ECON 1500 MIDTERM EXAM QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026

ECON 1500 MIDTERM EXAM QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026 Adam Smith - Answers All of the above - Thought that a market based economic system was superior to Mercantilism for maximizing the wealth of a nation. - Thought a market system would result in goods being produced efficiently. - Thought a market system would tend to result in the correct combination of goods being produced. Adam Smith's book, The Wealth of Nations: - Answers None of the above (Adam Smith was against Mercantilism and political forces controlling the economy) According to the Invisible Hand Theorem, the market system will A. distribute income equally B. eliminate scarcity C. produce goods efficiently D. None of the above - Answers C. produce goods efficiently According to the Invisible Hand Theorem, the market system will A. allocate resources inefficiently B. guarantee equality of opportunity C. produce goods that people want and demand D. eliminate scarcity - Answers C. produce goods that people want and demand Which of the following is(are) scarce? A. Clean water B. Electricity C. Workers D. All of the above - Answers D. All of the above If you make decisions as assumed by economists, you are working full time as a "sales bro" or "sales gal" for Fox Pest Control in Texas this semester rather than the alternative of attending USU in Logan becuase you percieve the __________ of being a "sales bro/gal" as less than the ____________ of being a "sales bro/gal" this semester A. Marginal Benefit; Marginal Cost B.Marginal Cost; Marginal Benefit C. Total Cost; Total Benefit D. Total Benefit; Total Cost - Answers B. Marginal Cost; Marginal Benefit For which of the following questions can the discipline of economics provide an explanation as to the correct answer? A. For whome to produce? B. How to produce? C. What is the correct income distribution? D. None of the above - Answers B. How to produce? Applying the economic decision rule, you would attend USU this semester rather than work full time for FedX if you perceive that the: A. Marginal benefit to society of you attending USU marginal cost to you of attending USU B. Total benefit to you of attending USU marginal cost to you of attending USU C. Marginal benefit to society of you attending USU marginal cost to you of attending USU D. Marginal benefit to you of attending USU marginal cost to you of attending USU - Answers D. Marginal benefit to you of attending USU marginal cost to you of attending USU Scarcity results in: A. opportunity costs B. the no free lunch principle C. the necessity of choice D. All of the above are correct - Answers D. All of the above are correct Which word or phrase best explains what determmines the average price and quantity sold per week in the U.S of the iPhone 14 Pro? A. The price mechanism B. fovernment control C. tradition D. All of the above - Answers A. The price mechanism Which statement best summarizes the Invisible Hand theory? A. Social forces channel individual self-interest to achieve the common or social good B. It requires political forces to channel individual self-interst to achieve the common good C. Markets typically channel individual self-interst to achieve the common of social good D. Socialism results in a more equitable distribuition of income - Answers C. Markets typically channel individual self-interst to achieve the common of social good Economics as a discipline A. is a very narrow discipline concerned primarily with three issues - interest rates, inflation and the stock market. B. typically assumes that individuals are capable of comparing costs and benefits associated with choices. C. typically assumes that individuals primarily make decisions based on a social as opposed to an individual perspective. D. All of the above correct. - Answers B. typically assumes that individuals are capable of comparing costs and benefits associated with choices. In the United States, which is primarily used to determine how cars are produced? A. Government Forces B. Tradition C. Political Forces D. Markets - Answers D. Markets In the United States, which is used to determine the wages of welders? A. Social Forces B. Tradition C. Political Forces D. Markets - Answers D. Markets In addition to The Wealth of Nations, Adam Smith is also the author of: A. On Human Understanding B. Two Treatises of Government C. A Theory of Moral Sentiments D. All of the above were written by the great Adam Smith - Answers C. A Theory of Moral Sentiments Which of the following are associated with Adam Smith and his book, Wealth of Nations: A. Individual choice. B. The Invisible Hand. C. The Market System. D. All of the above are correct. - Answers D. All of the above are correct Typically, USU would have more juniors and seniors on its men's basketball team compared to Duke since: A. USU players are not rational. B. Duke players face a higher marginal cost of staying in college. C. USU players face a higher marginal cost of staying in college. D. Duke players face a higher marginal benefit of staying in college. - Answers B. Duke players face a higher marginal cost of staying in college. For a given opportunity cost to the person, a rational individual chooses the option that has: A. the lowest benefit. B. the highest benefit to that individual. C. the highest benefit to society. D. the highest social status. - Answers B. the highest benefit to that individual. Which of the following is not one of the three economic questions faced by all societies? A. How to eliminate scarcity. B. What to produce. C. How to produce. D. Who gets what is produced. - Answers A. How to eliminate scarcity. To understand and appreciate the breadth of Economics (as well as perhaps significantly affecting howyour think of yourself), Professor Bowles suggested reading: A. A Monetary History of the United States by Milton Friedman. B. Thinking, Fast and Slow by Daniel Kahneman. C. Arguing with Zombies by Paul Krugman. D. Joe Biden: Promises Kept by Joe Biden. - Answers B. Thinking, Fast and Slow by Daniel Kahneman. Which of the following will shift the PPC out? A. Better technology. B. Less