Question 1

Which of the following claims is consistent with the views of mainstream economists?

Accepted Answer

A)   If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily fall.
B)   If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will temporarily rise.
C)   If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently fall.
D)   If we increase the rate of inflation from 3 percent to 6 percent, then the rate of unemployment will permanently rise.E) C) and D)
F) B) and D)

Question 2

One of the 20th century's worst episodes of inflation occurred in

Accepted Answer

A)   the United States in the 1960s.
B)   Italy in the 1950s.
C)   Russia in the 1930s.
D)   Germany in the 1920s.E) A) and D)
F) A) and C)

Question 3

What is the most important factor that explains differences in living standards across countries?

Accepted Answer

A)   the quantity of money
B)   the level of unemployment
C)   productivity
D)   equalityE) None of the above
F) A) and B)

Question 4

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Accepted Answer

A)   is a basic principle regarding individual decisionmaking.
B)   amounts to a denial of one of the basic principles regarding interactions among people.
C)   supports the idea that the "invisible hand" should guide economic activity.
D)   was promoted by the economist Adam Smith in a well-known 1776 book.E) A) and B)
F) None of the above

Question 5

When government policies are enacted,

Accepted Answer

A)   equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality.
B)   efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss.
C)   it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished.
D)   None of the above are correct.E) A) and B)
F) A) and C)

Question 6

You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

Accepted Answer

A)   both the cost of driving the first 800 miles and the next 15 miles.
B)   the cost of driving the first 800 miles, but not the cost of driving the next 15 miles.
C)   the cost of driving the next 15 miles, but not the cost of driving the first 800 miles.
D)   neither the cost of driving the first 800 miles nor the cost of driving the next 15 miles.E) A) and C)
F) B) and C)

Question 7

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Accepted Answer

A)   15 years.
B)   25 years.
C)   35 years.
D)   45 years.E) A) and B)
F) A) and C)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

Accepted Answer

They reduce the reward for wor...

Question 10

Economists use the term to refer to the ability of a single person or a small group) to have a substantial influence on market prices.

Accepted Answer

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

Question 11

Scarcity means that there is less of a good or resource available than people wish to have.

Accepted Answer

A) True 
 B)False

Question 12

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

Accepted Answer

A)   we should agree with Senator Brown.
B)   we should agree with Senator Johnson.
C)   a good decision requires that we recognize both viewpoints.
D)   there are no tradeoffs between equity and efficiency.E) A) and B)
F) B) and C)

Question 13

Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by

Accepted Answer

A)   a market economy.
B)   a strong reliance on prices and individuals' self­interests.
C)   a system of large privately-owned firms.
D)   the actions of government central planners.E) A) and C)
F) A) and D)

Question 14

Which of the following is a subject that economists study?

Accepted Answer

A)   the growth in average income
B)   the fraction of the population that cannot find work
C)   the rate at which prices are rising
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 15

Consider two countries, Muria and Zenya. In Muria total annual output is worth $800 million and people work 40 million hours. In Zenya total annual output is worth $900 million and people work 50 million hours. In which country is productivity higher?

Accepted Answer

The answer of Consider two countries, Muria and Zenya. In...

Question 16

The phrase "no such thing as a free lunch" means

Accepted Answer

A)   people must face tradeoffs.
B)   rational people think at the margin.
C)   people respond to incentives.
D)   trade can make everyone better off.E) None of the above
F) All of the above

Question 17

John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that

Accepted Answer

A)   trade can make everyone better off.
B)   people face trade-offs.
C)   rational people think at the margin.
D)   people respond to incentives.E) All of the above
F) B) and D)

Question 18

The mainstream view among economists is that

Accepted Answer

A)   society faces a tradeoff between unemployment and inflation, but only in the short run.
B)   society faces a tradeoff between unemployment and inflation, but only in the long run.
C)   society faces a tradeoff between unemployment and inflation, both in the short run and in the long run.
D)   no tradeoff exists between unemployment and inflation, either in the short run or in the long run.E) B) and D)
F) B) and C)

Question 19

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

Question 20

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

Accepted Answer

A)   cost of teaching increased.
B)   benefit of teaching increased.
C)   cost of a corporate job increased.
D)   benefit of a corporate job decreased.E) B) and D)
F) All of the above

Exam 1: Ten Principles of Economics

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

Correct AnswerverifiedShow Answer

The mainstream view among economists is that

Correct AnswerverifiedShow Answer

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

Correct AnswerverifiedShow Answer

Consider two countries, Muria and Zenya. In Muria total annual output is worth $800 million and people work 40 million hours. In Zenya total annual output is worth $900 million and people work 50 million hours. In which country is productivity higher?

Correct AnswerverifiedShow Answer

John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that

Correct AnswerverifiedShow Answer

What is the most important factor that explains differences in living standards across countries?

Correct AnswerverifiedShow Answer

In the United States, incomes historically have grown about 2 percent per year. At this rate, average income doubles every

Correct AnswerverifiedShow Answer

Economists use the term to refer to the ability of a single person or a small group) to have a substantial influence on market prices.

Correct AnswerverifiedShow Answer

When government policies are enacted,

Correct AnswerverifiedShow Answer

Scarcity means that there is less of a good or resource available than people wish to have.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

Correct AnswerverifiedShow Answer

Which of the following is a subject that economists study?

Correct AnswerverifiedShow Answer

The phrase "no such thing as a free lunch" means

Correct AnswerverifiedShow Answer

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

Correct AnswerverifiedThey reduce the reward for wor...View AnswerShow Answer

Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by

Correct AnswerverifiedShow Answer

In the 1990s, inflation in the United States was

Correct AnswerverifiedShow Answer

Which of the following claims is consistent with the views of mainstream economists?

Correct AnswerverifiedShow Answer

You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

Correct AnswerverifiedShow Answer

One of the 20th century's worst episodes of inflation occurred in

Correct AnswerverifiedShow Answer

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They reduce the reward for wor...
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