Question 1

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 2

When markets don't achieve efficiency:

Accepted Answer

A)  they must achieve equity. 
B)  the government must be participating in the market. 
C)  the government may intervene to improve society's welfare. 
D)  they should be closed. 
A)  they must achieve equity. 
B)  the government must be participating in the market. 
C)  the government may intervene to improve society's welfare. 
D)  they should be closed.

Question 3

Market failure occurs when the pursuit of self-interest leads to bad results for society.

Accepted Answer

A) True 
 B)False

Question 4

An economy is efficient if it is:

Accepted Answer

A)  possible to produce more of all goods and services. 
B)  possible to produce more of one good without producing less of another. 
C)  not possible to produce more of one good without producing less of another good. 
D)  producing a combination of goods. 
A)  possible to produce more of all goods and services. 
B)  possible to produce more of one good without producing less of another. 
C)  not possible to produce more of one good without producing less of another good. 
D)  producing a combination of goods.

Question 5

Marginal analysis:

Accepted Answer

A)  refers to decisions about whether or not to engage in a particular activity. 
B)  is primarily used when making an either-or choice. 
C)  is used primarily when deciding how much of an activity should be done. 
D)  does not help when making a "how much" choice. 
A)  refers to decisions about whether or not to engage in a particular activity. 
B)  is primarily used when making an either-or choice. 
C)  is used primarily when deciding how much of an activity should be done. 
D)  does not help when making a "how much" choice.

Question 6

A new fast-food restaurant offered a prize-a free meal (valued at $5) each week for a year-to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers, and she successfully obtained the prize. The cost to Ramona of obtaining the "free meal a week for a year" prize was:

Accepted Answer

A)  zero. 
B)  $260. 
C)  whatever else she would have done with the 48 hours. 
D)  The cost is impossible to determine. 
A)  zero. 
B)  $260. 
C)  whatever else she would have done with the 48 hours. 
D)  The cost is impossible to determine.

Question 7

In baseball, when one manager decides to send in a pinch hitter, the other manager often changes pitchers. This sometimes causes the first manager to send in a new pinch hitter. Once both managers decide that no more player substitutions will benefit their team, the situation has reached:

Accepted Answer

A)  efficiency. 
B)  equilibrium. 
C)  equity. 
D)  the market. 
A)  efficiency. 
B)  equilibrium. 
C)  equity. 
D)  the market.

Question 8

You are analyzing a trade-off when you compare the _____ and _____ of doing something.

Accepted Answer

A)  direct costs; opportunity costs 
B)  marginal benefits; total benefits 
C)  costs; benefits 
D)  direct costs; total costs 
A)  direct costs; opportunity costs 
B)  marginal benefits; total benefits 
C)  costs; benefits 
D)  direct costs; total costs

Question 9

Your health club is offering a free one-year membership for the person who attends the most yoga classes in March. This results in more people attending yoga. Which economic principle does this statement BEST represent?

Accepted Answer

A)  The true cost of something is its opportunity cost. 
B)  People usually respond to incentives, exploiting opportunities to make themselves better off. 
C)  There are gains from trade. 
D)  Markets move toward equilibrium. 
A)  The true cost of something is its opportunity cost. 
B)  People usually respond to incentives, exploiting opportunities to make themselves better off. 
C)  There are gains from trade. 
D)  Markets move toward equilibrium.

Question 10

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 11

Gains from trade exist for:

Accepted Answer

A)  individuals only. 
B)  states only. 
C)  countries only. 
D)  individuals, states, and countries. 
A)  individuals only. 
B)  states only. 
C)  countries only. 
D)  individuals, states, and countries.

Question 12

If resources are scarce, it means that they:

Accepted Answer

A)  are insufficient to provide enough goods and services to satisfy all human material wants and needs. 
B)  have no opportunity cost. 
C)  are probably not valued by consumers. 
D)  have an unlimited supply. 
A)  are insufficient to provide enough goods and services to satisfy all human material wants and needs. 
B)  have no opportunity cost. 
C)  are probably not valued by consumers. 
D)  have an unlimited supply.

Question 13

When markets fail:

Accepted Answer

A)  government intervention may help. 
B)  the market realizes the maximum possible gains from trade given the available resources. 
C)  there may still be an efficient allocation of resources. 
D)  no goods and services are produced. 
A)  government intervention may help. 
B)  the market realizes the maximum possible gains from trade given the available resources. 
C)  there may still be an efficient allocation of resources. 
D)  no goods and services are produced.

Question 14

Marginal analysis studies how individuals decide:

Accepted Answer

A)  whether to live on the margin of society. 
B)  whether to do a bit more of an activity versus a bit less of it. 
C)  whether to go to college. 
D)  how much down payment to make when buying stocks. 
A)  whether to live on the margin of society. 
B)  whether to do a bit more of an activity versus a bit less of it. 
C)  whether to go to college. 
D)  how much down payment to make when buying stocks.

Question 15

Some baseball fans leave the game in the seventh or eighth inning to avoid the postgame traffic. These fans are:

Accepted Answer

A)  not considering that they have already paid for their tickets. 
B)  making a marginal decision by comparing the cost of leaving early to the benefit of leaving early. 
C)  thinking only about the benefits of avoiding traffic. 
D)  underestimating the value of staying for the rest of the game. 
A)  not considering that they have already paid for their tickets. 
B)  making a marginal decision by comparing the cost of leaving early to the benefit of leaving early. 
C)  thinking only about the benefits of avoiding traffic. 
D)  underestimating the value of staying for the rest of the game.