capital. C. More labor. D. Both A and C are correct. - Answers D. Both A and C are correct. Which of the following will shift the PPC out? A. Better Institutions. B. Less trade. C. Population control. D. All of the above are correct. - Answers A. Better Institutions. Productive efficiency: A. requires production outside of the PPC. B. requires competition. C. requires production on the PPC. D. None of the above are correct. - Answers C. requires production on the PPC. A policy of Laissez Faire will: A. lead to less trade. B. lead to more specialization. C. lead to gains for all individuals. D. Both A and C are correct but not B. - Answers B. lead to more specialization. Which of the following is/are true concerning trade and specialization? For two states to benefit from specialization and trade: A. all that is required is a differences in goods. B. all that is required is a differences in resources. C. both differences in goods and resources are required. D. All of the above are correct. - Answers C. both differences in goods and resources are required Florida will have a comparative advantage in producing oranges compared to Idaho if: A. Florida is good at producing oranges. B. Florida has a lower opportunity cost of producing oranges. C. Idaho has a higher opportunity cost of producing oranges. D. Both B and C are correct. - Answers D. Both B and C are correct. Adam Smith was of the opinion that which of the following was a source of national wealth? A. A policy of Laissez Faire. B. Specialization based on comparative advantage. C. Trade and markets. D. All of the above are correct. - Answers D. All of the above are correct. Adam Smith argued: A. in favor of Mercantilism. B. against the Navigation Acts which controlled the trade of the American Colonies. C. in favor of government control of imports. D. All of the above are correct. - Answers B. against the Navigation Acts which controlled the trade of the American Colonies. If President Biden argues that trade with China is killing the U.S. economy, he: A. probably doesn't appreciate the concept of comparative advantage. B. is wrong if he means the U.S. as a whole is hurt by trade. C. may be correct if he means that trade with China is hurting some U.S. workers. D. All of the above are correct. - Answers D. All of the above are correct. Why doesn't Idaho produce cars? A. Technologically impossible. B. Too far from big markets. C. Opportunity cost is too high. D. Both A and B are correct. - Answers C. Opportunity cost is too high. Why do farmers in Idaho produce potatoes not oranges? A. It is in their self interest to do so. B. Tradition. C. Potato production is profitable, oranges would not be. D. Both A and C are correct. - Answers D. Both A and C are correct. Trade: A. is based on voluntary exchange. B. requires coercion. C. allows the world to solve the scarcity problem. D. All of the above are correct. - Answers A. is based on voluntary exchange. A point outside of an existing PPC: A. is presently possible. B. could become possible with better technology. C. likely will never be possible. D. None of the above are correct. - Answers B. could become possible with better technology. If there were decreasing marginal opportunity costs, the production possibility curve would be: A. flat. B. straight. C. bowed out. D. bowed in. - Answers D. bowed in. The principle of increasing marginal opportunity cost does not hold in which of the following cases? A. All inputs are equally useful in the production of all goods. B. Some inputs are more useful in the production of certain goods. C. Some inputs are less useful in the production of certain goods. D. Each input is useful in the production of a limited number of goods. - Answers A. All inputs are equally useful in the production of all goods. The text attributes the growth of economies over the last 200 years largely to: A. the development of markets. B. the discovery of additional resources. C. a decrease in the size of the world population. D. Government social policies. - Answers A. the development of markets. Two countries that specialize their production based on comparative advantage and then trade with each other will be able to: A. both produce and consume more. B. produce more and consume less. C. produce less and consume more. D. both produce and consume less. - Answers A. both produce and consume more. Which of the following result in U.S. wages remaining significantly higher than wages in Mexico? A. Higher labor productivity in the U.S. B. Different economic institutions in the U.S. compared to Mexico. C. Technology is not completely transferable between the two nations. D. All of the above. - Answers D. All of the above. If the hourly wage of U.S. workers is $16, the hourly wage of Mexican workers is $4, and U.S. workers produce 3 times as much output per hour as Mexican workers, then, other things equal, it would be efficient to locate production facilities in: A. the United States since the cost per unit of output will be higher. B. the United States since the cost per unit of output will be lower. C. Mexico since the cost per unit of output will be higher. D. Mexico since the cost per unit of output will be lower. - Answers D. Mexico since the cost per unit of output will be lower. Which explains why average income per capita in the world started to increase rapidly around 1750? A. Broader adoption of specialization and trade. B. Broader adoption of markets as the system for answering the questions of what, how, and for whom. C. Smarter Kings and Queens. D. Both A and B are correct but not C. - Answers D. Both A and B are correct but not C. In terms of American institutions, the ___________ system is most closely connected with _________ and the __________ is connected with ______________. A. Economic; Locke; political; Smith. B. Economic; Smith; political; Locke. C. Economic; Marx; political; Jefferson. D. Legal; Smith; Economic; Locke. - Answers B. Economic; Smith; political; Locke. In The Wealth of Nations, Adam Smith: A. Argued that Mercantilism was a system that produced wealthy nations. B. Argued in favor of the Market system as a source of economic growth and prosperity. C. Focused on the role of gold