Question 1

If an externality is present in a market, economic efficiency may be enhanced by

Accepted Answer

A)   government intervention.
B)   a decrease in foreign competition.
C)   fewer market participants.
D)   weaker property rights.

Question 2

During the early 1920s in Germany, prices

Accepted Answer

A)   doubled annually.
B)   doubled monthly.
C)   tripled monthly.
D)   tripled annually.

Question 3

The term used to describe a situation in which markets do not allocate resources efficiently is

Accepted Answer

A)   economic meltdown.
B)   market failure.
C)   equilibrium.
D)   the effect of the invisible hand.

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

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

Accepted Answer

A) True 
 B)False

Question 6

Government policies designed to equalize the distribution of economic well-being include (i) 
The welfare system
(ii.
Unemployment insurance
(iii) 
Progressive income tax

Accepted Answer

A)   (i)  only
B)   (ii)  only
C)   (i)  and (ii)  only
D)   (i) , (ii) , and (iii)

Question 7

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 8

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 9

In a market economy, economic activity is guided by

Accepted Answer

A)   the government.
B)   corporations.
C)   central planners.
D)   self-interest and prices.

Question 10

Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $6200. Bill discovers that he needs to do an additional $2400 of work to make the car worth $6200 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do?

Accepted Answer

A)   He should sell the car now for $3800.
B)   He should keep the car since it wouldn't be rational to spend $6400 restoring a car and then sell it for only $6200.
C)   He should complete the additional work and sell the car for $6200.
D)   It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same either way.

Question 11

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

Accepted Answer

A) True 
 B)False

Question 12

Prices direct economic activity in a market economy by

Accepted Answer

A)   influencing the actions of buyers and sellers.
B)   reducing scarcity of the goods and services produced.
C)   eliminating the need for government intervention.
D)   allocating goods and services in the most equitable way.

Question 13

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 14

Guns and butter are used to represent the classic societal tradeoff between spending on

Accepted Answer

A)   durable and nondurable goods.
B)   imports and exports.
C)   national defense and consumer goods.
D)   law enforcement and agriculture.

Question 15

Equality means distributing society's resources in the most efficient manner.

Accepted Answer

A) True 
 B)False

Question 16

Suppose the state of Massachusetts passes a law that increases the tax on alcoholic beverages. As a result, residents in Massachusetts start purchasing their alcohol 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

For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%. Country B had inflation of 4% for many years, but very recently inflation unexpectedly rose to 9%. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

Accepted Answer

A)   both country A and country B
B)   neither country A nor country B
C)   country A but not country B
D)   country B but not country A

Question 18

An example of a firm with market power is a

Accepted Answer

A)   delicatessen in New York.
B)   cable TV provider in St. Louis.
C)   clothing store in Los Angeles.
D)   family farm in Illinois.

Question 19

In the United States, the overall level of prices more than doubled during the

Accepted Answer

A)   1950s.
B)   1960s.
C)   1970s.
D)   1980s.

Question 20

When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing

Accepted Answer

A)   scarcity.
B)   surpluses.
C)   inefficiencies.
D)   inequalities.

Exam 1: Ten Principles of Economics

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

Correct Answer
verified

Government policies designed to equalize the distribution of economic well-being include (i) The welfare system (ii. Unemployment insurance (iii) Progressive income tax

Correct Answer
verified

Equality means distributing society's resources in the most efficient manner.

Correct Answer
verified

An example of a firm with market power is a

Correct Answer
verified

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

Correct Answer
verified

Guns and butter are used to represent the classic societal tradeoff between spending on

Correct Answer
verified

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

Correct Answer
verified

During the early 1920s in Germany, prices

Correct Answer
verified

Correct Answer
verified

Prices direct economic activity in a market economy by

Correct Answer
verified

If an externality is present in a market, economic efficiency may be enhanced by

Correct Answer
verified

In the United States, the overall level of prices more than doubled during the

Correct Answer
verified

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

Correct Answer
verified

The term used to describe a situation in which markets do not allocate resources efficiently is

Correct Answer
verified

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

Correct Answer
verified

Suppose the state of Massachusetts passes a law that increases the tax on alcoholic beverages. As a result, residents in Massachusetts start purchasing their alcohol in surrounding states. Which of the following principles does this best illustrate?

Correct Answer
verified

In a market economy, economic activity is guided by

Correct Answer
verified

When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Exam 1: Ten Principles of Economics

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

Correct AnswerverifiedShow Answer

Government policies designed to equalize the distribution of economic well-being include (i) The welfare system (ii. Unemployment insurance (iii) Progressive income tax

Correct AnswerverifiedShow Answer

Equality means distributing society's resources in the most efficient manner.

Correct AnswerverifiedShow Answer

An example of a firm with market power is a

Correct AnswerverifiedShow Answer

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

Correct AnswerverifiedShow Answer

Guns and butter are used to represent the classic societal tradeoff between spending on

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

During the early 1920s in Germany, prices

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Prices direct economic activity in a market economy by

Correct AnswerverifiedShow Answer

If an externality is present in a market, economic efficiency may be enhanced by

Correct AnswerverifiedShow Answer

In the United States, the overall level of prices more than doubled during the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The term used to describe a situation in which markets do not allocate resources efficiently is

Correct AnswerverifiedShow Answer

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

Correct AnswerverifiedShow Answer

Suppose the state of Massachusetts passes a law that increases the tax on alcoholic beverages. As a result, residents in Massachusetts start purchasing their alcohol in surrounding states. Which of the following principles does this best illustrate?

Correct AnswerverifiedShow Answer

In a market economy, economic activity is guided by

Correct AnswerverifiedShow Answer

When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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