Question 1

Economists use the word equality to describe a situation in which

Accepted Answer

A)   each member of society has the same income.
B)   each member of society has access to abundant quantities of goods and services, regardless of his or her income.
C)   society is getting the maximum benefits from its scarce resources.
D)   society's resources are used efficiently.E) None of the above
F) A) and D)

Question 2

The term "productivity"

Accepted Answer

A)   means the same thing as "efficiency."
B)   is seldom used by economists, as its meaning is not precise.
C)   refers to the quantity of goods and services produced from each unit of labor input.
D)   refers to the variety of goods and services from which households can choose when they shop.E) A) and D)
F) B) and C)

Question 3

Approximately what percentage of the world's economies experience scarcity?

Accepted Answer

A)   10%
B)   40%
C)   85%
D)   100%E) None of the above
F) All of the above

Question 4

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

Question 5

The U.S. president who referred to inflation as "public enemy number one" was

Accepted Answer

A)   Richard Nixon.
B)   Gerald Ford.
C)   Jimmy Carter.
D)   Ronald Reagan.E) A) and D)
F) A) and C)

Question 6

The amount of goods and services produced from each unit of labor input is called

Accepted Answer

A)   opportunity cost.
B)   productivity.
C)   externality.
D)   marginal benefit.E) C) and D)
F) A) and B)

Question 7

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.

Accepted Answer

A) True 
 B)False

Question 8

Economics is the study of how society manages its

Accepted Answer

A)   limited wants and unlimited resources.
B)   unlimited wants and unlimited resources.
C)   limited wants and limited resources.
D)   unlimited wants and limited resources.E) A) and C)
F) A) and D)

Question 9

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Accepted Answer

A) True 
 B)False

Question 10

The business cycle refers to fluctuations in economic activity such as employment and production.

Accepted Answer

A) True 
 B)False

Question 11

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The average cost per seat is

Accepted Answer

A)   $50.
B)   $500.
C)   $50,000.
D)   This cannot be determined from the information given.E) All of the above
F) B) and D)

Question 12

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Accepted Answer

A)   People face tradeoffs.
B)   The cost of something is what you give up to get it.
C)   Rational people think at the margin.
D)   People respond to incentives.E) None of the above
F) A) and D)

Question 13

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

Accepted Answer

A) True 
 B)False

Question 14

One effect of the government-imposed seat belt law in the U.S. has been

Accepted Answer

A)   a dramatic decrease in the number of pedestrian deaths.
B)   safer driving.
C)   an increase in the number of accidents.
D)   a dramatic decrease in the number of driver deaths.E) A) and D)
F) C) and D)

Question 15

The irregular and largely unpredictable fluctuations in economic activity are called

Accepted Answer

A)   market failure.
B)   business cycle.
C)   inflation.
D)   unemployment.E) A) and B)
F) All of the above

Question 16

What does the term "marginal change" mean?

Accepted Answer

A small incremental ...

Question 17

Government policies resulting in reduced efficiency include (i)  the welfare system
(ii)  unemployment insurance
(iii)  progressive income tax

Accepted Answer

A)   (i)  only
B)   (ii)  only
C)   (i)  and (ii)  only
D)   (i) , (ii) , and (iii) E) None of the above
F) A) and C)

Question 18

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.76 million. Which of the following statements is correct?

Accepted Answer

A)   For the first 30 houses, the average cost per house was $250,000.
B)   The marginal cost of the 31st house, if it is built, will be $260,000.
C)   If the company can experience a marginal benefit of $275,000 by building the 31st house, then the company should build it.
D)   All of the above are correct.E) A) and D)
F) C) and D)

Question 19

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 B)
F) C) and D)

Question 20

When the government prevents prices from adjusting naturally to supply and demand,

Accepted Answer

A)   it equates the amount buyers want to buy with the amount sellers want to sell.
B)   it adversely affects the allocation of resources.
C)   it improves equality and efficiency.
D)   it improves efficiency but reduces equality.E) B) and D)
F) A) and B)

Exam 1: Ten Principles of Economics

What does the term "marginal change" mean?

Correct AnswerverifiedA small incremental ...View AnswerShow Answer

The irregular and largely unpredictable fluctuations in economic activity are called

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Approximately what percentage of the world's economies experience scarcity?

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A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Correct AnswerverifiedShow Answer

The term "productivity"

Correct AnswerverifiedShow Answer

When the government prevents prices from adjusting naturally to supply and demand,

Correct AnswerverifiedShow Answer

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Correct AnswerverifiedShow Answer

One effect of the government-imposed seat belt law in the U.S. has been

Correct AnswerverifiedShow Answer

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

Correct AnswerverifiedShow Answer

The business cycle refers to fluctuations in economic activity such as employment and production.

Correct AnswerverifiedShow Answer

Economics is the study of how society manages its

Correct AnswerverifiedShow Answer

Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The average cost per seat is

Correct AnswerverifiedShow Answer

A rational decision maker takes an action if and only if

Correct AnswerverifiedShow Answer

Economists use the word equality to describe a situation in which

Correct AnswerverifiedShow 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

The U.S. president who referred to inflation as "public enemy number one" was

Correct AnswerverifiedShow Answer

Government policies resulting in reduced efficiency include (i) the welfare system (ii) unemployment insurance (iii) progressive income tax

Correct AnswerverifiedShow Answer

The amount of goods and services produced from each unit of labor input is called

Correct AnswerverifiedShow Answer

Because resources are scarce, a society cannot give all individuals the standard of living to which each aspires.

Correct AnswerverifiedShow Answer

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.76 million. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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A small incremental ...
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