as an explanation of the nature and causes of the wealth of nations. D. All of the above are correct. - Answers B. Argued in favor of the Market system as a source of economic growth and prosperity. John Locke: A. argued that elites have the right to inform others of the truth. B. argued that some individuals have an inherent right to rule others. C. argued in favor of individual rights, equality and access to the truth. D. All of the above are correct. - Answers C. argued in favor of individual rights, equality and access to the truth In a Market economy, A. the government answers the questions of what, how, and for whom. B. markets answer the questions of what, how, and for whom. C. society as a whole owns the factors of production (resources). D. Laissez faire is not an acceptable principle. - Answers B. markets answer the questions of what, how, and for whom. A Market economy: A. is based on coercion. B. aligns incentives in such a way that individual decisions result in socially undesirable outcomes. C. typically results in goods produced efficiently as inefficient producers are allowed to fail. D. typically results in goods produced efficiently as inefficient producers are subsidized by the government. - Answers C. typically results in goods produced efficiently as inefficient producers are allowed to fail. Which of the following was mentioned in the Chapter 3 lecture as an example of an American institution? A. English Common Law. B. The Electoral College. C. A culture of innovation and work. D. All of the above. - Answers D. All of the above. Compared to the market system, both feudalism and mercantilism: A. relied on a central government to decide what and how to produce. B. relied on tradition to answer the three economic questions. C. relied much less on markets to allocate resources. D. produced rapid economic growth. - Answers C. relied much less on markets to allocate resources. Households are on the: A. supply side of factor markets and the demand side of goods markets. B. demand side of factor markets and the supply side of goods markets. C. supply side of both factor markets and goods markets. D. demand side of both factor markets and goods markets. - Answers A. supply side of factor markets and the demand side of goods markets. Businesses are on the: A. supply side of factor markets and the demand side of goods markets. B. demand side of factor markets and the supply side of goods markets. C. supply side of both factor markets and goods markets. D. demand side of both factor markets and goods markets. - Answers B. demand side of factor markets and the supply side of goods markets. Households (i.e., consumers): A. ultimately determine the answer to the question, What to produce? B. are on the demand side of factor market and the supply side of goods market. C. are on the supply side of both the factor market and goods market. D. None of the above are correct. - Answers A. ultimately determine the answer to the question, What to produce? In the U.S. market based economy, most economists would consider which of the following is an example of the U.S. government properly performing its role as an actor? A. Establishing labor laws that restrict businesses' freedom to hire and fire whomever they want. B. Building a sports stadium and giving it away to the owner of the Dallas Cowboys. C. Building aircraft carriers for national defense. D. Establishing labor laws that restrict an individual's freedom to work for whom he/she wants. - Answers C. Building aircraft carriers for national defense. In the U.S. market based economy, most economists would consider which of the following is an example of the U.S. government properly conducting its role as a referee? A. Prosecuting Sam Bankman-Fried for fraud. B. Building a highway. C. Building aircraft carriers. D. Subsidizing the production of sugar. - Answers A. Prosecuting Sam Bankman-Fried for fraud. In explaining why a typical taxpayer living in Park City, UT is helping to pay for your education at Utah State University, your best economic argument would rely on: A. some concept of fairness. B. the notion of external benefits. C. the notion of external costs. D. the coercive power of government. - Answers B. the notion of external benefits. In the sense of cause and effect, which of the following logically fit together? A. 20th century socialism; inefficient economy. B. Markets; Chinese economic growth. C. Mercantilism; American Revolution. D. All of the above are correct. - Answers D. All of the above are correct The U.S. Government has an economic justification to and typically does: A. Produce public goods. B. Promote competition. C. Limit fraud and corruption. D. All the above are correct. - Answers D. All the above are correct. Professor Bowles would argue that the timing and pattern of economic growth shown in Figure 2-6 in the text is a consequence of: A. Enlightenment ideas of individual freedom and reason. B. the development of the market system in Europe in the 18th century. C. a general rejection in Britain and North America of the ideas expressed in Smith's Wealth of Nations. D. A and B are correct but not C. - Answers D. A and B are correct but not C. In the 20th century, socialism in practice (e.g., the Soviet Union) emerged as an economic system in which the three economic questions (what, how and for whom), were primarily answered by: A. peasants. B. government. C. the Lord of the Manor. D. markets. - Answers B. government. Which follow from John Locke's idea that individuals by nature are free and equal? A. The rule of law as opposed to the rule of the strong. B. A government of the people, by the people, for the people. C. Toleration of the views of others. D. All of the above. - Answers D. All of the above. In a Mercantilist system: A. markets, rather than political forces, decide what and how to produce. B. serfs make the central economic decisions. C. governments let the market decide what to produce. D. governments distributed the rights to produce. - Answers D. governments distributed the rights to produce. Markets, without government intervention, likely will: A. Produce too many college graduates due to external benefits of education.