Question 1

One advantage market economies have over centrally-planned economies is that market economies

Accepted Answer

A)   provide an equal distribution of goods and services to households.
B)   establish a significant role for government in the allocation of resources.
C)   solve the problem of scarcity.
D)   are more efficient.E) None of the above
F) All of the above

Question 2

Trade with any nation can be mutually beneficial.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following firms is most likely to have market power?

Accepted Answer

A)   a grocery store in a metropolitan area
B)   a convenience store in a suburb
C)   a pub in a college town
D)   the only gasoline station in a rural areaE) A) and B)
F) None of the above

Question 4

A rationale for government involvement in a market economy is

Accepted Answer

A)   markets sometimes fail to produce a fair distribution of economic well-being.
B)   markets sometimes fail to produce an efficient allocation of resources.
C)   property rights have to be enforced.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 5

Stephen is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5,800. Stephen discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do?

Accepted Answer

A)   He should sell the car now for $3,800.
B)   He should keep the car since it wouldn't be rational to spend $6,400 restoring a car and then sell it for only $5,800.
C)   He should complete the additional work and sell the car for $5,800.
D)   It does not matter which action he takes since the outcome will be the same either way.E) C) and D)
F) None of the above

Question 6

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 7

Market failure is the ability of a single person to have a substantial influence on market prices.

Accepted Answer

A) True 
 B)False

Question 8

The failure of communism in a large number of countries is at least partly explained by

Accepted Answer

A)   the fact that those countries relied absolutely on the invisible hand.
B)   the fact that those countries did little or nothing to restrict trade with other countries.
C)   the lack of information, on the part of central planners in those countries, about tastes and preferences in their economies.
D)   the lack of information, on the part of central planners in those countries, about how much authority the government had in affecting economic outcomes.E) B) and C)
F) A) and C)

Question 9

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

Question 10

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

Accepted Answer

A)   worker productivity in Bangladesh is higher than in India.
B)   the standard of living will likely be higher in India than in Bangladesh.
C)   productivity is 4 units per hour for the worker in Bangladesh and 3 units per hour for the worker in India.
D)   there will be no difference between the standard of living in India and Bangladesh.E) C) and D)
F) A) and B)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Which of the following is true?

Accepted Answer

A)   Efficiency refers to the size of the economic pie; equality refers to how the pie is divided.
B)   Government policies usually improve upon both equality and efficiency.
C)   As long as the economic pie continually gets larger, no one will have to go hungry.
D)   Efficiency and equality can both be achieved if the economic pie is cut into equal pieces.E) B) and D)
F) A) and C)

Question 15

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

Question 16

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Accepted Answer

A) True 
 B)False

Question 17

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) All of the above
F) None of the above

Question 18

For a very long time the country of Zeeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

Accepted Answer

A)   could be due to slower money supply growth. We would expect unemployment to be higher.
B)   could be due to slower money supply growth. We would expect unemployment to be lower.
C)   could be due to higher money supply growth. We would expect unemployment to be higher.
D)   could be due to higher money supply growth. We would expect unemployment to be lower.E) C) and D)
F) A) and B)

Question 19

The short-run tradeoff between inflation and unemployment implies that, in the short run,

Accepted Answer

A)   a decrease in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate.
B)   an increase in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate.
C)   policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate.
D)   policymakers can influence the inflation rate, but not the unemployment rate.E) B) and C)
F) A) and D)

Question 20

The decisions of firms and households are guided by prices and self-interest in a

Accepted Answer

A)   command economy.
B)   centrally-planned economy.
C)   market economy.
D)   All of the above are correct.E) B) and D)
F) A) and C)

Exam 1: Ten Principles of Economics

Efficiency means that

Correct Answer
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Trade with any nation can be mutually beneficial.

Correct Answer
verified

Market failure is the ability of a single person to have a substantial influence on market prices.

Correct Answer
verified

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

Correct Answer
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An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Correct Answer
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Correct Answer
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To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Correct Answer
verified

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

Correct Answer
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A rationale for government involvement in a market economy is

Correct Answer
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Central planning refers to

Correct Answer
verified

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

Correct Answer
verified

Which of the following is true?

Correct Answer
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The decisions of firms and households are guided by prices and self-interest in a

Correct Answer
verified

The short-run tradeoff between inflation and unemployment implies that, in the short run,

Correct Answer
verified

Which of the following firms is most likely to have market power?

Correct Answer
verified

One advantage market economies have over centrally-planned economies is that market economies

Correct Answer
verified

The failure of communism in a large number of countries is at least partly explained by

Correct Answer
verified

For a very long time the country of Zeeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Exam 1: Ten Principles of Economics

Efficiency means that

Correct AnswerverifiedShow Answer

Trade with any nation can be mutually beneficial.

Correct AnswerverifiedShow Answer

Market failure is the ability of a single person to have a substantial influence on market prices.

Correct AnswerverifiedShow Answer

Suppose a typical worker in India can produce 32 units of product in an eight-hour day, while a typical worker in Bangladesh can produce 30 units of product in a 10-hour day. We can conclude that

Correct AnswerverifiedShow Answer

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

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 rationale for government involvement in a market economy is

Correct AnswerverifiedShow Answer

Central planning refers to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

The decisions of firms and households are guided by prices and self-interest in a

Correct AnswerverifiedShow Answer

The short-run tradeoff between inflation and unemployment implies that, in the short run,

Correct AnswerverifiedShow Answer

Which of the following firms is most likely to have market power?

Correct AnswerverifiedShow Answer

One advantage market economies have over centrally-planned economies is that market economies

Correct AnswerverifiedShow Answer

The failure of communism in a large number of countries is at least partly explained by

Correct AnswerverifiedShow Answer

For a very long time the country of Zeeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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