Question 1

To promote good economic outcomes,policymakers should strive to enact policies that

Accepted Answer

A)  enhance productivity.
B)  enhance individuals' market power.
C)  result in a rapidly-growing quantity of money.
D)  All of the above are correct.

Question 2

In the early 1980s,U.S.economic policy was directed toward reducing inflation.What would you have expected to observe during this short period of time?

Accepted Answer

A)  Inflation fell and unemployment fell.
B)  Inflation and unemployment were both unaffected.
C)  Inflation fell and unemployment increased.
D)  Inflation fell and unemployment was unchanged.

Question 3

Which of the following products would be considered scarce?

Accepted Answer

A)  golf clubs
B)  Picasso paintings
C)  apples
D)  All of the above are correct.

Question 4

If Japan chooses to engage in trade,it

Accepted Answer

A)  will only benefit if it trades with countries that produce goods Japan cannot produce.
B)  cannot benefit if it trades with less developed countries.
C)  should first attempt to produce the good itself.
D)  can benefit by trading with any other country.

Question 5

What you give up to obtain an item is called your

Accepted Answer

A)  opportunity cost.
B)  explicit cost.
C)  true cost.
D)  direct cost.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is most likely to raise the average material standard of living in the United States?

Accepted Answer

A)  an increase in investment in new capital
B)  a continuation of the economic problems experienced by China, with whom the United States competes in world markets
C)  an increase in the minimum legal wage
D)  a shortening of the average work week

Question 8

The historical rise in living standards of American workers is primarily a result of

Accepted Answer

A)  the influence of labor unions in America.
B)  tariff protection imposed by the American government.
C)  the enactment of minimum-wage laws in America.
D)  the rise in American productivity.

Question 9

Which of the following is not generally regarded as a legitimate reason for the government to intervene in a market?

Accepted Answer

A)  to promote efficiency
B)  to promote equity
C)  to enforce property rights
D)  to protect an industry from foreign competition

Question 10

Which of the following is the best example of a marginal change?

Accepted Answer

A)  The price of housing in Denver increased by 6 percent last year.
B)  Kim gets a big promotion at work.She also gets a raise from $35,000 per year to $55,000 per year.
C)  Mark graduates from college and takes a job.His income increases from $10,000 per year to $35,000 per year.
D)  A drought hits the upper Midwest and the price of wheat increases from $4.00 per bushel to $6.50 per bushel.

Question 11

To say that government intervenes in the economy to promote efficiency is to say that government is attempting to

Accepted Answer

A)  create a more fair distribution of income.
B)  change the way in which the economic pie is divided.
C)  enlarge the economic pie.
D)  All of the above are correct.

Question 12

College-age athletes who drop out of college to play professional sports

Accepted Answer

A)  are not rational decision makers.
B)  are well aware that their opportunity cost of attending college is very high.
C)  are concerned more about present circumstances than their future.
D)  underestimate the value of a college education.

Question 13

When policymakers implement policies that alter incentives,they usually

Accepted Answer

A)  have carefully weighed the direct and indirect effects of the policy.
B)  do not observe the intended result of the policies.
C)  have considered all possible effects of the incentive changes when they developed the policy, which will make the policy effective.
D)  correctly anticipate the indirect effects, but often miss the direct effects.

Question 14

The "invisible hand" directs economic activity through

Accepted Answer

A)  advertising.
B)  prices.
C)  central planning.
D)  government regulations.

Question 15

Evidence indicates that seat belt laws have led to

Accepted Answer

A)  fewer pedestrian deaths.
B)  fewer automobile accidents.
C)  fewer deaths per automobile accident.
D)  All of the above are correct.

Question 16

The mainstream view among economists is that

Accepted Answer

A)  society faces a tradeoff between unemployment and inflation, but only in the short run.
B)  society faces a tradeoff between unemployment and inflation, but only in the long run.
C)  society faces a tradeoff between unemployment and inflation, both in the short run and in the long run.
D)  no tradeoff exists between unemployment and inflation, either in the short run or in the long run.

Question 17

The short-run tradeoff between inflation and unemployment implies that,in the short run,

Accepted Answer

A)  a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate.
B)  an increase in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate.
C)  policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate.
D)  policymakers can influence the inflation rate, but not the unemployment rate.

Question 18

Senator Smith wants to increase taxes on people with high incomes and use the money to help the poor.Senator Jones argues that such a tax will discourage successful people from working and will therefore make society worse off.An economist would say that

Accepted Answer

A)  we should agree with Senator Smith.
B)  we should agree with Senator Jones.
C)  a good decision requires that we recognize both viewpoints.
D)  there are no tradeoffs between equity and efficiency.

Question 19

Which of the following statements about markets is most accurate?

Accepted Answer

A)  Markets are usually a good way to organize economic activity.
B)  Markets are usually inferior to central planning as a way to organize economic activity.
C)  Markets fail and are therefore not an acceptable way to organize economic activity.
D)  Markets are a good way to organize economic activity in developed nations, but not in less developed nations.

Question 20

Adam Smith argued that in a market system,when people act in their own self-interest,they typically

Accepted Answer

A)  help only themselves.
B)  harm others.
C)  help others, but not as much as they would have if they were not self-interested.
D)  help others even more than when they deliberately try to help others.

Exam 1: Ten Principles of Economics

Senator Smith wants to increase taxes on people with high incomes and use the money to help the poor.Senator Jones argues that such a tax will discourage successful people from working and will therefore make society worse off.An economist would say that

Correct AnswerverifiedShow Answer

In the early 1980s,U.S.economic policy was directed toward reducing inflation.What would you have expected to observe during this short period of time?

Correct AnswerverifiedShow Answer

Which of the following is the best example of a marginal change?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What you give up to obtain an item is called your

Correct AnswerverifiedShow Answer

Which of the following is most likely to raise the average material standard of living in the United States?

Correct AnswerverifiedShow Answer

If Japan chooses to engage in trade,it

Correct AnswerverifiedShow Answer

Evidence indicates that seat belt laws have led to

Correct AnswerverifiedShow Answer

To promote good economic outcomes,policymakers should strive to enact policies that

Correct AnswerverifiedShow Answer

Adam Smith argued that in a market system,when people act in their own self-interest,they typically

Correct AnswerverifiedShow Answer

Which of the following is not generally regarded as a legitimate reason for the government to intervene in a market?

Correct AnswerverifiedShow Answer

The historical rise in living standards of American workers is primarily a result of

Correct AnswerverifiedShow Answer

College-age athletes who drop out of college to play professional sports

Correct AnswerverifiedShow Answer

The "invisible hand" directs economic activity through

Correct AnswerverifiedShow Answer

To say that government intervenes in the economy to promote efficiency is to say that government is attempting to

Correct AnswerverifiedShow Answer

The short-run tradeoff between inflation and unemployment implies that,in the short run,

Correct AnswerverifiedShow Answer

Which of the following statements about markets is most accurate?

Correct AnswerverifiedShow Answer

The mainstream view among economists is that

Correct AnswerverifiedShow Answer

Which of the following products would be considered scarce?

Correct AnswerverifiedShow Answer

When policymakers implement policies that alter incentives,they usually

Correct AnswerverifiedShow Answer

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