Question 1

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.E) A) and B)
F) A) and C)

Question 2

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

Accepted Answer

A)   to promote efficiency
B)   to promote equality
C)   to enforce property rights
D)   to protect an industry from foreign competitionE) A) and B)
F) A) and C)

Question 3

Trade makes costs

Accepted Answer

A)   higher and reduces the variety of goods and services available.
B)   higher but raises the variety of goods and services available.
C)   lower but reduces the variety of goods and services available.
D)   lower and raises the variety of goods and services available.E) B) and D)
F) A) and B)

Question 4

The principle that "people face tradeoffs" applies to

Accepted Answer

A)   individuals.
B)   families.
C)   societies.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 5

People are likely to respond to a policy change

Accepted Answer

A)   only if they think the policy is a good one.
B)   only if the policy change changes the costs of their behavior.
C)   only if the policy change changes the benefits of their behavior.
D)   if the policy changes either the costs or benefits of their behavior.E) A) and D)
F) B) and D)

Question 6

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

Accepted Answer

A)   The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise.
B)   The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise.
C)   Only half of the cost of the parking permit is part of the opportunity cost of attending college.
D)   The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances.E) B) and C)
F) A) and C)

Question 7

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) B) and D)
F) C) and D)

Question 8

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

Question 9

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) A) and D)
F) A) and C)

Question 10

Low rates of inflation are generally associated with

Accepted Answer

A)   low rates of government spending.
B)   small or nonexistent government budget deficits.
C)   low rates of productivity growth.
D)   low rates of growth of the quantity of money.E) A) and B)
F) B) and D)

Question 11

When the government prevents prices from adjusting naturally to supply and demand,

Accepted Answer

A)   it equates the amount buyers want to buy with the amount sellers want to sell.
B)   it adversely affects the allocation of resources.
C)   it improves equality and efficiency.
D)   it improves efficiency but reduces equality.E) A) and B)
F) All of the above

Question 12

Benefits from trade would not include

Accepted Answer

A)   the ability of people and nations to specialize.
B)   a greater variety of goods and services becoming available.
C)   less competition.
D)   lower prices.E) None of the above
F) A) and D)

Question 13

Oil is considered to be a non-renewable energy source.Oil

Accepted Answer

A)   is an unlimited resource.
B)   is a scarce resource.
C)   is not a productive resource.
D)   has no opportunity cost.E) B) and D)
F) None of the above

Question 14

The tradeoff between inflation and unemployment

Accepted Answer

A)   implies that policies designed to reduce unemployment also reduce inflation.
B)   was eliminated by improved economic policies in the 1900s.
C)   is a long-run tradeoff,persisting for decades,according to most economists.
D)   None of the above are correct.E) B) and D)
F) All of the above

Question 15

Economists study how people make decisions.

Accepted Answer

A) True 
 B)False

Question 16

Rational people make decisions at the margin by

Accepted Answer

A)   following marginal traditions.
B)   behaving in a random fashion.
C)   thinking in black-and-white terms.
D)   comparing marginal costs and marginal benefits.E) None of the above
F) C) and D)

Question 17

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight.The marginal cost per room per night

Accepted Answer

A)   is $40.
B)   is $80.
C)   is $120.
D)   cannot be determined from the information given.E) A) and B)
F) A) and C)

Question 18

When the government attempts to improve equality in an economy the result is often

Accepted Answer

A)   an increase in overall output in the economy.
B)   additional government revenue since overall income will increase.
C)   a reduction in equality.
D)   a reduction in efficiency.E) B) and C)
F) A) and D)

Question 19

Inflation increases the value of money.

Accepted Answer

A) True 
 B)False

Question 20

After much consideration,you have chosen Ireland over Spain for your Study Abroad program next year.However,the deadline for your final decision is still months away and you may reverse this decision.Which of the following events would prompt you to reverse this decision?

Accepted Answer

A)   The marginal benefit of going to Spain increases.
B)   The marginal cost of going to Spain increases.
C)   The marginal benefit of going to Ireland increases.
D)   The marginal cost of going to Ireland decreases.E) A) and C)
F) B) and D)

Exam 1: Ten Principles of Economics

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

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People are likely to respond to a policy change

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Oil is considered to be a non-renewable energy source.Oil

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Economists study how people make decisions.

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Benefits from trade would not include

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Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

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Which is the most accurate statement about trade?

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Rational people make decisions at the margin by

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Low rates of inflation are generally associated with

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When the government prevents prices from adjusting naturally to supply and demand,

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Inflation increases the value of money.

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

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The principle that "people face tradeoffs" applies to

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When the government attempts to improve equality in an economy the result is often

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After much consideration,you have chosen Ireland over Spain for your Study Abroad program next year.However,the deadline for your final decision is still months away and you may reverse this decision.Which of the following events would prompt you to reverse this decision?

Correct AnswerverifiedShow Answer

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight.The marginal cost per room per night

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

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Trade makes costs

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The tradeoff between inflation and unemployment

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An example of a firm with market power is a

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