Question 16

A trade-off between equity and efficiency may NOT exist because of the fact that:

Accepted Answer

A)  allocating resources fairly may increase efficiency. 
B)  the efficient allocation of resources may lead to an outcome that most people consider unfair. 
C)  policies that promote equity often come at a cost of decreased efficiency. 
D)  allocating resources fairly may cause inefficiency. 
A)  allocating resources fairly may increase efficiency. 
B)  the efficient allocation of resources may lead to an outcome that most people consider unfair. 
C)  policies that promote equity often come at a cost of decreased efficiency. 
D)  allocating resources fairly may cause inefficiency.

Question 17

If in Equitania, 20% of the population receive 80% of the income and the remaining 80% of the population receive 20% of the income, Equitania's economy:

Accepted Answer

A)  is efficient. 
B)  cannot be efficient since efficiency requires a more nearly equal distribution of income. 
C)  may be efficient. 
D)  is neither efficient nor equitable. 
A)  is efficient. 
B)  cannot be efficient since efficiency requires a more nearly equal distribution of income. 
C)  may be efficient. 
D)  is neither efficient nor equitable.

Question 18

If the value of beach-front property in Beach City decreases, the people of Beach City will likely spend _____, causing incomes in Beach City to _____.

Accepted Answer

A)  more; increase 
B)  more; decrease 
C)  less; increase 
D)  less; decrease 
A)  more; increase 
B)  more; decrease 
C)  less; increase 
D)  less; decrease

Question 19

Nara has gone to three movies this week. She has some extra money, so she decides to go to another. Which economic principle does this statement BEST represent?

Accepted Answer

A)  Choices are necessary because resources are scarce. 
B)  The true cost of something is its opportunity cost. 
C)  "How much" is a decision at the margin. 
D)  There are gains from trade. 
A)  Choices are necessary because resources are scarce. 
B)  The true cost of something is its opportunity cost. 
C)  "How much" is a decision at the margin. 
D)  There are gains from trade.

Question 20

You are planning to study eight hours this week for your economics final and are considering studying a ninth hour. You should:

Accepted Answer

A)  compare the benefits of one more hour of study with the cost of one less hour of sleep. 
B)  compare the benefits of one more hour of study with the cost of one less hour of studying calculus. 
C)  compare the benefits of one more hour of study with the cost of one less hour of work at your part-time job. 
D)  make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour of study. 
A)  compare the benefits of one more hour of study with the cost of one less hour of sleep. 
B)  compare the benefits of one more hour of study with the cost of one less hour of studying calculus. 
C)  compare the benefits of one more hour of study with the cost of one less hour of work at your part-time job. 
D)  make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour of study.

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

When markets don't achieve efficiency:

Market failure occurs when the pursuit of self-interest leads to bad results for society.

An economy is efficient if it is:

Marginal analysis:

In baseball, when one manager decides to send in a pinch hitter, the other manager often changes pitchers. This sometimes causes the first manager to send in a new pinch hitter. Once both managers decide that no more player substitutions will benefit their team, the situation has reached:

You are analyzing a trade-off when you compare the _ and _ of doing something.

Your health club is offering a free one-year membership for the person who attends the most yoga classes in March. This results in more people attending yoga. Which economic principle does this statement BEST represent?

Which statement is an example of individual choice?

Gains from trade exist for:

If resources are scarce, it means that they:

When markets fail:

Marginal analysis studies how individuals decide:

Some baseball fans leave the game in the seventh or eighth inning to avoid the postgame traffic. These fans are:

A trade-off between equity and efficiency may NOT exist because of the fact that:

If in Equitania, 20% of the population receive 80% of the income and the remaining 80% of the population receive 20% of the income, Equitania's economy:

If the value of beach-front property in Beach City decreases, the people of Beach City will likely spend _, causing incomes in Beach City to _.

Nara has gone to three movies this week. She has some extra money, so she decides to go to another. Which economic principle does this statement BEST represent?

You are planning to study eight hours this week for your economics final and are considering studying a ninth hour. You should:

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

Exam 1: First Principles

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

When markets don't achieve efficiency:

Market failure occurs when the pursuit of self-interest leads to bad results for society.

An economy is efficient if it is:

Marginal analysis:

In baseball, when one manager decides to send in a pinch hitter, the other manager often changes pitchers. This sometimes causes the first manager to send in a new pinch hitter. Once both managers decide that no more player substitutions will benefit their team, the situation has reached:

You are analyzing a trade-off when you compare the _____ and _____ of doing something.

Your health club is offering a free one-year membership for the person who attends the most yoga classes in March. This results in more people attending yoga. Which economic principle does this statement BEST represent?

Which statement is an example of individual choice?

Gains from trade exist for:

If resources are scarce, it means that they:

When markets fail:

Marginal analysis studies how individuals decide:

Some baseball fans leave the game in the seventh or eighth inning to avoid the postgame traffic. These fans are:

A trade-off between equity and efficiency may NOT exist because of the fact that:

If in Equitania, 20% of the population receive 80% of the income and the remaining 80% of the population receive 20% of the income, Equitania's economy:

If the value of beach-front property in Beach City decreases, the people of Beach City will likely spend _____, causing incomes in Beach City to _____.

Nara has gone to three movies this week. She has some extra money, so she decides to go to another. Which economic principle does this statement BEST represent?

You are planning to study eight hours this week for your economics final and are considering studying a ninth hour. You should:

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

GDP and the CPI: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial Syst

Income and Expenditure

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Filters

You are analyzing a trade-off when you compare the _ and _ of doing something.

If the value of beach-front property in Beach City decreases, the people of Beach City will likely spend _, causing incomes in Beach City to _.