Question 1

Which of the following demonstrates one of the three principles of economy-wide interactions?

Accepted Answer

A)  A student chooses to rent a movie with friends rather than study for an economics quiz. 
B)  Your roommate offers to pay for the movie tickets if you drive to the theater. 
C)  A city builds a new public park on the grounds of an abandoned warehouse. 
D)  In 2008, fearing a recession, Congress approved a White House proposal to rebate some taxes for 2007. 
A)  A student chooses to rent a movie with friends rather than study for an economics quiz. 
B)  Your roommate offers to pay for the movie tickets if you drive to the theater. 
C)  A city builds a new public park on the grounds of an abandoned warehouse. 
D)  In 2008, fearing a recession, Congress approved a White House proposal to rebate some taxes for 2007. D

Question 2

If Allison drives to a large city 100 miles from her small community to do her back-to-school shopping, this will:

Accepted Answer

A)  hurt Allison's community because Allison's spending will be income for people in the large city. 
B)  hurt the city because Allison will take the goods that she purchases back home to her small town. 
C)  help Allison's community because Allison's shopping in the big city leaves more goods for the other small-town residents to buy. 
D)  help the city because people from small towns usually buy things that people in big cities don't want. 
A)  hurt Allison's community because Allison's spending will be income for people in the large city. 
B)  hurt the city because Allison will take the goods that she purchases back home to her small town. 
C)  help Allison's community because Allison's shopping in the big city leaves more goods for the other small-town residents to buy. 
D)  help the city because people from small towns usually buy things that people in big cities don't want. A

Question 3

Which of the following statements is FALSE?

Accepted Answer

A)  Efficiency exists when an economy realizes the maximum possible gains from trade given the available resources. 
B)  If an economy is efficient, it is possible to make only a few people better off without reducing other individuals' economic welfare. 
C)  Economic efficiency exists when all opportunities to make people better off have been fully exploited. 
D)  Markets usually lead to efficiency. 
A)  Efficiency exists when an economy realizes the maximum possible gains from trade given the available resources. 
B)  If an economy is efficient, it is possible to make only a few people better off without reducing other individuals' economic welfare. 
C)  Economic efficiency exists when all opportunities to make people better off have been fully exploited. 
D)  Markets usually lead to efficiency. B

Question 4

Which of the following is NOT a reason that markets usually lead to efficiency?

Accepted Answer

A)  People are naturally efficient. 
B)  Individuals have incentives to offer what people want. 
C)  Trade encourages efficiency. 
D)  Inefficient firms will lose business. 
A)  People are naturally efficient. 
B)  Individuals have incentives to offer what people want. 
C)  Trade encourages efficiency. 
D)  Inefficient firms will lose business.

Question 5

The federal government regulates how much carbon dioxide a factory can emit. This statement best represents this economic concept:

Accepted Answer

A)  Resources are scarce. 
B)  "How much" is a decision at the margin. 
C)  Markets usually lead to efficiency. 
D)  When markets don't achieve efficiency, government intervention can improve society's welfare. 
A)  Resources are scarce. 
B)  "How much" is a decision at the margin. 
C)  Markets usually lead to efficiency. 
D)  When markets don't achieve efficiency, government intervention can improve society's welfare.

Question 6

To encourage people to retire later, because people usually exploit opportunities to make themselves better off, the government could:

Accepted Answer

A)  reduce Social Security benefits. 
B)  raise the tax rate on older individuals. 
C)  engage in a public service campaign explaining the value of these employees to the economy. 
D)  increase Social Security benefits. 
A)  reduce Social Security benefits. 
B)  raise the tax rate on older individuals. 
C)  engage in a public service campaign explaining the value of these employees to the economy. 
D)  increase Social Security benefits.

Question 7

Because one person's spending is another person's income:

Accepted Answer

A)  if one group in the economy spends more, the incomes of other groups will decrease. 
B)  if one group in the economy spends less, the incomes of other groups will increase. 
C)  if one group in the economy spends more, the incomes of other groups will increase. 
D)  spending by one group does not influence the income of any other group. 
A)  if one group in the economy spends more, the incomes of other groups will decrease. 
B)  if one group in the economy spends less, the incomes of other groups will increase. 
C)  if one group in the economy spends more, the incomes of other groups will increase. 
D)  spending by one group does not influence the income of any other group.

Question 8

Increases in total output realized when individuals specialize in particular tasks and trade are known as:

Accepted Answer

A)  the gains from trade. 
B)  the profits obtained from sales of a good or service. 
C)  marginal analysis. 
D)  a trade-off. 
A)  the gains from trade. 
B)  the profits obtained from sales of a good or service. 
C)  marginal analysis. 
D)  a trade-off.

