Question 1

Suppose that the average income of a Costa Rican is higher than the average income of a Guatemalan. You might conclude that

Accepted Answer

A)  Costa Rican firms are faced with stricter government regulations than Guatemalan firms.
B)  total income is divided among fewer workers in Costa Rica since it has a smaller labor force than Guatemala.
C)  Guatemala's climate allows for longer growing seasons and therefore Guatemala can produce large quantities of grain and other crops.
D)  productivity in Costa Rica is higher than in Guatemala.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

Accepted Answer

A)  goods are scarce.
B)  people face tradeoffs.
C)  income must be earned.
D)  households face many decisions.

Question 4

The adage, "There is no such thing as a free lunch," means

Accepted Answer

A)  even people on welfare have to pay for food.
B)  the cost of living is always increasing.
C)  people face tradeoffs.
D)  all costs are included in the price of a product.

Question 5

Which is the most accurate statement about trade?

Accepted Answer

A)  Trade can make every nation better off.
B)  Trade makes some nations better off and others worse off.
C)  Trading for a good can make a nation better off only if the nation cannot produce that good itself.
D)  Trade helps rich nations and hurts poor nations.

Question 6

In which of the following decades was there both high inflation and rapid money supply growth in the US?

Accepted Answer

A)  the 1970's and the 1990's
B)  the 1970's but not the 1990's
C)  the 1990's but not the 1970's
D)  neither the 1970's nor the 1990's

Question 7

If Germany chooses to engage in trade, it

Accepted Answer

A)  will only benefit if it trades with countries that produce goods Germany 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 8

George has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. George discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He can sell the boat as it is now for $400. What should he do?

Accepted Answer

A)  He should sell the boat as it is now for $400.
B)  He should keep the boat since it would not be rational to spend $1,000 on repairs and then sell the boat for $900.
C)  He should complete the repairs and sell the boat for $900.
D)  It does not matter which action he takes; the outcome is the same either way.

Question 9

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

Accepted Answer

A)  This loss of jobs has been detrimental to our economy.
B)  The government should provide subsidies to encourage more people to become farmers.
C)  This reduction in the number of farmers explains the increase in the price of food.
D)  This is progress because freed-up labor that is used to produce other goods.

Question 10

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.

Question 11

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 power

Question 12

The English word that comes from the Greek word for "one who manages a household" is

Accepted Answer

A)  market.
B)  consumer.
C)  producer.
D)  economy.

Question 13

The average cost per seat on the 75-passenger Get-There-Safe Bus company's trip from Milwaukee to Minneapolis, on which no refreshments are served, is $37. In advance of a particular trip, three seats remain unsold. The bus company could increase its profit only if it

Accepted Answer

A)  charged any ticket price above $0 for the three remaining seats.
B)  charged at least $18.50 for each of the three remaining seats.
C)  charged at least $37 for each of the three remaining seats.
D)  paid three people to occupy the three remaining seats.

Question 14

High-school athletes who skip college to become professional athletes

Accepted Answer

A)  obviously do not understand the value of a college education.
B)  usually do so because they cannot get into college.
C)  understand that the opportunity cost of attending college is very high.
D)  are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes.

Question 15

If the price of visiting a doctor were fixed below the current price, then we would expect

Accepted Answer

A)  an increase in the number of visits people want to make and an increase in the number of visits health care providers want to provide.
B)  an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.
C)  a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide.
D)  a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

Question 16

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 17

In the long run the primary effect of increasing the quantity of money is higher prices.

Accepted Answer

A) True 
 B)False

Question 18

When a species of fish dies off due to pollution in a river where it once lived, 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 19

U.S. laws requiring that drivers wear seat belts have resulted in

Accepted Answer

A)  a reduction in both driver deaths and pedestrian deaths.
B)  fewer accidents and fewer deaths per accident.
C)  fewer driver deaths, fewer accidents and fewer pedestrian deaths.
D)  little change in the number of driver deaths, but more accidents and more pedestrian deaths.

Question 20

The business cycle refers to fluctuations in economic activity such as employment and production.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

In the United States, incomes have historically grown

Correct Answer
verified

The English word that comes from the Greek word for "one who manages a household" is

Correct Answer
verified

Which is the most accurate statement about trade?

Correct Answer
verified

Suppose that the average income of a Costa Rican is higher than the average income of a Guatemalan. You might conclude that

Correct Answer
verified

The adage, "There is no such thing as a free lunch," means

Correct Answer
verified

If the price of visiting a doctor were fixed below the current price, then we would expect

Correct Answer
verified

In which of the following decades was there both high inflation and rapid money supply growth in the US?

Correct Answer
verified

When a species of fish dies off due to pollution in a river where it once lived, this is an example of

Correct Answer
verified

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

Correct Answer
verified

High-school athletes who skip college to become professional athletes

Correct Answer
verified

If Germany chooses to engage in trade, it

Correct Answer
verified

In the long run the primary effect of increasing the quantity of money is higher prices.

Correct Answer
verified

U.S. laws requiring that drivers wear seat belts have resulted in

Correct Answer
verified

The business cycle refers to fluctuations in economic activity such as employment and production.

Correct Answer
verified

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

Correct Answer
verified

The average cost per seat on the 75-passenger Get-There-Safe Bus company's trip from Milwaukee to Minneapolis, on which no refreshments are served, is $37. In advance of a particular trip, three seats remain unsold. The bus company could increase its profit only if it

Correct Answer
verified

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

Correct Answer
verified

Exam 1: Ten Principles of Economics

In the United States, incomes have historically grown

Correct AnswerverifiedShow Answer

The English word that comes from the Greek word for "one who manages a household" is

Correct AnswerverifiedShow Answer

Which is the most accurate statement about trade?

Correct AnswerverifiedShow Answer

Suppose that the average income of a Costa Rican is higher than the average income of a Guatemalan. You might conclude that

Correct AnswerverifiedShow Answer

The adage, "There is no such thing as a free lunch," means

Correct AnswerverifiedShow Answer

If the price of visiting a doctor were fixed below the current price, then we would expect

Correct AnswerverifiedShow Answer

In which of the following decades was there both high inflation and rapid money supply growth in the US?

Correct AnswerverifiedShow Answer

When a species of fish dies off due to pollution in a river where it once lived, this is an example of

Correct AnswerverifiedShow Answer

It once took 90 percent of our population to grow our food. It now takes only 3 percent of the population to grow our food. Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

Correct AnswerverifiedShow Answer

High-school athletes who skip college to become professional athletes

Correct AnswerverifiedShow Answer

If Germany chooses to engage in trade, it

Correct AnswerverifiedShow Answer

In the long run the primary effect of increasing the quantity of money is higher prices.

Correct AnswerverifiedShow Answer

U.S. laws requiring that drivers wear seat belts have resulted in

Correct AnswerverifiedShow Answer

The business cycle refers to fluctuations in economic activity such as employment and production.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The average cost per seat on the 75-passenger Get-There-Safe Bus company's trip from Milwaukee to Minneapolis, on which no refreshments are served, is $37. In advance of a particular trip, three seats remain unsold. The bus company could increase its profit only if it

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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