Question 1

Adam Smith's "invisible hand" refers to:

Accepted Answer

A)   people's pursuit of their own self-interest.
B)   people's pursuit of the social interest.
C)   social justice.
D)   government control.E) A) and D)
F) A) and B)

Question 2

In an episode of DuckTales (a Disney cartoon starring Scrooge McDuck)  entitled "Dough Ray Me," one of the characters invented a duplicating machine. Other characters used the machine to start duplicating money at a phenomenal rate. What would you expect to happen? (And indeed, the episode does show this happening.)

Accepted Answer

A)   More people would save money.
B)   The government would print more money.
C)   It would create massive inflation.
D)   Wages would fall.E) C) and D)
F) A) and C)

Question 3

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Accepted Answer

Opportunity cost is that which you must ...

Question 4

In the market for pharmaceuticals, the issue of "drug lag" illustrates which of the following ideas?

Accepted Answer

A)   The longer a drug is tested for safety, the lower the opportunity cost in terms of lives lost.
B)   If a drug is not tested for safety, it might kill more people.
C)   Because of the higher the cost of testing a drug, it takes longer to make it, and more lives are lost.
D)   Lives are being lost because safe drugs that are still in the testing stage have not yet been approved.E) None of the above
F) All of the above

Question 5

Why do you think researchers sometimes find a positive relationship between the unemployment rate and college enrollment rates?

Accepted Answer

A)   The opportunity cost of attending college rises during economic booms, leading to higher college enrollment rates.
B)   The opportunity cost of attending college rises during recessions, leading to higher college enrollment rates.
C)   The opportunity cost of attending college falls during recessions, leading to higher college enrollment rates.
D)   The opportunity cost of attending college falls during economic booms, leading to higher college enrollment rates.E) A) and B)
F) A) and D)

Question 6

When the unemployment rate rises, college enrollment tends to:

Accepted Answer

A)   rise.
B)   remain the same.
C)   fall.
D)   defy prediction.E) A) and D)
F) All of the above

Question 7

The legendary rock band KISS, which sold more than 100 million albums worldwide, is often said to be only concerned about making as much money as possible. This example highlights the idea that:

Accepted Answer

A)   greed is bad.
B)   markets align self-interest with the social interest.
C)   government can sometimes improve market outcomes.
D)   incentives are not always important.E) A) and D)
F) A) and B)

Question 8

Monetary and fiscal policies are among a government's tools for mitigating economic fluctuations.

Accepted Answer

A) True 
 B)False

Question 9

An automobile gets 40 miles per gallon, and a gallon of fuel costs $4.00. What is the marginal fuel cost for a typical mile of driving with this vehicle?

Accepted Answer

A)   $0.05
B)   $0.10
C)   $0.15
D)   $0.20E) C) and D)
F) B) and D)

Question 10

The theory of comparative advantage concludes that people can produce more by specializing than by doing everything themselves.

Accepted Answer

A) True 
 B)False

Question 11

In the long run, excess money printing by the government causes inflation and economic busts.

Accepted Answer

A) True 
 B)False

Question 12

An example of a marginal decision is deciding whether to:

Accepted Answer

A)   invest half your savings in Google or Microsoft.
B)   buy one more apple or one more banana.
C)   commit your life to economics or biology.
D)   study for 5 hours or for 10 hours.E) A) and B)
F) C) and D)

Question 13

A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker:

Accepted Answer

A)   should use a simple rule: once inflation is gone, it will always be gone.
B)   needs to know the causes of inflation, for example, the government's printing of too much money.
C)   should find out if people are really better off as a result of the inflation.
D)   should realize that inflation can be reduced without any costs.E) A) and B)
F) A) and D)

Question 14

Institutions that promote economic growth include:

Accepted Answer

A)   policies that provide incentives for people to produce and trade.
B)   the extent of government control in markets.
C)   income redistribution from the rich to the poor.
D)   the amount of goods and services that are provided citizens by their government.E) A) and C)
F) B) and D)

Question 15

What is one cause of inflation?

Accepted Answer

A)   the persistent rise in prices in the economy
B)   the inability of production to keep up with spending in the economy
C)   increased spending by people and the government.
D)   economic growth without money growthE) B) and C)
F) All of the above

Question 16

If two countries are initially at the same level of development, the institution of well-functioning markets can allow one country to develop faster than the other.

Accepted Answer

A) True 
 B)False

Question 17

In an effort to clean the air, many communities impose restrictions on the burning of garbage. This policy causes more garbage to be buried underground, potentially increasing groundwater contamination. What concept does this example represent?

