Question 1

Suppose that the Federal Reserve Bank announces that it will be making a change to a key interest rate to increase the money supply.This is likely because

Accepted Answer

A)   the Federal Reserve Bank is worried about inflation.
B)   the Federal Reserve Bank is worried about unemployment.
C)   the Federal Reserve Bank is hoping to reduce the demand for goods and services.
D)   the Federal Reserve Bank is worried that the economy is growing too quickly.E) C) and D)
F) None of the above

Question 2

The principle that trade can make everyone better off applies to

Accepted Answer

A)   individuals.
B)   families.
C)   countries.
D)   All of the aboveE) B) and D)
F) None of the above

Question 3

When the government redistributes income from the wealthy to the poor,

Accepted Answer

A)   efficiency is improved,but equality is not.
B)   both wealthy people and poor people benefit directly.
C)   people work less and produce fewer goods and services.
D)   the government collects less revenue in total.E) A) and D)
F) B) and D)

Question 4

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

Question 5

In the United States,incomes have historically grown

Accepted Answer

A)   about 0.5 percent per year.
B)   about 2 percent per year.
C)   about 4 percent per year.
D)   about 6 percent per year.E) A) and B)
F) A) and C) B

Question 6

Tom is restoring a car and has already spent $3500 on the restoration.He expects to be able to sell the car for $5000.Tom discovers that he needs to do an additional $2000 of work to make the table worth $5000 to potential buyers.He could also sell the car now,without completing the additional work,for $2800.What should he do?

Accepted Answer

A)   He should sell the car now for $2800.
B)   He should keep the car since it wouldn't be rational to spend $5500 restoring a car and then sell it for only $5000.
C)   He should complete the additional work and sell the car for $5000.
D)   It does not matter which action he takes since the outcome will be the same either way.E) A) and D)
F) B) and C) C

Question 7

A marginal change is a

Accepted Answer

A)   change that involves little,if anything,that is important.
B)   large,significant adjustment.
C)   change for the worse,and so it is usually a short-term change.
D)   small,incremental adjustment.E) A) and D)
F) A) and C)

Question 8

The invisible hand works to promote general well-being in the economy primarily through

Accepted Answer

A)   government intervention.
B)   the political process.
C)   people's pursuit of self-interest.
D)   altruism.E) A) and D)
F) None of the above

Question 9

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.He has decided to take the job.For him,the marginal

Accepted Answer

A)   cost of leaving was greater than the marginal benefit.
B)   benefit of leaving was greater than the marginal cost.
C)   benefit of teaching was greater than the marginal cost.
D)   All of the above are correct.E) C) and D)
F) A) and B)

Question 10

Following the implementation of laws requiring automobiles to have seat belts,which of the following occurred?

Accepted Answer

A)   An individual's probability of surviving an auto accident rose..
B)   There was an increase in pedestrian deaths.
C)   There was an increase in automobile accidents.
D)   All of the above are correct.E) All of the above
F) A) and C)

Question 11

For a very long time Tropicland has had inflation of 12%.Suddenly its inflation rate drops to 4%.The drop in the inflation rate

Accepted Answer

A)   could be due to slower money supply growth.We would expect unemployment to be higher.
B)   could be due to slower money supply growth.We would expect unemployment to be lower.
C)   could be due to higher money supply growth.We would expect unemployment to be higher.
D)   could be due to higher money supply growth.We would expect unemployment to be lower.E) A) and C)
F) A) and B)

Question 12

Stan buys a 1966 Mustang for $2,000,planning to restore and sell the car.He goes on to spend $8,000 restoring the car.At this point he can sell the car for $9,000.As an alternative,he can spend an additional $3,000 replacing the engine.With a new engine the car would sell for $12,000.Stan should

Accepted Answer

A)   complete the repairs and sell the car for $12,000.
B)   sell the car now for $9,000.
C)   never try such an expensive project again.
D)   be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it.E) A) and B)
F) C) and D)

Question 13

The cost of an action is measured in terms of foregone opportunities.

Accepted Answer

A) True 
 B)False

Question 14

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) A) and D)
F) C) and D)

Question 15

Suppose that the average income of a Kenyan is higher than the average income of a South African.You might conclude that

Accepted Answer

A)   Kenyan firms are faced with stricter government regulations than South African firms.
B)   total income is divided among fewer workers in Kenya since it has a smaller labor force than South Africa.
C)   Kenya's climate allows for longer growing seasons and therefore Kenya can produce large quantities of grain and other crops.
D)   productivity in Kenya is higher than in South Africa.E) A) and C)
F) B) and C)

Question 16

The mainstream view among economists is that

Accepted Answer

A)   society faces a tradeoff between unemployment and inflation,but only in the short run.
B)   society faces a tradeoff between unemployment and inflation,but only in the long run.
C)   society faces a tradeoff between unemployment and inflation,both in the short run and in the long run.
D)   no tradeoff exists between unemployment and inflation,either in the short run or in the long run.E) All of the above
F) A) and B)

Question 17

In the United States,the overall level of prices more than doubled during the

Accepted Answer

A)   1950s.
B)   1960s.
C)   1970s.
D)   1980s.E) A) and C)
F) All of the above

Question 18

To promote good economic outcomes,policymakers should strive to enact policies that

Accepted Answer

A)   enhance productivity.
B)   enhance individuals' market power.
C)   result in a rapidly-growing quantity of money.
D)   All of the above are correct.E) None of the above
F) B) and C) A

Question 19

If the average cost of transporting a passenger on the train from Chicago to St.Louis is $75,it would be irrational for the railroad to allow any passenger to ride for less than $75.

