Question 1

Owen had a typewriter shop, but he went out of business because no one buys typewriters anymore. This statement best represents this economic concept:

Accepted Answer

The statement reflects the concept that changes in consumer preferences (like not buying typewriters) can lead to a decrease in income for businesses that rely on those sales, illustrating how interconnected spending and income are in an economy.

Question 2

The government of a small town has decided to ban smoking in all restaurants, stores, and government offices. This is an example of the principle that:

Accepted Answer

The government's decision to ban smoking in restaurants, stores, and government offices is an example of government intervention to improve society's welfare when markets fail to achieve efficiency. The negative externalities of secondhand smoke justify government intervention to protect public health.

Question 3

Sometimes the government varies its spending, depending on the needs of the country. This statement best represents the economic concept that:

Accepted Answer

The statement suggests that the government has the power to change its spending patterns, which is a key concept of government policies. A reflects the concept of efficiency, but not necessarily the government's role in changing spending. B refers to the concept of market failure and government intervention, which is not directly related to the statement. C mentions spending and the economy's productive capacity, but not necessarily the government's role in changing spending patterns.

Question 4

Which of the following principles underlies the gains from trade?

Accepted Answer

The answer of Which of the following principles underlies the...

Question 5

You notice that when a new yoga class is offered at the student recreation center at a highly desirable time, some students from the other yoga classes go to the new class instead. This statement best represents this economic concept:

Accepted Answer

When students switch to a new yoga class at a more desirable time, they are exploiting an opportunity to make themselves better off by choosing a class that better fits their schedule or preferences.

Question 6

If Allison drives to a large city 100 miles from her small community to do her back-to-school shopping, this will:

Accepted Answer

A) Allison's spending in the large city diverts potential income from her local community to the larger city, potentially reducing the economic activity and support for local businesses in her own community.

Question 7

When people want more goods and services than are available, the economy undergoes inflation. This statement best represents this economic concept:

Accepted Answer

Inflation occurs when there is too much demand for goods and services relative to the economy's productive capacity. This causes prices to rise, as suppliers can charge more for their products since there are more people looking to buy them than there are goods to go around. This can happen when there is excessive spending, whether due to consumer demand, government policies, or other factors.

Question 8

All children have to be immunized against polio, measles, mumps, and other diseases. If you don't have enough money to pay for the immunizations, they will be provided free at the county health clinic. This statement best represents this economic concept:

Accepted Answer

This statement best represents the economic concept of government intervention to improve society's welfare when markets fail to achieve efficiency. In this case, the government provides free immunizations to ensure all children receive the necessary vaccinations, regardless of their ability to pay.

Question 9

A grocery store benefits when a new furniture factory moves to town and hires workers because:

Accepted Answer

The new jobs at the factory will increase local incomes, which in turn will increase the demand for goods and services offered by local businesses like grocery stores. This will benefit the grocery store as it experiences an increase in sales and revenue.

Question 10

If the value of beach-front property in Beach City decreases, the people of Beach City will likely spend _____, causing incomes in Beach City to _____.

Accepted Answer

If the value of beach-front property in Beach City decreases, people would likely spend less, leading to a decrease in incomes in Beach City.

Question 11

Because the United States is a rich nation, free health care can be provided for all citizens without considering the issue of scarcity.

Accepted Answer

The issue of scarcity is relevant regardless of a nation's wealth. Providing free health care for all citizens would require significant resources and could potentially impact the allocation of resources for other essential goods and services.

Question 12

The federal government regulates how much carbon dioxide a factory can emit. This statement best represents this economic concept:

Accepted Answer

This statement best represents the concept of market failure and the need for government intervention to correct it. The regulation of carbon dioxide emissions by the federal government is an example of a government intervention designed to correct the negative externalities caused by pollution. By limiting how much carbon dioxide a factory can emit, the government is reducing the social costs associated with pollution and improving society's welfare.

Question 13

One person's spending is another person's:

Accepted Answer

When one person spends money, it goes towards someone else's income. For example, if someone spends money at a store, that money goes towards the income of the store's employees or owner. Therefore, one person's spending becomes another person's income.

Question 14

Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before they can go to the high school football game. Nate mows the lawn and Dylan picks up the rooms, and they make it to the football game on time. This statement best represents this economic concept:

Accepted Answer

The concept of gains from trade is relevant in this scenario because Nate and Dylan divided the tasks based on their comparative advantages, leading to greater efficiency in completing the tasks. By specializing in tasks they were better suited for, they were able to complete them more quickly and move on to enjoy the benefits of attending the football game.

Question 15

Which of the following demonstrates one of the three principles of economy-wide interactions?

Accepted Answer

The passage describes Congress approving a White House proposal to rebate some taxes in 2008, which is an example of government intervention in the economy and the use of fiscal policy to stimulate economic growth. This demonstrates one of the three principles of economy-wide interactions, which is that changes in government policies can have significant impacts on the economy as a whole.

Question 16

If the value of homes in University City increases and as a result the people of University City spend more, incomes in University City will:

Accepted Answer

As the value of homes in University City increases, it is likely that the overall economic activity in the area will increase. This increased economic activity will likely lead to an increase in incomes, as people may have more opportunities for employment or start businesses in the area to meet the increased demand from the higher-spending residents.

Question 17

I know when I shop at the local grocery store, I am helping my community. This statement best represents this economic concept:

Accepted Answer

This statement reflects the economic concept that "one person's spending is another person's income." By shopping at a local grocery store, the money spent goes towards the income of the store's employees and suppliers, supporting the local economy.

Question 18

Lena and Jess are roommates. Lena hates to clean the bathroom. Jess will agree to clean the bathroom only if Lena vacuums the living room. This statement best represents this economic concept:

Accepted Answer

This scenario illustrates the concept of gains from trade, where both parties benefit by specializing in tasks they prefer or are willing to do in exchange for something else. Lena and Jess trade tasks to achieve a mutually beneficial outcome.

Question 19

Buying vegetables at a farmers' market benefits the community because:

Accepted Answer

Buying vegetables at a farmers' market increases the income of local farmers and supports the local economy. This, in turn, can lead to an increase in human capital and overall economic growth within the community. Additionally, buying locally sourced food helps to reduce transportation costs and the carbon footprint associated with long-distance transportation of goods, contributing to a more sustainable and environmentally conscious community.

Question 20

During the Great Depression, consumers and producers in the United States dramatically reduced their spending as compared to the quantity of goods and services available at the time. This statement best represents this economic concept:

Accepted Answer

This statement describes the concept of a demand-supply gap, where overall spending (demand) does not align with the economy's productive capacity (supply). This can lead to economic downturns such as the Great Depression.

Quiz 1: First Principles