Question 1

Workers in the countries of Western Europe have a relatively high standard of living because those countries have relatively high minimum wage rates.

Accepted Answer

A) True 
 B)False

Question 2

In a market economy:

Accepted Answer

A)   People are rewarded according to their family size.
B)   People are rewarded according to how well they achieve the goals set by government.
C)   People are rewarded according to how many hours they work.
D)   People are rewarded according to their ability to produce things for which other people are willing to pay.E) C) and D)
F) None of the above

Question 3

The European Union will benefit economically if we eliminate trade with Asian countries because EU citizens will be forced to produce more of their own cars and clothes.

Accepted Answer

A) True 
 B)False

Question 4

Adam Smith argues in the Wealth of Nations that an economy will produce more goods and services if:

Accepted Answer

A)   People act in the public interest than if they act in their own self-interest.
B)   People act in their own self-interest, than if the government directs economic activity.
C)   The government controls the use of the nation's scarce resources.
D)   People ignore their own interests and contribute to national wealth as a whole.E) B) and D)
F) B) and C)

Question 5

A rational person does not act unless:

Accepted Answer

A)   The action is ethical.
B)   The action produces marginal costs that exceed marginal benefits.
C)   The action produces marginal benefits that exceed marginal costs.
D)   The action makes money for the person.
E)   None of these answers.F) D) and E)
G) C) and E)

Question 6

High and persistent inflation is caused by:

Accepted Answer

A)   Unions increasing wages too much.
B)   OPEC raising the price of oil too much.
C)   Governments increasing the quantity of money too much.
D)   Regulations raising the cost of production too much.E) B) and D)
F) C) and D)

Question 7

Which of the following products would be least capable of producing an externality?

Accepted Answer

A)   Inoculations against disease.
B)   Cigarettes.
C)   Food.
D)   Education.
E)   Hi-fi equipment.F) A) and B)
G) A) and E)

Question 8

Workers in Western Europe enjoy a high standard of living because:

Accepted Answer

A)   The countries of Western Europe have set high minimum wage rates.
B)   Unions in Western Europe keep the wage high.
C)   None of these answers.
D)   The countries of Western Europe have protected their industries from foreign competition.
E)   Workers in the Western Europe are highly productive.F) A) and C)
G) D) and E)

Question 9

Suppose you find €30. If you choose to use the €30 to go to a football match, your opportunity cost of going to the game is:

Accepted Answer

A)   Nothing, because you found the money.
B)   €30 (because you could have used the €30 to buy other things)  plus the value of your time spent at the game.
C)   €30 (because you could have used the €30 to buy other things)  plus the value of your time spent at the game, plus the cost of the dinner you purchased at the game.
D)   €30 (because you could have used the €30 to buy other things) .
E)   None of these answersF) A) and E)
G) A) and D)

Question 10

Why is a high quality education system important in raising living standards for future generations?

Accepted Answer

A high quality educational system will r...

Question 11

Economics deals primarily with the concept of:

Accepted Answer

A)   Scarcity.
B)   Money.
C)   Poverty.
D)   Banking.E) B) and C)
F) All of the above

Question 12

When economists say, "There is no such thing as a free lunch," they mean that all economic decisions involve trade-offs.

Accepted Answer

A) True 
 B)False

Question 13

The Phillips curve shows that:

Accepted Answer

A)   The business cycle has been eliminated.
B)   An increase in inflation temporarily increases unemployment.
C)   Inflation and unemployment are unrelated in the short run.
D)   A decrease in inflation temporarily increases unemployment.
E)   None of these answers.F) A) and E)
G) A) and D)

Question 14

The market power that your university's bookstore has now, compared with the 1990s, is limited by:

Accepted Answer

A)   New competition laws.
B)   Public goods provided by the government.
C)   University policies against monopoly power.
D)   Increased access to other booksellers provided by the internet.E) A) and D)
F) A) and C)

Question 15

When the government redistributes income with taxes and welfare, the economy becomes more efficient.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is true about a market economy?

Accepted Answer

A)   With a large enough computer, central planners could guide production more efficiently than markets.
B)   Market participants act as if guided by an invisible hand to produce outcomes that maximize social welfare.
C)   The strength of a market system is that it tends to distribute resources evenly across consumers.
D)   Taxes help prices communicate costs and benefits to producers and consumers.E) A) and C)
F) A) and D)

Question 17

Policy makers can affect inflation and unemployment in the short term by

Accepted Answer

A)   Eliminating externalities.
B)   Giving the central bank independence.
C)   Changing the amount that the government spends.
D)   Encouraging firms to think at the margin.E) A) and D)
F) B) and C)

Question 18

Since people respond to incentives, we would expect that, if the average salary of accountants increases by 50% while the average salary of teachers increases by 20%, then:

Accepted Answer

A)   Fewer students will take degree courses in accounting and more will take education courses.
B)   Fewer students will take degree courses in education and more will take accounting courses.
C)   Fewer students will attend university.
D)   None of these answers.E) A) and C)
F) B) and C)

Question 19

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

Accepted Answer

To lower inflation, the government may c...

Question 20

Almost all variation in living standards in different countries:

Accepted Answer

A)   Is attributable to variations in productivity.
B)   Is attributable to differences in countries' endowments of natural resources.
C)   Is attributable to differences in climate.
D)   Is attributable to variation in population sizes.E) None of the above
F) B) and D)

Exam 1: What Is Economics

A rational person does not act unless:

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When economists say, "There is no such thing as a free lunch," they mean that all economic decisions involve trade-offs.

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The European Union will benefit economically if we eliminate trade with Asian countries because EU citizens will be forced to produce more of their own cars and clothes.

Correct AnswerverifiedShow Answer

Economics deals primarily with the concept of:

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The Phillips curve shows that:

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Workers in the countries of Western Europe have a relatively high standard of living because those countries have relatively high minimum wage rates.

Correct AnswerverifiedShow Answer

Policy makers can affect inflation and unemployment in the short term by

Correct AnswerverifiedShow Answer

Suppose you find €30. If you choose to use the €30 to go to a football match, your opportunity cost of going to the game is:

Correct AnswerverifiedShow Answer

Almost all variation in living standards in different countries:

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Adam Smith argues in the Wealth of Nations that an economy will produce more goods and services if:

Correct AnswerverifiedShow Answer

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

Correct AnswerverifiedTo lower inflation, the government may c...View AnswerShow Answer

Workers in Western Europe enjoy a high standard of living because:

Correct AnswerverifiedShow Answer

Why is a high quality education system important in raising living standards for future generations?

Correct AnswerverifiedA high quality educational system will r...View AnswerShow Answer

Since people respond to incentives, we would expect that, if the average salary of accountants increases by 50% while the average salary of teachers increases by 20%, then:

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In a market economy:

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High and persistent inflation is caused by:

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Which of the following statements is true about a market economy?

Correct AnswerverifiedShow Answer

When the government redistributes income with taxes and welfare, the economy becomes more efficient.

Correct AnswerverifiedShow Answer

The market power that your university's bookstore has now, compared with the 1990s, is limited by:

Correct AnswerverifiedShow Answer

Which of the following products would be least capable of producing an externality?

Correct AnswerverifiedShow Answer

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To lower inflation, the government may c...
View Answer

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A high quality educational system will r...
View Answer

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