Question 1

Bill is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $6,200. Bill discovers that he needs to do an additional $2,400 of work to make the car worth $6,200 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do?

Accepted Answer

A)   He should sell the car now for $3,800.
B)   He should keep the car since it wouldn't be rational to spend $6,400 restoring a car and then sell it for only $6,200.
C)   He should complete the additional work and sell the car for $6,200.
D)   It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same either way.E) A) and D)
F) B) and C)

Question 2

If the United States decides to trade with Yemen, we know that

Accepted Answer

A)   Yemen will benefit, but trade with a less developed country could not benefit the United States.
B)   it will not benefit Yemen because workers in the United States are more productive.
C)   Yemen and the United States can both benefit.
D)   it will not benefit either country because their cultural differences are too vast.E) A) and B)
F) A) and C)

Question 3

Government policies can change the costs and benefits that people face. Those policies have the potential to

Accepted Answer

A)   alter people's behavior.
B)   alter people's decisions at the margin.
C)   produce results that policymakers did not intend.
D)   All of the above are correct.E) C) and D)
F) A) and D)

Question 4

The business cycle is measured by the

Accepted Answer

A)   production of goods and services.
B)   number of people employed.
C)   the interest rate.
D)   Both a and b are correct.E) All of the above
F) B) and D)

Question 5

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

Accepted Answer

A)   automakers
B)   pedestrians
C)   drivers
D)   owners of collision-repair shopsE) None of the above
F) A) and B)

Question 6

The opportunity cost of an item is

Accepted Answer

A)   the number of hours needed to earn money to buy the item.
B)   what you give up to get that item.
C)   usually less than the dollar value of the item.
D)   the dollar value of the item.E) B) and C)
F) A) and D)

Question 7

The term market failure refers to

Accepted Answer

A)   a situation in which the market on its own fails to allocate resources efficiently.
B)   an unsuccessful advertising campaign which reduces demand for a product.
C)   a situation in which competition among firms becomes ruthless.
D)   a firm which is forced out of business because of losses.E) B) and C)
F) A) and C)

Question 8

To say that government intervenes in the economy to promote equality is to say that government is aiming to

Accepted Answer

A)   create a more fair distribution of income.
B)   change the ingredients that are used to "bake" the economic pie.
C)   enlarge the economic pie.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 9

Irregular fluctuations in economic activity are known as the

Accepted Answer

A)   business cycle.
B)   broken window fallacy.
C)   tradeoff between inflation and unemployment.
D)   ten principles of economics.E) B) and C)
F) A) and D)

Question 10

Evidence indicates that seat belt laws have led to

Accepted Answer

A)   fewer pedestrian deaths.
B)   fewer automobile accidents.
C)   fewer deaths per automobile accident.
D)   All of the above are correct.E) None of the above
F) B) and D)

Question 11

Under what conditions might government intervention in a market economy improve the economy's performance?

Accepted Answer

If there is a market failure, such as an...

Question 12

The "invisible hand" directs economic activity through

Accepted Answer

A)   advertising.
B)   prices.
C)   central planning.
D)   government regulations.E) A) and B)
F) B) and C)

Question 13

In the early 1980s, U.S. economic policy was directed toward reducing inflation. What would you have expected to observe during this short period of time?

Accepted Answer

A)   Inflation fell and unemployment fell.
B)   Inflation and unemployment were both unaffected.
C)   Inflation fell and unemployment increased.
D)   Inflation fell and unemployment was unchanged.E) None of the above
F) B) and D)

Question 14

Scenario 1-1
You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $8.00 on a ticket and $4.50 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 10 points.
-Refer to Scenario 1-1. What is your opportunity cost of going to the movies?

Accepted Answer

$12.50 and...

Question 15

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

Accepted Answer

A)   its average cost is greater than its marginal cost.
B)   its average cost and its marginal cost are equal.
C)   its average cost is less than its marginal cost.
D)   This cannot be determined from the information given.E) B) and D)
F) All of the above

Question 16

Olivia was accepted by Northwestern and by another university. She is trying to decide where to go. Which of the following should influence her decision?

