Question 1

The "broken window fallacy"

Accepted Answer

A)   explains why inflation is so high.
B)   is a justification for the government to print more money.
C)   is illustrated when a government program is justified not on its merits but on the number of jobs it will create.
D)   has nothing to do with public policy.E) C) and D)
F) B) and D)

Question 2

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Accepted Answer

In Germany. Almost all variati...

Question 3

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

Question 4

In the long run the primary effect of increasing the quantity of money is higher prices.

Accepted Answer

A) True 
 B)False

Question 5

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Accepted Answer

A)   enhance equality.
B)   enhance efficiency.
C)   increase the reward for working hard.
D)   All of the above are correct.E) A) and C)
F) B) and D)

Question 6

The economy of the former Soviet Union is best described as a

Accepted Answer

A)   primitive economy.
B)   market economy.
C)   hybrid economy.
D)   centrally-planned economy.E) A) and B)
F) A) and C)

Question 7

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Accepted Answer

A)   U.S. textile workers belong to a union, whereas Vietnamese textile workers do not belong to a union.
B)   There is little demand for cotton cloth in Vietnam and great demand in the U.S.
C)   Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.
D)   Vietnam has a low-wage policy to make its textile industry more competitive in world markets.E) A) and D)
F) B) and C)

Question 8

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 D)
F) None of the above

Question 9

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

Question 10

Which of these activities will most likely result in an external benefit?

Accepted Answer

A)   A college student buys a deck of cards to play solitaire in her dorm room.
B)   An elderly woman plants a flower garden on the vacant lot next to her house.
C)   An executive purchases a book to read on a business trip.
D)   A ten-year-old uses his allowance to buy new Nike shoes.E) A) and B)
F) A) and C)

Question 11

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Accepted Answer

A)   There is no such thing as a free lunch.
B)   People buy more when prices are low than when prices are high.
C)   No matter how much people earn, they tend to spend more than they earn.
D)   Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.E) B) and D)
F) A) and D)

Question 12

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 13

For most students, the earnings they give up to attend college are

Accepted Answer

A)   a minor cost when compared to the costs of tuition, room and board, and the like.
B)   the single largest cost of their education.
C)   about equal to the costs of room and board at college.
D)   not considered true costs by an economist.E) All of the above
F) B) and D)

Question 14

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

Question 15

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

Question 16

What is the main difference between a centrally planned economy and a market economy?

Accepted Answer

In a market economy, decisions...

Question 17

Scenario 1-6
It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors.
-Refer to Scenario 1-6. What is the minimum price that would induce this company to produce the 601st heart rate monitor?

Accepted Answer

The answer of Scenario 1-6
It costs a company $30,000 to...

Question 18

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) None of the above
F) All of the above

Question 19

Central planning refers to

Accepted Answer

A)   markets guiding economic activity. Today many countries that had this system have abandoned it.
B)   markets guiding economic activity. Today many countries that did not have this system have implemented it.
C)   government guiding economic activity. Today many countries that had this system have abandoned it.
D)   government guiding economic activity. Today many countries that did not have this system have implemented it.E) All of the above
F) None of the above

Question 20

Scenario 1-6
It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors.
-Refer to Scenario 1-6. A customer is willing to pay $60 for the 601st heart rate monitor. Should the company produce and sell it? Explain.

Accepted Answer

No, because the marg...

Exam 1: Ten Principles of Economics

Correct Answer
verified
No, because the marg...
View 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

Correct Answer
verified

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Correct Answer
verified

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Correct Answer
verified
In Germany. Almost all variati...
View Answer

Trade makes costs

Correct Answer
verified

For most students, the earnings they give up to attend college are

Correct Answer
verified

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 Answer
verified

What is the main difference between a centrally planned economy and a market economy?

Correct Answer
verified
In a market economy, decisions...
View Answer

The economy of the former Soviet Union is best described as a

Correct Answer
verified

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Correct Answer
verified

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

Correct Answer
verified

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 Answer
verified

In the long run the primary effect of increasing the quantity of money is higher prices.

Correct Answer
verified

The "broken window fallacy"

Correct Answer
verified

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

Correct Answer
verified

Which of these activities will most likely result in an external benefit?

Correct Answer
verified

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

Correct Answer
verified

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Correct Answer
verified

Central planning refers to

Correct Answer
verified

Correct Answer
verified

Exam 1: Ten Principles of Economics

Correct AnswerverifiedNo, because the marg...View AnswerShow 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

Correct AnswerverifiedShow Answer

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Correct AnswerverifiedShow Answer

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Correct AnswerverifiedIn Germany. Almost all variati...View AnswerShow Answer

Trade makes costs

Correct AnswerverifiedShow Answer

For most students, the earnings they give up to attend college are

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

What is the main difference between a centrally planned economy and a market economy?

Correct AnswerverifiedIn a market economy, decisions...View AnswerShow Answer

The economy of the former Soviet Union is best described as a

Correct AnswerverifiedShow Answer

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Correct AnswerverifiedShow Answer

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

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

In the long run the primary effect of increasing the quantity of money is higher prices.

Correct AnswerverifiedShow Answer

The "broken window fallacy"

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of these activities will most likely result in an external benefit?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

Correct AnswerverifiedShow Answer

Central planning refers to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified
No, because the marg...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In Germany. Almost all variati...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In a market economy, decisions...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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