Question 1

When the government attempts to cut the economic pie into more equal slices, what happens?

Accepted Answer

A)  It is easier to cut the pie, and therefore the economy can produce a larger pie.
B)  The government can more easily allocate the pie to those most in need.
C)  The pie gets smaller, and there will be less pie for everyone.
D)  The economy will spend too much time cutting and loses the ability to produce enough pie for everyone.E) None of the above
F) C) and D)

Question 2

Which of the following best defines efficiency?

Accepted Answer

A)  absolute fairness
B)  equal distribution
C)  minimum waste
D)  consumer sovereigntyE) All of the above
F) A) and D)

Question 3

What happened when the German government increased the quantity of money in the German economy in the 1920s?

Accepted Answer

A)  Germany experienced hyperinflation.
B)  Many people in Germany became rich.
C)  Unemployment increased.
D)  Germany was able to repay all its foreign debts.E) None of the above
F) B) and C)

Question 4

What did Ralph Nader's book Unsafe at Any Speed cause the U.S. government to require?

Accepted Answer

A)  safety glass in all new cars
B)  seat belts in all new cars
C)  air bags in all new cars
D)  stricter drunk driving lawsE) All of the above
F) B) and C)

Question 5

In most societies, who allocates resources?

Accepted Answer

A)  a single central planner
B)  those who own the resources
C)  those firms that use resources to provide goods and services
D)  the combined actions of millions of households and firmsE) A) and B)
F) None of the above

Question 6

What concept is illustrated by the adage, "There is no such thing as a free lunch"?

Accepted Answer

A)  tradeoffs
B)  scarcity
C)  productivity
D)  efficiencyE) B) and D)
F) A) and D)

Question 7

What is almost always the cause of large or persistent inflation?

Accepted Answer

A)  an increase in demand for domestic production
B)  growth in the quantity of money
C)  foreign competition
D)  higher worker productivityE) B) and D)
F) A) and B)

Question 8

How do prices direct economic activity in a market economy?

Accepted Answer

A)  by influencing the actions of buyers and sellers
B)  by reducing scarcity of the goods and services produced
C)  by eliminating the need for government intervention
D)  by allocating goods and services produced in the most equitable wayE) A) and B)
F) A) and C)

Question 9

Under what conditions might government intervention in an economy improve the market outcome?

Accepted Answer

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

Question 10

Equity means everyone in the economy should receive an equal share of the goods and services produced.

Accepted Answer

A) True 
 B)False

Question 11

What is an increase in the overall level of prices in an economy called?

Accepted Answer

A)  economic growth
B)  inflation
C)  monetary policy
D)  supply shocksE) B) and C)
F) A) and C)

Question 12

What does economics study?

Accepted Answer

A)  business
B)  how society manages its scarce resources
C)  central planning
D)  government regulationE) A) and B)
F) A) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

What will pollution regulations do?

Accepted Answer

A)  increase profit to firms
B)  impose a tradeoff on society
C)  allow firms to raise workers' wages
D)  lower prices for consumersE) A) and C)
F) B) and D)

Question 15

Why do taxes adversely affect the allocation of resources in society?

Accepted Answer

A)  because they do not always fall more heavily on the rich
B)  because the taxes collected are not enough to finance government spending
C)  because not everyone pays taxes
D)  because they distort prices and thus the decisions of households and firmsE) A) and C)
F) None of the above

Question 16

How do people make decisions at the margin?

Accepted Answer

A)  by following tradition
B)  by experience
C)  by calculating dollar costs
D)  by comparing costs and benefitsE) A) and D)
F) C) and D)

Question 17

The Phillips curve shows the short-run tradeoff between inflation and economic growth.

Accepted Answer

A) True 
 B)False

Question 18

What does the adage, "There is no such thing as a free lunch," mean?

Accepted Answer

A)  Even people on welfare have to pay for food.
B)  The cost of living is always increasing.
C)  To get something we like, we usually have to give up another thing we like.
D)  All costs are included in the price of a product.E) None of the above
F) A) and D)

Question 19

With careful planning, we can usually get something that we like without having to give up something else that we like.

Accepted Answer

A) True 
 B)False

Question 20

What has been one effect of a government-imposed seat belt law?

Accepted Answer

A)  fewer pedestrian deaths
B)  safer driving
C)  an increase in the number of accidents
D)  everyone now wears seat beltsE) C) and D)
F) B) and D)

Exam 1: Ten Principles of Economics

When the government attempts to cut the economic pie into more equal slices, what happens?

Correct AnswerverifiedShow Answer

Under what conditions might government intervention in an economy improve the market outcome?

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

How do people make decisions at the margin?

Correct AnswerverifiedShow Answer

What has been one effect of a government-imposed seat belt law?

Correct AnswerverifiedShow Answer

What happened when the German government increased the quantity of money in the German economy in the 1920s?

Correct AnswerverifiedShow Answer

How do prices direct economic activity in a market economy?

Correct AnswerverifiedShow Answer

What did Ralph Nader's book Unsafe at Any Speed cause the U.S. government to require?

Correct AnswerverifiedShow Answer

The Phillips curve shows the short-run tradeoff between inflation and economic growth.

Correct AnswerverifiedShow Answer

What concept is illustrated by the adage, "There is no such thing as a free lunch"?

Correct AnswerverifiedShow Answer

With careful planning, we can usually get something that we like without having to give up something else that we like.

Correct AnswerverifiedShow Answer

What is an increase in the overall level of prices in an economy called?

Correct AnswerverifiedShow Answer

Why do taxes adversely affect the allocation of resources in society?

Correct AnswerverifiedShow Answer

Which of the following best defines efficiency?

Correct AnswerverifiedShow Answer

In most societies, who allocates resources?

Correct AnswerverifiedShow Answer

What is almost always the cause of large or persistent inflation?

Correct AnswerverifiedShow Answer

What does economics study?

Correct AnswerverifiedShow Answer

What will pollution regulations do?

Correct AnswerverifiedShow Answer

What does the adage, "There is no such thing as a free lunch," mean?

Correct AnswerverifiedShow Answer

Equity means everyone in the economy should receive an equal share of the goods and services produced.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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