Accepted Answer

A)   how much she spent applying to Northwestern, and the difference between living expenses at Northwestern and the other university
B)   how much she spent applying to Northwestern, but not the difference between living expenses at Northwestern and the other university
C)   the difference between living expenses at Northwestern and her second choice, but not how much she spent applying to Northwestern
D)   neither how much she spent applying to Northwestern nor the difference between living expenses at Northwestern and her second choiceE) C) and D)
F) All of the above

Question 17

In response to the deep economic downturn in the US in 2008 and 2009, the US

Accepted Answer

A)   reduced taxes.
B)   increased government spending.
C)   increased the supply of money.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 18

The principle that "trade can make everyone better off" applies to interactions and trade between

Accepted Answer

A)   families.
B)   states within the United States.
C)   nations.
D)   All of the above are correct.E) A) and B)
F) A) and D)

Question 19

Inflation is the primary determinant of a country's living standards.

Accepted Answer

A) True 
 B)False

Question 20

Scenario 1-5
Suppose that you have a choice between going to the movies with a friend for three hours or working at your job. If you go to the movies, you will spend $12 on a ticket and $6 on popcorn. If you choose to work, you will earn $10 an hour.
-Refer to Scenario 1-5. What is your opportunity cost of working?

Accepted Answer

The enjoyment you wo...

Exam 1: Ten Principles of Economics

The principle that "trade can make everyone better off" applies to interactions and trade between

Correct Answer
verified

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

Correct Answer
verified

Correct Answer
verified

In response to the deep economic downturn in the US in 2008 and 2009, the US

Correct Answer
verified

Olivia was accepted by Northwestern and by another university. She is trying to decide where to go. Which of the following should influence her decision?

Correct Answer
verified

In the early 1980s, U.S. economic policy was directed toward reducing inflation. What would you have expected to observe during this short period of time?

Correct Answer
verified

Irregular fluctuations in economic activity are known as the

Correct Answer
verified

To say that government intervenes in the economy to promote equality is to say that government is aiming to

Correct Answer
verified

Correct Answer
verified
The enjoyment you wo...
View Answer

Evidence indicates that seat belt laws have led to

Correct Answer
verified

The "invisible hand" directs economic activity through

Correct Answer
verified

Under what conditions might government intervention in a market economy improve the economy's performance?

Correct Answer
verified
If there is a market failure, such as an...
View Answer

Inflation is the primary determinant of a country's living standards.

Correct Answer
verified

If the United States decides to trade with Yemen, we know that

Correct Answer
verified

The opportunity cost of an item is

Correct Answer
verified

The business cycle is measured by the

Correct Answer
verified

Government policies can change the costs and benefits that people face. Those policies have the potential to

Correct Answer
verified

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

Correct Answer
verified

Correct Answer
verified
$12.50 and...
View Answer

The term market failure refers to

Correct Answer
verified

Exam 1: Ten Principles of Economics

The principle that "trade can make everyone better off" applies to interactions and trade between

Correct AnswerverifiedShow Answer

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In response to the deep economic downturn in the US in 2008 and 2009, the US

Correct AnswerverifiedShow Answer

Olivia was accepted by Northwestern and by another university. She is trying to decide where to go. Which of the following should influence her decision?

Correct AnswerverifiedShow Answer

In the early 1980s, U.S. economic policy was directed toward reducing inflation. What would you have expected to observe during this short period of time?

Correct AnswerverifiedShow Answer

Irregular fluctuations in economic activity are known as the

Correct AnswerverifiedShow Answer

To say that government intervenes in the economy to promote equality is to say that government is aiming to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe enjoyment you wo...View AnswerShow Answer

Evidence indicates that seat belt laws have led to

Correct AnswerverifiedShow Answer

The "invisible hand" directs economic activity through

Correct AnswerverifiedShow Answer

Under what conditions might government intervention in a market economy improve the economy's performance?

Correct AnswerverifiedIf there is a market failure, such as an...View AnswerShow Answer

Inflation is the primary determinant of a country's living standards.

Correct AnswerverifiedShow Answer

If the United States decides to trade with Yemen, we know that

Correct AnswerverifiedShow Answer

The opportunity cost of an item is

Correct AnswerverifiedShow Answer

The business cycle is measured by the

Correct AnswerverifiedShow Answer

Government policies can change the costs and benefits that people face. Those policies have the potential to

Correct AnswerverifiedShow Answer

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

Correct AnswerverifiedShow Answer

Correct Answerverified$12.50 and...View AnswerShow Answer

The term market failure refers to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The enjoyment you wo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If there is a market failure, such as an...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$12.50 and...
View Answer

Correct Answer
verified