Question 1

In a particular country in 1999, the average worker had to work 20 hours to produce 55 units of output. In that same country in 2009, the average worker needed to work 28 hours to produce 77 units of output. In that country, the productivity of the average worker

Accepted Answer

A)  increased by 2 percent between 1999 and 2009.
B)  increased by 5 percent between 1999 and 2009.
C)  remained unchanged between 1999 and 2009.
D)  decreased by 3 percent between 1999 and 2009.E) None of the above
F) All of the above

Question 2

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Accepted Answer

A) True 
 B)False

Question 3

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

Accepted Answer

A)  more than $40, as the average benefit will exceed the marginal cost.
B)  more than $40, as the marginal benefit will exceed the marginal cost.
C)  more than $80, as the average benefit will exceed the marginal cost.
D)  more than $80, as the marginal benefit will exceed the marginal cost.E) A) and B)
F) B) and C)

Question 4

In a market economy, who makes the decisions that guide most economic activity?

Accepted Answer

A)  firms only
B)  households only
C)  firms and households
D)  governmentE) A) and D)
F) A) and C)

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

Question 6

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)  reducing opportunity cost of goods and services produced.
D)  allocating goods and services in the most equitable way.E) A) and B)
F) C) and D)

Question 7

Which of the following phrases best captures the notion of efficiency?

Accepted Answer

A)  absolute fairness
B)  equal distribution
C)  minimum waste
D)  equitable outcomeE) C) and D)
F) All of the above

Question 8

When a single person (or small group)  has the ability to influence market prices, there is

Accepted Answer

A)  competition.
B)  market power.
C)  an externality.
D)  a lack of property rights.E) B) and C)
F) B) and D)

Question 9

Making rational decisions "at the margin" means that people

Accepted Answer

A)  make those decisions that do not impose a marginal cost.
B)  evaluate how easily a decision can be reversed if problems arise.
C)  compare the marginal costs and marginal benefits of each decision.
D)  always calculate the dollar costs for each decision.E) None of the above
F) A) and B)

Question 10

​Which of the following industries has a marginal cost that is close to zero?

Accepted Answer

A)  ​automobile
B)  ​aircraft
C)  ​software
D)  ​furnitureE) A) and D)
F) A) and C)

Question 11

Economists use the term ______ to refer to fluctuations in economic activity, such as employment and production.

Accepted Answer

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

Question 12

Economics is the study of how evenly goods and services are distributed within society.

Accepted Answer

A) True 
 B)False

Question 13

Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

Accepted Answer

A)  only if it allows us to obtain things that we couldn't make for ourselves.
B)  because it allows specialization, which increases total output.
C)  to us if we can gain and the others involved in the trade lose.
D)  in only a limited number of circumstances because others are typically self-interested.E) B) and C)
F) A) and D)

Question 14

For which of the following individuals would the opportunity cost of going to college be highest?

Accepted Answer

A)  a promising young mathematician who will command a high salary once she earns her college degree
B)  a student with average grades who has never held a job
C)  a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree
D)  a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketballE) None of the above
F) A) and B)

Question 15

Explain how trade with other countries is beneficial.

Accepted Answer

Trade allows countri...

Question 16

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) B) and C)
F) All of the above

Question 17

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

Question 18

An increase in the overall level of prices in an economy is referred to as

Accepted Answer

A)  the income effect.
B)  inflation.
C)  deflation.
D)  the substitution effect.E) A) and B)
F) None of the above

Question 19

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

Question 20

Causes of market failure include

Accepted Answer

A)  externalities and market power.
B)  market power and incorrect forecasts of consumer demand.
C)  externalities and foreign competition.
D)  incorrect forecasts of consumer demand and foreign competition.E) None of the above
F) A) and D)

Exam 1: Ten Principles of Economics

Causes of market failure include

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A rational decision maker takes an action if and only if

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Which of the following phrases best captures the notion of efficiency?

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An increase in the overall level of prices in an economy is referred to as

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Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial

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Which is the most accurate statement about trade?

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

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Economics is the study of how evenly goods and services are distributed within society.

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A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

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In a market economy, who makes the decisions that guide most economic activity?

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Benefits from trade would not include

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Explain how trade with other countries is beneficial.

Correct AnswerverifiedTrade allows countri...View AnswerShow Answer

Prices direct economic activity in a market economy by

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For which of the following individuals would the opportunity cost of going to college be highest?

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When a single person (or small group) has the ability to influence market prices, there is

Correct AnswerverifiedShow Answer

Economists use the term ______ to refer to fluctuations in economic activity, such as employment and production.

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. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

Correct AnswerverifiedShow Answer

Making rational decisions "at the margin" means that people

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​Which of the following industries has a marginal cost that is close to zero?

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In a particular country in 1999, the average worker had to work 20 hours to produce 55 units of output. In that same country in 2009, the average worker needed to work 28 hours to produce 77 units of output. In that country, the productivity of the average worker

Correct AnswerverifiedShow Answer

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Trade allows countri...
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Which of the following industries has a marginal cost that is close to zero?

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