because the Federal Reserve is

Accepted Answer

A)  worried about inflation.
B)  worried about unemployment.
C)  hoping to increase the demand for goods and services.
D)  worried that the economy is growing too slowly.

Question 10

Invisible hand is a term used by the economist ______ to describe how the decisions of households and firms lead to desirable market outcomes.

Accepted Answer

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

Question 11

Economists use the term ______ to refer to an increase in the overall level of prices in the economy.

Accepted Answer

The answer of Economists use the term ______ to refer...

Question 12

When Ukraine trades with Italy,

Accepted Answer

A)  both countries are likely made better off.
B)  only Italy benefits since Ukraine can produce all goods at a higher level of quality than Italy.
C)  only Ukraine benefits since Italy's low wages guarantee that Italian firms will be profitable regardless of trade.
D)  neither country will benefit since Ukraine is more efficient than Italy in the production of all goods.

Question 13

Which of the following firms is most likely to have market power?

Accepted Answer

A)  a grocery store in a metropolitan area
B)  a convenience store in a suburb
C)  a pub in a college town
D)  the only gasoline station in a rural area

Question 14

The price of diamonds is high, in part because the majority of the world's diamonds are controlled by a single firm. 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.

Question 15

Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Frank's cost of going to college is

Accepted Answer

A)  $33,800.
B)  $42,600.
C)  $49,800.
D)  $57,000.

Question 16

Trade makes costs

Accepted Answer

A)  higher and reduces the variety of goods and services available.
B)  higher but raises the variety of goods and services available.
C)  lower but reduces the variety of goods and services available.
D)  lower and raises the variety of goods and services available.

Question 17

Scenario 1-3
It costs a company $35,000 to produce 700 graphing calculators. The company's cost will be $35,070 if it produces an additional graphing calculator. The company is currently producing 700 graphing calculators.
-Refer to Scenario 1-3. What is the minimum price the company will charge for the 701th calculator?

Accepted Answer

Question 18

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

Accepted Answer

A)  $99,000.
B)  $103,000.
C)  $108,000.
D)  $121,000.

Question 19

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 activity

Question 20

Consider Larry's decision to go to college. If he goes to college, he will spend a total of $120,000 on tuition, $30,000 on room and board, and $3,500 on books over four years. If he does not go to college, he will earn $30,000 annually working in a store and spend $7,000 on room and board each year. Larry's cost of going to college is

Accepted Answer

A)  $123,500.
B)  $153,500.
C)  $190,500
D)  $245,500

Exam 1: Ten Principles of Economics

Correct Answer
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Which of the following firms is most likely to have market power?

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

Correct Answer
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Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

Correct Answer
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Michael is a college student. He can either buy a textbook for $100 or save up for a road trip he wants to take during the summer. This illustrates the principle that

Correct Answer
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Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Correct Answer
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Economists use the term ______ to refer to an increase in the overall level of prices in the economy.

Correct Answer
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Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Frank's cost of going to college is

Correct Answer
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Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

Correct Answer
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Trade makes costs

Correct Answer
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Suppose the Federal Reserve announces that it will be making a change to a key interest rate to decrease the money supply. This is likely because the Federal Reserve is

Correct Answer
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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
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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 Answer
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Invisible hand is a term used by the economist ______ to describe how the decisions of households and firms lead to desirable market outcomes.

Correct Answer
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Correct Answer
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Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should

Correct Answer
verified

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

Correct Answer
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When Ukraine trades with Italy,

Correct Answer
verified

The price of diamonds is high, in part because the majority of the world's diamonds are controlled by a single firm. This is an example of

Correct Answer
verified

Exam 1: Ten Principles of Economics

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following firms is most likely to have market power?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

Correct AnswerverifiedShow Answer

Michael is a college student. He can either buy a textbook for $100 or save up for a road trip he wants to take during the summer. This illustrates the principle that

Correct AnswerverifiedShow Answer

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

Correct AnswerverifiedShow Answer

Economists use the term ______ to refer to an increase in the overall level of prices in the economy.

Correct AnswerverifiedShow Answer

Consider Frank's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Frank's cost of going to college is

Correct AnswerverifiedShow Answer

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

Correct AnswerverifiedShow Answer

Trade makes costs

Correct AnswerverifiedShow Answer

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to decrease the money supply. This is likely because the Federal Reserve is

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

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

Invisible hand is a term used by the economist ______ to describe how the decisions of households and firms lead to desirable market outcomes.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When Ukraine trades with Italy,

Correct AnswerverifiedShow Answer

The price of diamonds is high, in part because the majority of the world's diamonds are controlled by a single firm. This is an example of

Correct AnswerverifiedShow Answer

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