Question 1

Which statement is NOT one of the five principles for understanding how individual choices interact?

Accepted Answer

A) There are gains from trade. 
B) Markets move toward equilibrium. 
C) Resources should be used as efficiently as possible to achieve society's goals. 
D) Overall spending sometimes gets out of line with the economy's productive capability. 
A) There are gains from trade. 
B) Markets move toward equilibrium. 
C) Resources should be used as efficiently as possible to achieve society's goals. 
D) Overall spending sometimes gets out of line with the economy's productive capability.

Question 2

Overall,trade between China and the United States will:

Accepted Answer

A) benefit the United States more than China. 
B) benefit China more than the United States. 
C) benefit both countries. 
D) hurt both countries. 
A) benefit the United States more than China. 
B) benefit China more than the United States. 
C) benefit both countries. 
D) hurt both countries.

Question 3

Which book illustrates the advantages of specialization using an eighteenth-century pin factory as an example?

Accepted Answer

A) Free to Choose,by Milton Friedman 
B) The Wealth of Nations,by Adam Smith 
C) Das Kapital,by Karl Marx 
D) The General Theory,by John Maynard Keynes 
A) Free to Choose,by Milton Friedman 
B) The Wealth of Nations,by Adam Smith 
C) Das Kapital,by Karl Marx 
D) The General Theory,by John Maynard Keynes

Question 4

Your neighbor is mowing her yard one afternoon when she stops to have some lemonade.She drinks one glass and is now deciding whether or not to have a second glass.This is an example of _____ analysis.

Accepted Answer

A) marginal 
B) benefit 
C) cost 
D) equilibrium 
A) marginal 
B) benefit 
C) cost 
D) equilibrium

Question 5

If an economy is efficient:

Accepted Answer

A) all goods are produced at their maximum quantity. 
B) all opportunities to make people better off without making other people worse off have been taken. 
C) more resources have been used to produce specific consumer goods than producer goods. 
D) prices are the lowest they can possibly be. 
A) all goods are produced at their maximum quantity. 
B) all opportunities to make people better off without making other people worse off have been taken. 
C) more resources have been used to produce specific consumer goods than producer goods. 
D) prices are the lowest they can possibly be.

Question 6

Two neighbors,Molly and Sandy,are separated by a white picket fence.Each neighbor has a garden that grows tomatoes and peppers.To gain from trade,_____ can trade _____ to _____ for _____ if _____ is the more efficient grower of peppers.

Accepted Answer

A) Molly;peppers;Sandy;peppers;Molly 
B) Sandy;tomatoes;Molly;peppers;Sandy 
C) Sandy;peppers;Molly;tomatoes;Molly 
D) Molly;peppers;Sandy;tomatoes;Molly 
A) Molly;peppers;Sandy;peppers;Molly 
B) Sandy;tomatoes;Molly;peppers;Sandy 
C) Sandy;peppers;Molly;tomatoes;Molly 
D) Molly;peppers;Sandy;tomatoes;Molly

Question 7

The government of a small town has decided to ban smoking in all restaurants,stores,and government offices.This is an example of the principle that:

Accepted Answer

A) one person's spending is another person's income. 
B) when markets fail to achieve efficiency,government intervention can improve society's welfare. 
C) there are gains from trade. 
D) "How Much" is a decision at the margin. 
A) one person's spending is another person's income. 
B) when markets fail to achieve efficiency,government intervention can improve society's welfare. 
C) there are gains from trade. 
D) "How Much" is a decision at the margin.

Question 8

Which decision is the BEST example of making a choice at the margin?

Accepted Answer

A) buying a new car 
B) quitting your job 
C) drinking another cup of coffee 
D) attending college 
A) buying a new car 
B) quitting your job 
C) drinking another cup of coffee 
D) attending college

Question 9

Which of the following policies is MOST likely to reduce traffic congestion in a large metropolitan area because people usually exploit opportunities to make themselves better off?

Accepted Answer

A) a limited number of free early-bird parking passes given only to those who arrive prior to 6 A.M. 
B) a toll road that requires each car to pay a fee to enter the city center 
C) an increase in the price of subway and bus fare to and from the city 
D) asking citizens to carpool 
A) a limited number of free early-bird parking passes given only to those who arrive prior to 6 A.M. 
B) a toll road that requires each car to pay a fee to enter the city center 
C) an increase in the price of subway and bus fare to and from the city 
D) asking citizens to carpool

Question 10

Buying vegetables at a farmers' market benefits the community because:

Accepted Answer

A) it is not possible to be self-sufficient when it comes to growing food. 
B) this will eliminate the opportunity cost of buying food. 
C) buying locally will decrease human capital in the community. 
D) one person's local spending will increase another local person's income. 
A) it is not possible to be self-sufficient when it comes to growing food. 
B) this will eliminate the opportunity cost of buying food. 
C) buying locally will decrease human capital in the community. 
D) one person's local spending will increase another local person's income.

Question 11

Resources are being used efficiently when:

Accepted Answer

A) scarcity is no longer an issue. 
B) they are also used equitably. 
C) every opportunity to make people better off without making others worse off has been seized. 
D) gains from trade are still available. 
A) scarcity is no longer an issue. 
B) they are also used equitably. 
C) every opportunity to make people better off without making others worse off has been seized. 
D) gains from trade are still available.

