Question 1

The study of a single firm and how it determines prices falls under the study of:

Accepted Answer

A)  macroeconomics. 
B)  microeconomics. 
C)  economic growth. 
D)  fiscal policy. 
A)  macroeconomics. 
B)  microeconomics. 
C)  economic growth. 
D)  fiscal policy.

Question 2

Because people usually exploit opportunities to make themselves better off, which of the following methods of reducing pollution is likely to be most effective?

Accepted Answer

A)  appealing to the polluter to be a good citizen 
B)  publicizing the harmful effects of pollution 
C)  imposing a tax per unit of pollution generated 
D)  All three methods are equally effective. 
A)  appealing to the polluter to be a good citizen 
B)  publicizing the harmful effects of pollution 
C)  imposing a tax per unit of pollution generated 
D)  All three methods are equally effective.

Question 3

The phrase gains from trade refers to the:

Accepted Answer

A)  profits obtained from sales of a good or service. 
B)  increase in total output that is realized when individuals specialize in particular tasks and trade with each other. 
C)  gains that one obtains by taking advantage of an uninformed buyer and selling at a higher than average price. 
D)  gains that one obtains by taking advantage of a temporary discount, or sale price. 
A)  profits obtained from sales of a good or service. 
B)  increase in total output that is realized when individuals specialize in particular tasks and trade with each other. 
C)  gains that one obtains by taking advantage of an uninformed buyer and selling at a higher than average price. 
D)  gains that one obtains by taking advantage of a temporary discount, or sale price.

Question 4

A trade-off between equity and efficiency may exist because of all of the following EXCEPT that:

Accepted Answer

A)  allocating resources fairly may cause efficiency. 
B)  an 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 cause efficiency. 
B)  an 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 5

Many college freshmen describe themselves as pre-med, but a very small percentage of these freshmen will ever attend medical school. After the first course in biology or chemistry, many decide to major in something other than the natural sciences. Which of the 12 principles is at work here?

Accepted Answer

Resources are scarce. The scarce resourc

Question 6

One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner. This is an example of the principle that:

Accepted Answer

A)  markets move toward equilibrium. 
B)  government policies can change spending. 
C)  there are gains from trade. 
D)  markets usually lead to efficiency. 
A)  markets move toward equilibrium. 
B)  government policies can change spending. 
C)  there are gains from trade. 
D)  markets usually lead to efficiency.

Question 7

A popular train station has free parking for commuters who take the train. This often results in many people being unable to find a parking spot and missing their train. To solve this problem, all commuters should be:

Accepted Answer

A)  given a parking pass along with their ticket. 
B)  required to pay for parking. 
C)  able to purchase an annual pass which allows them to park at the train station. 
D)  exempt from parking lot fees. 
A)  given a parking pass along with their ticket. 
B)  required to pay for parking. 
C)  able to purchase an annual pass which allows them to park at the train station. 
D)  exempt from parking lot fees.

Question 8

A market failure occurs when:

Accepted Answer

A)  some people are able to buy many more goods than other people are. 
B)  the individual's pursuit of self-interest means some people will not be able to buy all of the goods they need. 
C)  the individual's pursuit of self-interest makes the society worse off. 
D)  while pursuing their self-interest, some people may make a mistake-for example, they may regret buying a particular car. 
A)  some people are able to buy many more goods than other people are. 
B)  the individual's pursuit of self-interest means some people will not be able to buy all of the goods they need. 
C)  the individual's pursuit of self-interest makes the society worse off. 
D)  while pursuing their self-interest, some people may make a mistake-for example, they may regret buying a particular car.

Question 9

If an economy has NOT achieved efficiency, there must be ways to:

Accepted Answer

A)  increase opportunity costs. 
B)  eliminate inequity. 
C)  make some people better off without making others worse off. 
D)  increase the incentives for its citizens to follow their own self-interest. 
A)  increase opportunity costs. 
B)  eliminate inequity. 
C)  make some people better off without making others worse off. 
D)  increase the incentives for its citizens to follow their own self-interest.

Question 10

You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. This statement best represents this economic concept:

Accepted Answer

A)  The real cost of something is what you must give up to get it. 
B)  "How much" is a decision at the margin. 
C)  People usually exploit opportunities to make themselves better off. 
D)  There are gains from trade. 
A)  The real cost of something is what you must give up to get it. 
B)  "How much" is a decision at the margin. 
C)  People usually exploit opportunities to make themselves better off. 
D)  There are gains from trade.

Question 11

Specialization and trade usually lead to:

Accepted Answer

A)  lower economic growth. 
B)  the exchange of goods and services in markets. 
C)  lower living standards. 
D)  higher prices. 
A)  lower economic growth. 
B)  the exchange of goods and services in markets. 
C)  lower living standards. 
D)  higher prices.

