Question 1

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)

Question 2

The term market failure refers to

Accepted Answer

A)   a situation in which the market on its own fails to allocate resources efficiently.
B)   an unsuccessful advertising campaign which reduces demand for a product.
C)   a situation in which competition among firms becomes ruthless.
D)   a firm which is forced out of business because of losses.E) A) and D)
F) A) and B)

Question 3

Productivity is defined as the

Accepted Answer

A)   amount of goods and services produced from each unit of labor input.
B)   number of workers required to produce a given amount of goods and services.
C)   amount of labor that can be saved by replacing workers with machines.
D)   actual amount of effort workers put into an hour of working time.E) A) and B)
F) A) and C)

Question 4

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents. As a student of economics, you know that

Accepted Answer

A)   this is a case of the "broken window fallacy."
B)   this is a great use of taxpayer dollars.
C)   this policy diverts money from spending somewhere else in the economy.
D)   Both a and c are correct.E) A) and B)
F) A) and C)

Question 5

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 company's average cost?

Accepted Answer

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

Question 6

The opportunity cost of going to college is

Accepted Answer

A)   the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses.
B)   the value of the best opportunity a student gives up to attend college.
C)   zero for students who are fortunate enough to have all of their college expenses paid by someone else.
D)   zero, since a college education will allow a student to earn a larger income after graduation.E) A) and D)
F) A) and C)

Question 7

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

Question 8

Government policies can change the costs and benefits that people face. Those policies have the potential to

Accepted Answer

A)   alter people's behavior.
B)   alter people's decisions at the margin.
C)   produce results that policymakers did not intend.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 9

For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%. Country B had inflation of 4% for many years, but very recently inflation unexpectedly rose to 9%. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

Accepted Answer

A)   both country A and country B
B)   neither country A nor country B
C)   country A but not country B
D)   country B but not country AE) A) and B)
F) B) and C)

Question 10

One reason we need government, even in a market economy, is that

Accepted Answer

A)   there is insufficient market power in the absence of government.
B)   property rights are too strong in the absence of government.
C)   the invisible hand is not perfect.
D)   Both a and b are correct.E) A) and C)
F) A) and B)

Question 11

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

Accepted Answer

A)   in Brazil. Most variation in the standard of living across countries is due to differences in productivity.
B)   in Brazil. Differences in productivity explain very little of the variation in the standard of living across countries.
C)   in Peru. Most variation in the standard of living across countries is due to differences in productivity.
D)   in Peru. Differences in productivity explain very little of the variation in the standard of living across countries.E) All of the above
F) None of the above

Question 12

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 13

The income of a typical worker in a country is most closely linked to which of the following?

Accepted Answer

A)   population
B)   productivity
C)   market power
D)   government policiesE) None of the above
F) All of the above

Question 14

Which of the following is a decision that economists study?

Accepted Answer

A)   how much people work
B)   what people buy
C)   how much money people save
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 15

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 16

In most societies, resources are allocated by

Accepted Answer

A)   a single central planner.
B)   a small number of central planners.
C)   those firms that use resources to provide goods and services.
D)   the combined actions of millions of households and firms.E) A) and D)
F) None 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) A) and B)
F) B) 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) All of the above

Question 19

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

Accepted Answer

A)   intended to reduce unemployment.
B)   may lead to excessive inflation over time.
C)   resulted in higher taxes and an increased supply of money.
D)   Both a and b are correct.E) A) and D)
F) All of the above

Question 20

People are willing to pay more for a diamond than for a bottle of water because

Accepted Answer

A)   the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water.
B)   the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.
C)   producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices.
D)   water prices are held artificially low by governments, since water is necessary for life.E) None of the above
F) B) and C)

Exam 1: Ten Principles of Economics

Government policies can change the costs and benefits that people face. Those policies have the potential to

Correct Answer
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Correct Answer
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The term market failure refers to

Correct Answer
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Causes of market failure include

Correct Answer
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Which of the following is a decision that economists study?

Correct Answer
verified

Productivity is defined as the

Correct Answer
verified

The income of a typical worker in a country is most closely linked to which of the following?

Correct Answer
verified

A rational decision maker takes an action if and only if

Correct Answer
verified

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

Correct Answer
verified

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

Correct Answer
verified

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents. As a student of economics, you know that

Correct Answer
verified

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 Answer
verified

The opportunity cost of going to college is

Correct Answer
verified

People are willing to pay more for a diamond than for a bottle of water because

Correct Answer
verified

One reason we need government, even in a market economy, is that

Correct Answer
verified

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 company's average cost?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

In most societies, resources are allocated by

Correct Answer
verified

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 Answer
verified

Exam 1: Ten Principles of Economics

Government policies can change the costs and benefits that people face. Those policies have the potential to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The term market failure refers to

Correct AnswerverifiedShow Answer

Causes of market failure include

Correct AnswerverifiedShow Answer

Which of the following is a decision that economists study?

Correct AnswerverifiedShow Answer

Productivity is defined as the

Correct AnswerverifiedShow Answer

The income of a typical worker in a country is most closely linked to which of the following?

Correct AnswerverifiedShow Answer

A rational decision maker takes an action if and only if

Correct AnswerverifiedShow Answer

Suppose that in Brazil total annual output is worth $600 million and people work 30 million hours. In Peru total annual output is worth $800 million and people work 50 million hours. Productivity is higher

Correct AnswerverifiedShow Answer

The combination of President Obama's strategies and the Federal Reserve's reaction to the deep economic downturn in the US in 2008 and 2009

Correct AnswerverifiedShow Answer

Congressman Dearmark justified spending $3 million on a new entertainment complex in his district because it will create 450 new jobs for his residents. As a student of economics, you know that

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

The opportunity cost of going to college is

Correct AnswerverifiedShow Answer

People are willing to pay more for a diamond than for a bottle of water because

Correct AnswerverifiedShow Answer

One reason we need government, even in a market economy, is that

Correct AnswerverifiedShow Answer

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 company's average cost?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In most societies, resources are allocated by

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

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