Question 12

If a market is in disequilibrium:

Accepted Answer

A) it will continue unless there is government intervention. 
B) no individual will be better off doing something different. 
C) there are opportunities for some people to make themselves better off. 
D) it must be because the government has intervened in the market,resulting in the market's failure to reach equilibrium. 
A) it will continue unless there is government intervention. 
B) no individual will be better off doing something different. 
C) there are opportunities for some people to make themselves better off. 
D) it must be because the government has intervened in the market,resulting in the market's failure to reach equilibrium.

Question 13

The opportunity cost of something is:

Accepted Answer

A) larger during periods of rising prices. 
B) equal to the monetary cost. 
C) smaller during periods of falling prices. 
D) what is given up to acquire it. 
A) larger during periods of rising prices. 
B) equal to the monetary cost. 
C) smaller during periods of falling prices. 
D) what is given up to acquire it.

Question 14

If equilibrium exists:

Accepted Answer

A) all individuals must have an equal amount of income. 
B) the price in that market will not fluctuate by more than 5%. 
C) there will be no remaining opportunities for individuals to make themselves better off. 
D) the number of buyers will equal the number of sellers. 
A) all individuals must have an equal amount of income. 
B) the price in that market will not fluctuate by more than 5%. 
C) there will be no remaining opportunities for individuals to make themselves better off. 
D) the number of buyers will equal the number of sellers.

Question 15

A busy professor needs to decide whether to stay in his office to grade papers for another hour or to go home and go to bed.This is an example of:

Accepted Answer

A) equity versus efficiency. 
B) how one person's spending is another person's income. 
C) economic incentives. 
D) marginal analysis. 
A) equity versus efficiency. 
B) how one person's spending is another person's income. 
C) economic incentives. 
D) marginal analysis.

Question 16

Which statement is an example of individual choice?

Accepted Answer

A) The government announces plans to ban smoking in all Florida restaurants. 
B) Lauren spends her allowance on pillows for her bed. 
C) France decides to withhold funding to rebuild Iraq. 
D) Africa decides to accept U.S.aid for humanitarian efforts. 
A) The government announces plans to ban smoking in all Florida restaurants. 
B) Lauren spends her allowance on pillows for her bed. 
C) France decides to withhold funding to rebuild Iraq. 
D) Africa decides to accept U.S.aid for humanitarian efforts.

Question 17

All children have to be immunized against polio,measles,mumps,and other diseases.If you don't have enough money to pay for the immunizations,they will be provided free at the county health clinic.Which economic principle does this statement BEST represent?

Accepted Answer

A) People usually respond to incentives,exploiting opportunities to make themselves better off. 
B) Resources should be used efficiently to achieve society's goals. 
C) When markets don't achieve efficiency,government intervention can improve society's welfare. 
D) Government policies can change spending. 
A) People usually respond to incentives,exploiting opportunities to make themselves better off. 
B) Resources should be used efficiently to achieve society's goals. 
C) When markets don't achieve efficiency,government intervention can improve society's welfare. 
D) Government policies can change spending.

Question 18

In most cases,economic efficiency is achieved through:

Accepted Answer

A) incentives built into a market economy. 
B) reducing regulation. 
C) individuals seeking out opportunities that involve no risk. 
D) maximizing equity. 
A) incentives built into a market economy. 
B) reducing regulation. 
C) individuals seeking out opportunities that involve no risk. 
D) maximizing equity.

Question 19

In equilibrium,there will be no further opportunities for gains from trade.

Accepted Answer

A) True 
 B)False

Question 20

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behavior.

Accepted Answer

A) True 
 B)False

Exam 1: First Principles

Which statement is NOT one of the five principles for understanding how individual choices interact?

Overall,trade between China and the United States will:

Which book illustrates the advantages of specialization using an eighteenth-century pin factory as an example?

Your neighbor is mowing her yard one afternoon when she stops to have some lemonade.She drinks one glass and is now deciding whether or not to have a second glass.This is an example of _____ analysis.

If an economy is efficient:

Two neighbors,Molly and Sandy,are separated by a white picket fence.Each neighbor has a garden that grows tomatoes and peppers.To gain from trade,_____ can trade _____ to _____ for _____ if _____ is the more efficient grower of peppers.

The government of a small town has decided to ban smoking in all restaurants,stores,and government offices.This is an example of the principle that:

Which decision is the BEST example of making a choice at the margin?

Which of the following policies is MOST likely to reduce traffic congestion in a large metropolitan area because people usually exploit opportunities to make themselves better off?

Buying vegetables at a farmers' market benefits the community because:

Resources are being used efficiently when:

If a market is in disequilibrium:

The opportunity cost of something is:

If equilibrium exists:

A busy professor needs to decide whether to stay in his office to grade papers for another hour or to go home and go to bed.This is an example of:

Which statement is an example of individual choice?

All children have to be immunized against polio,measles,mumps,and other diseases.If you don't have enough money to pay for the immunizations,they will be provided free at the county health clinic.Which economic principle does this statement BEST represent?

In most cases,economic efficiency is achieved through:

In equilibrium,there will be no further opportunities for gains from trade.

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behavior.

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Two neighbors,Molly and Sandy,are separated by a white picket fence.Each neighbor has a garden that grows tomatoes and peppers.To gain from trade,___ can trade _ to _ for _ if ___ is the more efficient grower of peppers.