Question 1

Consider Mandy's decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. Mandy's cost of going to college is

Accepted Answer

A)  $32,000.
B)  $42,000.
C)  $50,000.
D)  $58,000.E) B) and C)
F) A) and B)

Question 2

In the 1990s, inflation in the United States was

Accepted Answer

A)  very close to zero.
B)  about 3 percent per year.
C)  about 6 percent per year.
D)  commonly referred to as "public enemy number one."E) C) and D)
F) B) and D)

Question 3

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

Accepted Answer

A)  its average cost is greater than its marginal cost.
B)  its average cost and its marginal cost are equal.
C)  its average cost is less than its marginal cost.
D)  This cannot be determined from the information given.E) C) and D)
F) A) and C)

Question 4

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

Accepted Answer

A)  inefficiency
B)  inequality
C)  scarcity
D)  market failureE) A) and B)
F) All of the above

Question 5

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

Accepted Answer

A)  $50.
B)  $500.
C)  $50,000.
D)  This cannot be determined from the information given.E) All of the above
F) A) and D)

Question 6

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

Accepted Answer

A)  1950s.
B)  1960s.
C)  1970s.
D)  1980s.E) A) and B)
F) None of the above

Question 7

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

Accepted Answer

A) True 
 B)False

Question 8

The amount of goods and services produced from each unit of labor input is called

Accepted Answer

A)  opportunity cost.
B)  productivity.
C)  externality.
D)  marginal benefit.E) A) and B)
F) A) and C)

Question 9

A rational decision maker takes an action if and only if

Accepted Answer

A)  the average benefit of the action exceeds the average cost.
B)  the average cost of the action exceeds the average benefit.
C)  the marginal benefit of the action exceeds the marginal cost.
D)  the marginal cost of the action exceeds the marginal benefit.E) A) and B)
F) B) and C)

Question 10

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The average cost per seat is

Accepted Answer

A)  $50.
B)  $500.
C)  $50,000.
D)  This cannot be determined from the information given.E) A) and D)
F) A) and C)

Question 11

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

Accepted Answer

A)  the value of a good to society, but not the cost of making it.
B)  the cost of making a good to society, but not its value.
C)  both the value of a good to society and the cost of making it.
D)  neither the value of a good to society nor the cost of making it.E) B) and C)
F) A) and D)

Question 12

Which of the following is an important cause of inflation in an economy?

Accepted Answer

A)  increases in productivity in the economy
B)  the influence of positive externalities on the economy
C)  lack of property rights in the economy
D)  growth in the quantity of money in the economyE) C) and D)
F) A) and B)

Question 13

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Accepted Answer

A) True 
 B)False

Question 14

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.E) A) and B)
F) None of the above

Question 15

Tim decides to spend four hours playing video games rather than attending his classes. His opportunity cost of playing games is

Accepted Answer

A)  the value of the knowledge he would have received had he attended his classes.
B)  the $50 he could have earned if he had worked at his job for those four hours.
C)  the value of his time playing video games minus the value of attending classes.
D)  nothing, since he valued playing video games more than attending classes.E) A) and B)
F) None of the above

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

In the short run, which of the following is not correct?

Accepted Answer

A)  Increasing the money supply increases the demand for goods and services.
B)  Increasing the money supply encourages firms to hire more workers.
C)  Lowering the money supply leads to a higher level of unemployment.
D)  Policies that encourage higher employment will also induce a lower rate of inflation.E) C) and D)
F) B) and C)

Question 18

Efficiency means that

Accepted Answer

A)  society is conserving resources in order to save them for the future.
B)  society's goods and services are distributed equally among society's members.
C)  society's goods and services are distributed fairly, though not necessarily equally, among society's members.
D)  society is getting the maximum benefits from its scarce resources.E) None of the above
F) A) and D)

Question 19

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) None of the above
F) B) and C)

Question 20

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Accepted Answer

A) True 
 B)False

Exam 1: Ten Principles of Economics

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

Correct AnswerverifiedShow Answer

Consider Mandy's decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. Mandy's cost of going to college is

Correct AnswerverifiedShow Answer

Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.

Correct AnswerverifiedShow Answer

A rational decision maker takes an action if and only if

Correct AnswerverifiedShow Answer

In the 1990s, inflation in the United States was

Correct AnswerverifiedShow Answer

Tim decides to spend four hours playing video games rather than attending his classes. His opportunity cost of playing games is

Correct AnswerverifiedShow Answer

Efficiency means that

Correct AnswerverifiedShow Answer

The amount of goods and services produced from each unit of labor input is called

Correct AnswerverifiedShow Answer

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

Correct AnswerverifiedShow Answer

In the short run, which of the following is not correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have?

Correct AnswerverifiedShow Answer

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

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

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

Correct AnswerverifiedShow Answer

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The average cost per seat is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is an important cause of inflation in an economy?

Correct AnswerverifiedShow Answer

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

Correct AnswerverifiedShow Answer

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

Correct AnswerverifiedShow Answer

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It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26^th table. If the company produces 26 tables, then

Correct Answer
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