Accepted Answer

A) True 
 B)False

Question 20

What you give up to obtain an item is called your

Accepted Answer

A)   opportunity cost.
B)   explicit cost.
C)   true cost.
D)   direct cost.E) A) and B)
F) B) and C)

Exam 1: Ten Principles of Economics

Suppose that the Federal Reserve Bank announces that it will be making a change to a key interest rate to increase the money supply.This is likely because

Correct Answer
verified

The principle that trade can make everyone better off applies to

Correct Answer
verified

When the government redistributes income from the wealthy to the poor,

Correct Answer
verified

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

Correct Answer
verified

In the United States,incomes have historically grown

Correct Answer
verified
B

Correct Answer
verified
C

A marginal change is a

Correct Answer
verified

The invisible hand works to promote general well-being in the economy primarily through

Correct Answer
verified

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.He has decided to take the job.For him,the marginal

Correct Answer
verified

Following the implementation of laws requiring automobiles to have seat belts,which of the following occurred?

Correct Answer
verified

For a very long time Tropicland has had inflation of 12%.Suddenly its inflation rate drops to 4%.The drop in the inflation rate

Correct Answer
verified

Stan buys a 1966 Mustang for $2,000,planning to restore and sell the car.He goes on to spend $8,000 restoring the car.At this point he can sell the car for $9,000.As an alternative,he can spend an additional $3,000 replacing the engine.With a new engine the car would sell for $12,000.Stan should

Correct Answer
verified

The cost of an action is measured in terms of foregone opportunities.

Correct Answer
verified

Economists use the word equality to describe a situation in which

Correct Answer
verified

Suppose that the average income of a Kenyan is higher than the average income of a South African.You might conclude that

Correct Answer
verified

The mainstream view among economists is that

Correct Answer
verified

In the United States,the overall level of prices more than doubled during the

Correct Answer
verified

To promote good economic outcomes,policymakers should strive to enact policies that

Correct Answer
verified
A

If the average cost of transporting a passenger on the train from Chicago to St.Louis is $75,it would be irrational for the railroad to allow any passenger to ride for less than $75.

Correct Answer
verified

What you give up to obtain an item is called your

Correct Answer
verified

Exam 1: Ten Principles of Economics

Suppose that the Federal Reserve Bank announces that it will be making a change to a key interest rate to increase the money supply.This is likely because

Correct AnswerverifiedShow Answer

The principle that trade can make everyone better off applies to

Correct AnswerverifiedShow Answer

When the government redistributes income from the wealthy to the poor,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the United States,incomes have historically grown

Correct AnswerverifiedB

Correct AnswerverifiedC

A marginal change is a

Correct AnswerverifiedShow Answer

The invisible hand works to promote general well-being in the economy primarily through

Correct AnswerverifiedShow Answer

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.He has decided to take the job.For him,the marginal

Correct AnswerverifiedShow Answer

Following the implementation of laws requiring automobiles to have seat belts,which of the following occurred?

Correct AnswerverifiedShow Answer

For a very long time Tropicland has had inflation of 12%.Suddenly its inflation rate drops to 4%.The drop in the inflation rate

Correct AnswerverifiedShow Answer

Stan buys a 1966 Mustang for $2,000,planning to restore and sell the car.He goes on to spend $8,000 restoring the car.At this point he can sell the car for $9,000.As an alternative,he can spend an additional $3,000 replacing the engine.With a new engine the car would sell for $12,000.Stan should

Correct AnswerverifiedShow Answer

The cost of an action is measured in terms of foregone opportunities.

Correct AnswerverifiedShow Answer

Economists use the word equality to describe a situation in which

Correct AnswerverifiedShow Answer

Suppose that the average income of a Kenyan is higher than the average income of a South African.You might conclude that

Correct AnswerverifiedShow Answer

The mainstream view among economists is that

Correct AnswerverifiedShow Answer

In the United States,the overall level of prices more than doubled during the

Correct AnswerverifiedShow Answer

To promote good economic outcomes,policymakers should strive to enact policies that

Correct AnswerverifiedA

If the average cost of transporting a passenger on the train from Chicago to St.Louis is $75,it would be irrational for the railroad to allow any passenger to ride for less than $75.

Correct AnswerverifiedShow Answer

What you give up to obtain an item is called your

Correct AnswerverifiedShow Answer

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B

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C

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A

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