Accepted Answer

A)   trade-offs
B)   marginal pollution
C)   sunk costs
D)   public provisionE) C) and D)
F) None of the above

Question 18

Among the most powerful institutions for supporting good incentives are:

Accepted Answer

A)   government price controls.
B)   monopolies.
C)   legal limits on excessive profits.
D)   property rights.E) None of the above
F) A) and B)

Question 19

A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts. So the first dozen is $6 and the second would be $3. A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is:

Accepted Answer

A)   greater than $3
B)   greater than $6
C)   greater than $9
D)   less than $3E) C) and D)
F) All of the above

Question 20

The decisions made by the Federal Reserve Bank sometimes result in negative effects on the economy because:

Accepted Answer

A)   the economy is weakened when the Fed uses monetary policy.
B)   the government uses money inefficiently when it comes to fiscal policy.
C)   the Fed finds that forecasting economic conditions is easy but controlling the money supply is difficult.
D)   too much money or too little money might induce inflation or unemployment due to bad timing of decisions.E) B) and D)
F) None of the above

Exam 1: The Big Ideas

When the unemployment rate rises, college enrollment tends to:

Correct Answer
verified

The decisions made by the Federal Reserve Bank sometimes result in negative effects on the economy because:

Correct Answer
verified

Correct Answer
verified

The legendary rock band KISS, which sold more than 100 million albums worldwide, is often said to be only concerned about making as much money as possible. This example highlights the idea that:

Correct Answer
verified

Monetary and fiscal policies are among a government's tools for mitigating economic fluctuations.

Correct Answer
verified

A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts. So the first dozen is $6 and the second would be $3. A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is:

Correct Answer
verified

Among the most powerful institutions for supporting good incentives are:

Correct Answer
verified

The theory of comparative advantage concludes that people can produce more by specializing than by doing everything themselves.

Correct Answer
verified

An example of a marginal decision is deciding whether to:

Correct Answer
verified

What is one cause of inflation?

Correct Answer
verified

Adam Smith's "invisible hand" refers to:

Correct Answer
verified

Institutions that promote economic growth include:

Correct Answer
verified

In an effort to clean the air, many communities impose restrictions on the burning of garbage. This policy causes more garbage to be buried underground, potentially increasing groundwater contamination. What concept does this example represent?

Correct Answer
verified

An automobile gets 40 miles per gallon, and a gallon of fuel costs $4.00. What is the marginal fuel cost for a typical mile of driving with this vehicle?

Correct Answer
verified

A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker:

Correct Answer
verified

In the market for pharmaceuticals, the issue of "drug lag" illustrates which of the following ideas?

Correct Answer
verified

In the long run, excess money printing by the government causes inflation and economic busts.

Correct Answer
verified

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Correct Answer
verified
Opportunity cost is that which you must ...
View Answer

If two countries are initially at the same level of development, the institution of well-functioning markets can allow one country to develop faster than the other.

Correct Answer
verified

Why do you think researchers sometimes find a positive relationship between the unemployment rate and college enrollment rates?

Correct Answer
verified

Exam 1: The Big Ideas

When the unemployment rate rises, college enrollment tends to:

Correct AnswerverifiedShow Answer

The decisions made by the Federal Reserve Bank sometimes result in negative effects on the economy because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The legendary rock band KISS, which sold more than 100 million albums worldwide, is often said to be only concerned about making as much money as possible. This example highlights the idea that:

Correct AnswerverifiedShow Answer

Monetary and fiscal policies are among a government's tools for mitigating economic fluctuations.

Correct AnswerverifiedShow Answer

A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts. So the first dozen is $6 and the second would be $3. A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is:

Correct AnswerverifiedShow Answer

Among the most powerful institutions for supporting good incentives are:

Correct AnswerverifiedShow Answer

The theory of comparative advantage concludes that people can produce more by specializing than by doing everything themselves.

Correct AnswerverifiedShow Answer

An example of a marginal decision is deciding whether to:

Correct AnswerverifiedShow Answer

What is one cause of inflation?

Correct AnswerverifiedShow Answer

Adam Smith's "invisible hand" refers to:

Correct AnswerverifiedShow Answer

Institutions that promote economic growth include:

Correct AnswerverifiedShow Answer

In an effort to clean the air, many communities impose restrictions on the burning of garbage. This policy causes more garbage to be buried underground, potentially increasing groundwater contamination. What concept does this example represent?

Correct AnswerverifiedShow Answer

An automobile gets 40 miles per gallon, and a gallon of fuel costs $4.00. What is the marginal fuel cost for a typical mile of driving with this vehicle?

Correct AnswerverifiedShow Answer

A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker:

Correct AnswerverifiedShow Answer

In the market for pharmaceuticals, the issue of "drug lag" illustrates which of the following ideas?

Correct AnswerverifiedShow Answer

In the long run, excess money printing by the government causes inflation and economic busts.

Correct AnswerverifiedShow Answer

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Correct AnswerverifiedOpportunity cost is that which you must ...View AnswerShow Answer

If two countries are initially at the same level of development, the institution of well-functioning markets can allow one country to develop faster than the other.

Correct AnswerverifiedShow Answer

Why do you think researchers sometimes find a positive relationship between the unemployment rate and college enrollment rates?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Opportunity cost is that which you must ...
View Answer

Correct Answer
verified

Correct Answer
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