ECO Chapter 1 & 2

Institutions of Economic Growth

1. Property rights 2. Honest government 3. Political stability 4. A dependable legal system 5. Competitive and open markets 6. Politically Stable

Suppose Betty can repair two cars or bake eight pies in a day. Don can repair one car or bake five pies in a day. When Betty repairs one car, she forgoes the opportunity to have baked _____ pie(s). 4 1 8 2

4

Jasmine is considering taking a job as a hostess at the Forty Thieves restaurant, for $8 an hour. She was also offered a hostess position at Ali Baba's restaurant, where she would be paid $7.25 an hour. Which of the following will decrease Jasmine's opportunity cost of taking the job at Forty Thieves? Ali Baba's changes its offer to $6.75 an hour. Forty Thieves changes its offer to $8.25 an hour. Ali Baba's changes its offer to $7.50 an hour. Forty Thieves changes its offer to $7.75 an hour.

Ali Baba's changes its offer to $6.75 an hour.

Jasmine is considering taking a job as a hostess at the Forty Thieves restaurant for $8 an hour. She was also offered a hostess position at Ali Baba's restaurant, where she would be paid $7.25 an hour. Which of the following will not increase Jasmine's opportunity cost of taking the job at Forty Thieves? Ali Baba's changes its offer to $7.00 an hour. Forty Thieves changes its offer to $7.00 an hour. Ali Baba's changes its offer to $7.75 an hour. Forty Thieves changes its offer to $8.25 an hour.

Ali Baba's changes its offer to $7.00 an hour.

Suppose Betty can repair two cars or bake eight pies in a day. Don can repair one car or bake five pies in a day. Who has the comparative advantage in the production of the two goods? Betty has the comparative advantage in the production of both goods. Betty has the comparative advantage in repairing cars, and Don has the comparative advantage in baking pies. Don has the comparative advantage in the production of both goods. Betty has the comparative advantage in baking pies, and Don has the comparative advantage in repairing cars.

Betty has the comparative advantage in repairing cars, and Don has the comparative advantage in baking pies.

Which of the following statements is (are) true? I. North Korea has a larger per capita income than South Korea. II. South Korea has a smaller per capita income than North Korea III. The two countries share the same language and cultural and historical background. Answer choices: II and III only I only II only III only

III only: The two countries share the same language and cultural and historical background.

Which scenario would least likely change an individual's behavior? In an effort to make people eat healthier, the city of Bakersville tells its residents to eat wheat bread instead of white bread. The city of Saskatoon chooses to give its residents a penny for each soda can they recycle in an effort to promote environmental awareness. A basketball team manages to sign a trio of famous basketball stars who then clamor for other players to come join their team to win a guaranteed championship. The country of Ravamolk enacts a policy to fine companies 20% of their earnings if the safety standards in their factories do not reach acceptable work conditions

In an effort to make people eat healthier, the city of Bakersville tells its residents to eat wheat bread instead of white bread.

_____ is an increase in the general level of prices. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices Inflation Deflation Unemployment Growth

Inflation

The _____ tax rate is the tax rate on additional income. Average Median Mean Marginal

Marginal

Which of the following is not true about monetary and fiscal policy? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices Monetary and fiscal policy are easy to implement. The Great Depression could have been less severe given different monetary and fiscal policy. Monetary and fiscal policy can affect the length and severity of recessions. The Federal Reserve is responsible for monetary policy.

Monetary and fiscal policy are easy to implement.

Juan Valdez, a coffee farmer in Colombia, sells his coffee to Cafe Emporium, a U.S. firm which specializes in gourmet coffee blends. What must be true of this arrangement? When Juan and other farmers in Colombia sell their coffee beans to foreigners, they gain in the short run, but in the long run will only impoverish their nation as a whole. Juan thinks he is better off with this contract, but in reality the wealthy American buyer is taking advantage of Juan's naiveté. While this arrangement is good for Juan, he would be even better off if the government had negotiated the contract because they could have gotten a better price for Juan. All three of these statements must be true. None of these statements must be true.

None of these statements must be true.

