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Question 1. 1. Market economies are distinguished from other types of economies largely on the basis of (Points : 5)
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the political affiliations of government officials.
the process by which government officials are elected or appointed.
the ways in which scarce resources are allocated.
the number of retail outlets available to consumers.
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Question 2. 2. The phrase “no such thing as a free lunch” means (Points : 5)
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people must face tradeoffs.
rational people think at the margin.
people respond to incentives.
trade can make everyone better off.
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Question 3. 3. Which of the following is a correct statement about production possibilities frontiers? (Points : 5)
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An economy can produce only on the production possibilities frontier.
An economy can produce at any point inside or outside a production possibilities frontier.
An economy can produce at any point on or inside the production possibilities frontier, but not outside the frontier.
An economy can produce at any point inside the production possibilities frontier, but not on or outside the frontier.
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Question 4. 4. In the simple circular-flow diagram, the participants in the economy are (Points : 5)
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firms and government.
households and firms.
households and government.
households, firms, and government.
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Question 5. 5. US citizens have better nutrition, better healthcare, and a longer life expectancy than citizens of Ghana. Which of the following conclusions can be drawn from this statement? (Points : 5)
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Average income in the US is higher than the average income in Ghana.
The US has a higher standard of living than Ghana.
Productivity in the US is higher than productivity in Ghana.
All of the above are correct.
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Question 6. 6. Table 2-5
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Cookies (in dozens)
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Coffee (in pounds)
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1000
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0
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800
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350
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600
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650
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400
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800
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200
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1000
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0
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1150
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Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Which of the following statements is correct? (Points : 5)
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The opportunity cost of a dozen cookies does not depend on how many pounds of coffee are being produced.
The opportunity cost of a dozen cookies increases as more cookies are produced.
The opportunity cost of a dozen cookies decreases as more cookies are produced.
The opportunity cost of a pound of coffee decreases as more coffee is produced.
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Question 7. 7. Senator Bright, who understands economic principles, is trying to convince workers in her district that trade with other countries is beneficial. Senator Bright should argue that trade can be beneficial (Points : 5)
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only if it allows us to obtain things that we couldn't make for ourselves.
because it allows specialization, which increases total output.
to us if we can gain and the others involved in the trade lose.
in only a limited number of circumstances because others are typically self-interested.
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Question 8. 8. Factors of production are (Points : 5)
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the mathematical calculations firms make in determining their optimal production levels.
social and political conditions that affect production.
the physical relationships between economic inputs and outputs.
inputs into the production process.
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Question 9. 9. The production possibilities frontier is used to illustrate some basic economic ideas, including (Points : 5)
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scarcity.
opportunity cost.
economic growth.
All of the above are correct.
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Question 10. 10. One of the 20th century’s worst episodes of inflation occurred in (Points : 5)
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the United States in the 1960s
Italy in the 1950s.
Russia in the 1930s.
Germany in the 1920s.
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Question 11. 11. Suppose after graduating from college you get a job working at a bank earning $30,000 per year. After two years of working at the bank earning the same salary, you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank. Which of the following should not be included in a calcula-tion of your opportunity cost? (Points : 5)
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the cost of tuition and books to attend the graduate program
the $30,000 salary that you could have earned if you retained your job at the bank
the $45,000 salary that you will be able to earn after having completed your graduate program
the value of insurance coverage and other employee benefits you would have received if you retained your job at the bank
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Question 12. 12. Figure 2-4
Refer to Figure 2-4 Suppose this economy is producing at point W. Which of the following statements would best explain this situation? (Points : 5)
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The economy lacks the resources to produce at a more desirable point.
The economy’s available technology prevents it from producing at a more desirable point.
There is widespread unemployment in the economy.
Any of the above statements would be a legitimate explanation for this situation.
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Question 13. 13. Market power refers to the (Points : 5)
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power of a single person or small group to influence market prices.
ability of a person or small group to successfully market new products.
power of the government to regulate a market.
importance of a certain market in relation to the overall economy.
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Question 14. 14. Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"? (Points : 5)
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Joe needs to pay his rent and his electric bill.
Pete must choose between buying a new flat screen television and buying his textbooks for this semester.
Kevin must decide between studying for his economics exam and working at his part-time job.
Lisa can spend her money on a new sweater or a pair of jeans.
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Question 15. 15. The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the (Points : 5)
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amount of the other good that must be given up.
market price of the additional amount produced.
amount of resources that must be devoted to its production.
number of dollars that must be spent to produce it.
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Question 16. 16. The circular-flow diagram is a (Points : 5)
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visual model of the economy.
visual model of the relationships among money, prices, and businesses.
model that shows the effects of government on the economy.
mathematical model of how the economy works.
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Question 17. 17. A rational decisionmaker (Points : 5)
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ignores marginal changes and focuses instead on “the big picture.”
ignores the likely effects of government policies when he or she makes choices.
takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.
takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.
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Question 18. 18. Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations? (Points : 5)
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There is no such thing as a free lunch.
People buy more when prices are low than when prices are high.
No matter how much people earn, they tend to spend more than they earn.
Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
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Question 19. 19. When computing the opportunity cost of attending a concert you should include (Points : 5)
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the price you pay for the ticket and the value of your time.
the price you pay for the ticket, but not the value of your time.
the value of your time, but not the price you pay for the ticket.
neither the price of the ticket nor the value of your time.
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Question 20. 20. The "invisible hand" directs economic activity through (Points : 5)
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advertising.
prices.
central planning.
government regulations.
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Question 21. 21. Irregular fluctuations in economic activity are known as the (Points : 5)
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business cycle.
broken window fallacy.
tradeoff between inflation and unemployment.
ten principles of economics.
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Question 22. 22. When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included? (Points : 5)
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Your full room-and-board expenses should always be included.
None of your room-and-board expenses should ever be included.
You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college.
You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college.
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Question 23. 23. Macroeconomics is the study of (Points : 5)
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individual decision makers.
international trade.
economy-wide phenomena.
markets for large products.
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Question 24. 24. The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that (Points : 5)
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equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits.
equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits.
equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.
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Question 25. 25. Catherine buys and sells real estate. Two weeks ago, she paid $300,000 for a house on Pine Street, intending to spend $50,000 on repairs and then sell the house for $400,000. Last week, the city government announced a plan to build a new landfill on Pine Street just down the street from the house Catherine purchased. As a result of the city’s announced plan, Catherine is weighing two alternatives: She can go ahead with the $50,000 in repairs and then sell the house for $290,000, or she can forgo the repairs and sell the house as it is for $250,000. She should (Points : 5)
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keep the house and live in it.
go ahead with the $50,000 in repairs and sell the house for $290,000.
forgo the repairs and sell the house as it is for $250,000.
move the house from Pine Street to a more desirable location, regardless of the cost of doing so.
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26. The famous observation that households and firms interacting in markets act as if they are guided by an “invisible hand” that leads them to desirable market outcomes comes from whose 1776 book? (Points : 5)
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David Ricardo
Thorstein Veblen
John Maynard Keynes
Adam Smith
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tali04
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