Ten principles of economics

1. Government policies designed to promote efficiency:

a. usually do so at the expense of equity.b. tend to cause the economy to grow more slowly.c. always fail.d. require very high taxes.

2. All of the following can be considered a student's costs of going to college, EXCEPT:

a. textbooks.b. tuition and fees.c. room and board (that costs her about the same as she was paying before entering college).d. the student's time, which can no longer be devoted to earning a salary.

3. An airline's plane from Los Angeles to New York is about to take off, but it still has a few seats empty. If the average cost per seat is $500, what price should the airline charge passengers in standby to fill in those remaining seats? (Consider that quantitative decisions are made at the margin)a. At least $500.b. Exactly $500.c. Any price above zero that will entice standby passengers to take the flight.d. Slightly less than $500.

4. The Federal government enacted regulation in the 1960s requiring people to wear seatbelts in their cars. All of the following resulted from this regulation, EXCEPT:a. overall deaths due to car accidents changed very little in the United States.b. fewer deaths occurred per accident.c. fewer pedestrians were killed in car accidents.d. the frequency of accidents increased

5. When two persons trade goods:

a.one person always gains at the expense of the other.b. both persons usually gain from the exchange.c. one person usually gains at the expense of the other.d. the overall well being of the two persons remains unchanged.

6. In a market economy, the decisions of what and how much to produce are made by:

a. voters in elections.b. all producers and consumers.c. the government only.d. non governmental agencies.

7. Even though markets do a great job in organizing economic activity, governments are needed to do all of the following EXCEPT:a. establish and enforce property rights.b. intervene when markets fail due to externalities.c. intervene when markets fail due to market power.d. decide what and how much should be produced.

8. Living standards in the United States have risen tremendously over the years, mainly due to:

a. relentless increases in the productivity of labor over the years.b. the forceful efforts of labor unions.c. successive increases in the minimum wage.d. trade protection from competition from countries with low wages, such as China.

9. Rapid and persistent inflation occurs mainly due to:a. high wage increases demanded by labor unions.b. greedy firms that abuse consumers with higher-than-necessary prices.c. rapid increases in the quantity of money in the economy.d. trade with other countries.

10. A government that implements a policy designed to reduce inflation can expect unemployment to:

a. increase in the short-run.b. decrease in the short-run.c. increase in the long-run.d. decrease in the long-run.