Question 9

Scarcity in economics means that:

Accepted Answer

A)  we do not have sufficient resources to produce all of the goods and services we want. 
B)  the wants of people are limited. 
C)  there must be poor people in rich countries. 
D)  shortages exist in nearly all markets. 
A)  we do not have sufficient resources to produce all of the goods and services we want. 
B)  the wants of people are limited. 
C)  there must be poor people in rich countries. 
D)  shortages exist in nearly all markets.

Question 10

Because people usually exploit opportunities to make themselves better off, if the price of gasoline falls and stays low for an extended period, we expect people to:

Accepted Answer

A)  reduce their reliance on gasoline-powered cars. 
B)  buy larger and less fuel-efficient cars. 
C)  use more public transportation. 
D)  ride bicycles. 
A)  reduce their reliance on gasoline-powered cars. 
B)  buy larger and less fuel-efficient cars. 
C)  use more public transportation. 
D)  ride bicycles.

Question 11

For a student who owns his or her own home and doesn't plan to live in the dorm, the cost of going to college is:

Accepted Answer

A)  tuition and the cost of housing. 
B)  tuition, the cost of housing, and the cost of books. 
C)  tuition, the cost of books, and forgone income. 
D)  forgone income only. 
A)  tuition and the cost of housing. 
B)  tuition, the cost of housing, and the cost of books. 
C)  tuition, the cost of books, and forgone income. 
D)  forgone income only.

Question 12

Specialization and trade should lead to all of the following EXCEPT:

Accepted Answer

A)  individuals learning specific skills and earning a salary. 
B)  a decrease in total economic output. 
C)  higher living standards. 
D)  the exchange of goods and services in markets. 
A)  individuals learning specific skills and earning a salary. 
B)  a decrease in total economic output. 
C)  higher living standards. 
D)  the exchange of goods and services in markets.

Question 13

Because one person's spending is another person's income, if one group in the economy spends more, the incomes of other groups will increase.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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 16

Economists define an efficient use of resources as a situation in which:

Accepted Answer

A)  one person can be made better off but only by making another person worse off. 
B)  all persons can be made better off without making anyone worse off. 
C)  all persons receive an equal share of the resources. 
D)  all persons are made worse off when one person is made better off. 
A)  one person can be made better off but only by making another person worse off. 
B)  all persons can be made better off without making anyone worse off. 
C)  all persons receive an equal share of the resources. 
D)  all persons are made worse off when one person is made better off.

Question 17

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

Accepted Answer

A) True 
 B)False

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

Sometimes the government varies its spending, depending on the needs of the country. This statement best represents economic concept that:

Accepted Answer

A)  resources should be used as efficiently as possible to achieve society's goals. 
B)  when markets don't achieve efficiency, government intervention can improve society's welfare. 
C)  overall spending sometimes gets out of line with the economy's productive capacity. 
D)  government policies can change spending. 
A)  resources should be used as efficiently as possible to achieve society's goals. 
B)  when markets don't achieve efficiency, government intervention can improve society's welfare. 
C)  overall spending sometimes gets out of line with the economy's productive capacity. 
D)  government policies can change spending.

Question 20

Freshwater is considered a scarce good because:

Accepted Answer

A)  not enough of it is available for all needs. 
B)  it does not have any uses. 
C)  scarce goods are not expensive. 
D)  not enough of it is available for all needs and because it is not expensive. 
A)  not enough of it is available for all needs. 
B)  it does not have any uses. 
C)  scarce goods are not expensive. 
D)  not enough of it is available for all needs and because it is not expensive.

Exam 1: First Principles

Which of the following demonstrates one of the three principles of economy-wide interactions?

If Allison drives to a large city 100 miles from her small community to do her back-to-school shopping, this will:

Which of the following statements is FALSE?

Which of the following is NOT a reason that markets usually lead to efficiency?

The federal government regulates how much carbon dioxide a factory can emit. This statement best represents this economic concept:

To encourage people to retire later, because people usually exploit opportunities to make themselves better off, the government could:

Because one person's spending is another person's income:

Increases in total output realized when individuals specialize in particular tasks and trade are known as:

Scarcity in economics means that:

Because people usually exploit opportunities to make themselves better off, if the price of gasoline falls and stays low for an extended period, we expect people to:

For a student who owns his or her own home and doesn't plan to live in the dorm, the cost of going to college is:

Specialization and trade should lead to all of the following EXCEPT:

Because one person's spending is another person's income, if one group in the economy spends more, the incomes of other groups will increase.

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:

Marginal analysis:

Economists define an efficient use of resources as a situation in which:

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

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 _____.

Sometimes the government varies its spending, depending on the needs of the country. This statement best represents economic concept that:

Freshwater is considered a scarce good because:

Economic Models- Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas- Meddling With Markets

Elasticity

Taxes

The Rational Consumer

International Trade

Decision Making by Individuals and Firms

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

Macroeconomics- the Big Picture

Gdp and the Consumer Price Index

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Macroeconomics- Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

Toward a Fuller Understanding

Consumer Preferences and Consumer Choice

Indifference Curve Analysis of Labor Supply

Filters

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 _.