Question 12

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 13

For which of the following decisions would marginal analysis be MOST relevant?

Accepted Answer

A)  Should George accept a job with Delta Airlines or with Greenpeace? 
B)  Should Mary go to graduate school after graduating from college? 
C)  Should Vevik emigrate to the United States or stay in India? 
D)  Should Hong work an additional hour or take a short nap? 
A)  Should George accept a job with Delta Airlines or with Greenpeace? 
B)  Should Mary go to graduate school after graduating from college? 
C)  Should Vevik emigrate to the United States or stay in India? 
D)  Should Hong work an additional hour or take a short nap?

Question 14

Because the United States is a rich nation, free health care can be provided for all citizens without considering the issue of scarcity.

Accepted Answer

A) True 
 B)False

Question 15

Grades are low in class and your professor makes available a 10-point extra credit assignment. Most of the students turn in the assignment. This statement best represents this economic concept:

Accepted Answer

A)  The real cost of something is what you must give up to get it. 
B)  "How much" is a decision at the margin. 
C)  People usually exploit opportunities to make themselves better off. 
D)  There are gains from trade. 
A)  The real cost of something is what you must give up to get it. 
B)  "How much" is a decision at the margin. 
C)  People usually exploit opportunities to make themselves better off. 
D)  There are gains from trade.

Question 16

Equilibrium exists when:

Accepted Answer

A)  output is distributed equitably. 
B)  scarcity is eliminated. 
C)  an individual would be better off taking a different action. 
D)  no individual has an incentive to change his or her behavior. 
A)  output is distributed equitably. 
B)  scarcity is eliminated. 
C)  an individual would be better off taking a different action. 
D)  no individual has an incentive to change his or her behavior.

Question 17

For which of the following decisions would marginal analysis be most relevant?

Accepted Answer

A)  Should I go to college or work after graduating from high school? 
B)  Should I eat another doughnut? 
C)  Should I use $20,000 as a down payment on a house or to buy a car? 
D)  Should I get married? 
A)  Should I go to college or work after graduating from high school? 
B)  Should I eat another doughnut? 
C)  Should I use $20,000 as a down payment on a house or to buy a car? 
D)  Should I get married?

Question 18

When people in Brazil engage in trade with people in Germany, the citizens of each nation are made worse off.

Accepted Answer

A) True 
 B)False

Question 19

Who wrote The Wealth of Nations, a book that many credit with establishing economics as a discipline?

Accepted Answer

A)  Karl Marx 
B)  David Ricardo 
C)  Adam Smith 
D)  John Maynard Keynes 
A)  Karl Marx 
B)  David Ricardo 
C)  Adam Smith 
D)  John Maynard Keynes

Question 20

When the United States and Mexico trade:

Accepted Answer

A)  the United States will be worse off because wages in Mexico are so low. 
B)  Mexico will be worse off because the United States is a stronger economic power. 
C)  both Mexico and the United States will be better off. 
D)  both Mexico and the United States will be worse off. 
A)  the United States will be worse off because wages in Mexico are so low. 
B)  Mexico will be worse off because the United States is a stronger economic power. 
C)  both Mexico and the United States will be better off. 
D)  both Mexico and the United States will be worse off.

Exam 1: First Principles

The study of a single firm and how it determines prices falls under the study of:

Because people usually exploit opportunities to make themselves better off, which of the following methods of reducing pollution is likely to be most effective?

The phrase gains from trade refers to the:

A trade-off between equity and efficiency may exist because of all of the following EXCEPT that:

Many college freshmen describe themselves as pre-med, but a very small percentage of these freshmen will ever attend medical school. After the first course in biology or chemistry, many decide to major in something other than the natural sciences. Which of the 12 principles is at work here?

One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner. This is an example of the principle that:

A popular train station has free parking for commuters who take the train. This often results in many people being unable to find a parking spot and missing their train. To solve this problem, all commuters should be:

A market failure occurs when:

If an economy has NOT achieved efficiency, there must be ways to:

You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. This statement best represents this economic concept:

Specialization and trade usually lead to:

An economy is efficient if it is:

For which of the following decisions would marginal analysis be MOST relevant?

Because the United States is a rich nation, free health care can be provided for all citizens without considering the issue of scarcity.

Grades are low in class and your professor makes available a 10-point extra credit assignment. Most of the students turn in the assignment. This statement best represents this economic concept:

Equilibrium exists when:

For which of the following decisions would marginal analysis be most relevant?

When people in Brazil engage in trade with people in Germany, the citizens of each nation are made worse off.

Who wrote The Wealth of Nations, a book that many credit with establishing economics as a discipline?

When the United States and Mexico trade:

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

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