Becky loves watching her favorite 30-minute television shows once they are available for streaming on the Internet. In order from her most to least favorite, Becky's show preferences are Community, Parks and Recreation, The Office, and 30 Rock. If Becky has time for only one show, she chooses to watch Community. In this case, what is her opportunity cost? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices 30 Rock Parks and Recreation Parks and Recreation, The Office, and 30 Rock The Office

Parks and Recreation

Which of the following is an example of thinking on the margin? Steve considers how many calories he'll consume if he eats one more cupcake. Sammy decides not to have pizza for lunch. Joyce decides not to have a hamburger for lunch. Joan considers whether to enroll in courses in the spring.

Steve considers how many calories he'll consume if he eats one more cupcake.

In economics, what is meant by "optimal decisions are made at the margin?" The idea of the margin is that all economic decisions are made at the very fringes of society. The concept of the margin was initially developed in 2012 by Professor Marginus; research is still being done on how it can be used for decision-making. The idea of the margin does not help compare trade-offs and is not relevant to decision-making. The idea of the margin is related to making decisions while thinking about the benefits and costs of small changes in behavior.

The idea of the margin is related to making decisions while thinking about the benefits and costs of small changes in behavior.

Which is an issue that makes central banking difficult for the Federal Reserve Bank (the Fed)? The Fed does not control the money supply, so it is hapless in the face of Congress, who does control the money supply. So even when the Fed has many ideas for the betterment of the economy, Congress sometimes makes bad economic decisions. There is a lag between when policies are enacted and when the effects of those policies can be seen. Because inflation is unacceptable due to the increased price levels throughout the economy, the Fed can only lower the money supply, not raise it. All of these make central banking difficult. Central banking is a relatively easy task, so none of these make it difficult

There is a lag between when policies are enacted and when the effects of those policies can be seen.

Which of the following is not an incentive for earning good grades in high school? being competitive for college scholarship opportunities getting into a high-ranked university getting into college high-paying local jobs that do not require a high school diploma

high-paying local jobs that do not require a high school diploma

The opportunity cost of attending college increases as _____ increase(s). job opportunities for high school graduates scholarship opportunity cost of living job opportunities for college graduates

job opportunities for high school graduates

The Federal Reserve is responsible for _____ in the United States transfer payments monetary policy tax rates fiscal policy

monetary policy

We can be sure that voluntary exchanges tend to be mutually beneficial because: all voluntary actions must benefit the person taking the action as well as all other people. people would not voluntarily engage in exchanges that made them worse off. all exchanges are mutually beneficial. Adam Smith told us it was so.

people would not voluntarily engage in exchanges that made them worse off.

Veronica has three friends, none of whom like the others. Consequently, she has to choose which friend to spend time with. Sarah is her favorite. If Sarah is not available to hang out, Veronica prefers Abbey. Of her three friends, Veronica likes Vickie least (though she still enjoys spending time with her). If all of her friends are busy, Veronica will read a book. If Veronica finds herself hanging out with Abbey, what must have been the opportunity cost of this decision if both Abbey and Vickie are available? spending time by herself reading spending an evening with Sarah spending an evening with Vickie None of these choices is correct.

spending an evening with Vickie

Wealth ended malaria in the United States by: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices enabling the United States to pay for workers from other countries to come to the United States and spray pesticides to eliminate mosquitoes. enabling people to move out of the country. the ability to pay for the prevention of malaria. slowing down economic growth.

the ability to pay for the prevention of malaria.

Janice didn't get a flu shot this year because she thought only about the benefits to herself not the benefits to others. In this case: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices the invisible hand may not be present. the invisible hand aligns self-interest with the social interest. marginal thinking pursues the social interest. incentives do not matter.

the invisible hand may not be present.

Daniel is a baker who has decided to create his own brand of chain restaurants, Short and Sweet. He negotiates with three suppliers for weeks and ultimately signs contracts with these suppliers. Francis, who owns a new sugar plantation, agrees to sell Daniel freshly refined sugar on the condition that Daniel helps him advertise his brand of sugar. Diana runs an orchard and provides Daniel with fruit. She enters into the partnership knowing that she can dramatically increase her profits if she can sell fruit to Daniel. Lastly, Ryan, who owns a mill, decides to purchase a new piece of machinery so that he can sell Daniel flour at a lower price than his competitor. The end result of Daniel's interactions with his suppliers is that folks in his neighborhood have a chance to buy delicious baked goods at reasonable prices. Daniel's situation with his suppliers is an example of the invisible hand. market failure. a recession. a command economy.

the invisible hand.