Question 1

The principle that "trade can make everyone better off" applies to interactions and trade between

Accepted Answer

A)   families.
B)   states within the United States.
C)   nations.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 2

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.E) All of the above
F) A) and B)

Question 3

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Accepted Answer

A)   the pie gets larger, and there will be more pie overall.
B)   the pie gets smaller, and there will be less pie overall.
C)   it increases the reward for working hard, resulting in people producing more goods and services.
D)   those who earn more income pay less in taxes.E) B) and C)
F) All of the above

Question 4

Explain the concept of externality and give an example.

Accepted Answer

The impact of one pe...

Question 5

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

Accepted Answer

A)   productivity.
B)   an externality.
C)   market power.
D)   property rights.E) None of the above
F) A) and D)

Question 6

Almost all variation in living standards is attributable to differences in countries'

Accepted Answer

A)   population growth rates.
B)   productivity.
C)   systems of public education.
D)   taxes.E) None of the above
F) C) and D)

Question 7

Economists use the term to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

Accepted Answer

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

Question 8

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Accepted Answer

A)   the unexpected repairs and the increase in the price of gas
B)   the unexpected increase for repairs, but not the increase in the price of gas
C)   the increase in the price of gas, but not the unexpected repairs
D)   neither the unexpected increase in the price of gas nor the unexpected repairsE) B) and C)
F) B) and D)

Question 9

When calculating the cost of college, which of the following should you probably include?

Accepted Answer

A)   The cost of your meal plan for the cafeteria.
B)   The cost of books required for college classes
C)   The income you earn at your part-time job.
D)   The cost of living in the dormitory.E) A) and D)
F) B) and C)

Question 10

Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.

Accepted Answer

A) True 
 B)False

Question 11

To improve living standards, policymakers should

Accepted Answer

A)   impose restrictions on foreign competition.
B)   formulate policies designed to increase productivity.
C)   impose tougher immigration policies.
D)   provide tax breaks for the middle class.E) A) and C)
F) A) and B)

Question 12

An example of an externality is the impact of

Accepted Answer

A)   bad weather on the income of farmers.
B)   the personal income tax on a person's ability to purchase goods and services.
C)   pollution from a factory on the health of people in the vicinity of the factory.
D)   increases in health care costs on the health of individuals in society.E) None of the above
F) B) and D)

Question 13

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.E) A) and D)
F) All of the above

Question 14

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. 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.E) B) and D)
F) A) and B)

Question 15

The term refers to a small incremental adjustment to an existing plan of action.

Accepted Answer

The answer of The term refers to a small incremental...

Question 16

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

Accepted Answer

A) True 
 B)False

Question 17

Olivia was accepted by Northwestern and by another university. She is trying to decide where to go. Which of the following should influence her decision?

Accepted Answer

A)   how much she spent applying to Northwestern, and the difference between living expenses at Northwestern and the other university
B)   how much she spent applying to Northwestern, but not the difference between living expenses at Northwestern and the other university
C)   the difference between living expenses at Northwestern and her second choice, but not how much she spent applying to Northwestern
D)   neither how much she spent applying to Northwestern nor the difference between living expenses at Northwestern and her second choiceE) All of the above
F) None of the above

Question 18

A rational decisionmaker

Accepted Answer

A)   ignores marginal changes and focuses instead on "the big picture."
B)   ignores the likely effects of government policies when he or she makes choices.
C)   takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.
D)   takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.E) B) and D)
F) B) and C)

Question 19

The term "productivity"

Accepted Answer

A)   means the same thing as "efficiency."
B)   is seldom used by economists, as its meaning is not precise.
C)   refers to the quantity of goods and services produced from each unit of labor input.
D)   refers to the variety of goods and services from which households can choose when they shop.E) B) and C)
F) None of the above

Question 20

Which of the following statements best characterizes a basic difference between market economies and centrally- planned economies?

Accepted Answer

A)   Society relies more upon prices to allocate resources when the economy is centrally-planned than when it is market-based.
B)   The self-interest of households is reflected more fully in the outcome of a centrally-planned economy than in the outcome of a market economy.
C)   Government plays a larger role in the economic affairs of a market economy than in the economic affairs of a centrally-planned economy.
D)   None of the above are correct.E) B) and C)
F) All of the above

Exam 1: Ten Principles of Economics

Almost all variation in living standards is attributable to differences in countries'

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

The term refers to a small incremental adjustment to an existing plan of action.

Correct AnswerverifiedShow Answer

An example of an externality is the impact of

Correct AnswerverifiedShow Answer

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

Correct AnswerverifiedShow Answer

Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity.

Correct AnswerverifiedShow Answer

Explain the concept of externality and give an example.

Correct AnswerverifiedThe impact of one pe...View AnswerShow Answer

A rational decisionmaker

Correct AnswerverifiedShow Answer

When calculating the cost of college, which of the following should you probably include?

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The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

Correct AnswerverifiedShow Answer

The principle that "trade can make everyone better off" applies to interactions and trade between

Correct AnswerverifiedShow Answer

Which of the following statements best characterizes a basic difference between market economies and centrally- planned economies?

Correct AnswerverifiedShow Answer

Olivia was accepted by Northwestern and by another university. She is trying to decide where to go. Which of the following should influence her decision?

Correct AnswerverifiedShow Answer

To improve living standards, policymakers should

Correct AnswerverifiedShow Answer

Economists use the term to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

Correct AnswerverifiedShow Answer

The term "productivity"

Correct AnswerverifiedShow Answer

As a result of a successful attempt by government to cut the economic pie into more equal slices,

Correct AnswerverifiedShow Answer

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

Correct AnswerverifiedShow Answer

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The impact of one pe...
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