ECON m1

Which of the following is true? (about efficiency and equality)

Efficiency refers to the size of the economic pie; equality refers to how the pie is divided.

Suppose that you have received $650 as a birthday gift. You can spend it today or you can put the money in a savings account for a year and earn 2 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

$663.00

Suppose the cost of flying a 350-seat plane for an airline is $350,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is

this cannot be determined from the info given

In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

8 percent per year

For which of the following individuals would the opportunity cost of going to college be highest?

A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree

In the short run, which of the following is not correct? (about policies and inflation)

Policies that encourage higher employment will also induce a lower rate of inflation.

Senator Fujita argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Watson objects that this policy would benefit the rich at the expense of the poor

Senator Fujita's argument is primarily about efficiency, while Senator Watson's argument is primarily about equality

The term market failure refers to

a situation in which the market on its own fails to allocate resources efficiently

When society requires that firms reduce pollution, there is

a tradeoff because of reduced incomes to the firms' owners and workers

Which of the following firms is likely to have the greatest market power? -a utility company, -a farmer, -a grocery store, -a local electronics retailer

a utility company

When the government prevents prices from adjusting naturally to supply and demand, it

adversely affects the allocation of resources

If China decides to trade with France, we know that a. France will benefit, but trade with a less developed country could not benefit China. b. it will not benefit France because workers in China are more productive. c. France and China can both benefit. d. it will not benefit either country because their cultural differences are too vast.

c

Communist countries worked under the premise that

central planners were in the best position to determine the allocation of scarce resources in the economy

Making rational decisions at the margin means that people

compare the marginal costs and marginal benefits of each decision

Your professor loves her work, teaching math. She has been offered other positions in the corporate world that would increase her income by 15 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal

cost of teaching increased

Large or persistent inflation is almost always caused by

excessive growth in the quantity of money

Which of the following claims is consistent with the views of mainstream economists? a. If we increase the rate of inflation from 4 percent to 6 percent, then the rate of unemployment will temporarily fall. b. If we increase the rate of inflation from 4 percent to 6 percent, then the rate of unemployment will temporarily rise. c. If we increase the rate of inflation from 4 percent to 6 percent, then the rate of unemployment will permanently fall. d. If we increase the rate of inflation from 4 percent to 6 percent, then the rate of unemployment will permanently rise.

if we increase the rate of inflation from 4%-6%, then the rate of unemployment will temporarily fall

Suppose that in Peru total annual output is worth $750 million and people work 40 million hours. In Oman, total annual output is worth 650 million and people work 20 million hours. Productivity is higher

in Oman. most variation in the standard of living across countries is due to differences in productivity

Which of the following is the most correct statement about the relationship between inflation and unemployment

in the short ru, falling inflation is associated with rising unemployment

trade between countries tends to

increase both competition and specialization.

Prices direct economic activity in a market economy by

influencing the actions of buyers and sellers

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

is more equal but less efficient for society

A hair stylist currently cuts and colors hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

it depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients

In the short run, an increase in the money supply is likely to lead to

lower unemployment and higher inflation

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

market failure caused by an externality

Chloe's college raises the cost of room and board per semester. This increase raises Chloe's opportunity cost of attending college

only if the amount she would have to pay for room and board if she didnt attend college rose by less than the increase in the amount her college charges. an increase in opportunity cost reduces Chloe's incentive to attend college.

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

people face tradeoffs

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

people face tradeoffs

Suppose the state of Rhode Island passes a law that increases the tax on beer. As a result, beer consumers who live in Rhode Island start purchasing their beer in surrounding states. Which of the following principles does this best illustrate?

people respond to incentives

When the government redistributes income from the wealthy to the poor,

people work less and produce fewer goods and services

the phenomenon of scarcity stems from the fact that

resources are limited

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should

sell the ticket because the marginal benefit exceeds the marginal cost

If the government were to intervene and set a wage for unskilled labor above the market wage, then we would expect, relative to the market outcome,

a decrease in the number of unskilled jobs available

Suppose your finance professor has been offered a corporate job with a 25 percent pay increase. He has decided to take the job. For him, the marginal

benefit of leaving was greater than the marginal cost

For a very long time the country of Tofu has had an inflation rate of 8 percent. Suddenly its inflation rate drops to 3 percent. The drop in the inflation rate

could be due to slower money supply growth. We would expect unemployment to be higher.

Laws that enforce chemical hazard control are examples of government intervention that is intended to reduce

externalities

Which of the following industries has a marginal cost that is close to zero? -automobile, -aircraft, -software, -furniture

software

Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market?

to protect an industry from foreign competition

The slow growth of U.S. incomes during the 1970s and 1980s can best be explained by

a decline in the rate of increase in US productivity

Both the production of goods and services and the unemployment rate are used to measure a. the business cycle. b. productivity. c. the interest rate. d. inflation.

a

52. Which is the most accurate statement about trade? a. Trade can make every nation better off. b. Trade makes some nations better off and others worse off. c. Trading for a good can make a nation better off only if the nation cannot produce that good itself. d. Trade helps rich nations and hurts poor nations.

a

Productivity is defined as the

amount of goods and services produced from each unit of labor input

Which of these activities will most likely result in an external benefit?

an elderly woman plants a flower garden on the vacant lot next to her house

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as

an externality

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

67. When the government implements programs such as progressive income tax rates, which of the following is likely to occur? a. Equality is increased and efficiency is increased. b. Equality is increased and efficiency is decreased. c. Equality is decreased and efficiency is increased. d. Equality is decreased and efficiency is decreased.

b

Which of the following is an example of an externality? a. Zima purchases a new pants suit. b. Malik's bird chirps loudly during the night, waking his neighbors. c. Roberto sells a book to Kevin, who uses the book and then gives it to Lee as a gift. d. Kalene watches a scary movie.

b

Which of the following statements about trade is false? a. Trade increases competition. b. With trade, one country must win and one country must lose. c. Bulgaria can benefit, potentially, from trade with any other country. d. Trade allows people to buy a greater variety of goods and services at lower cost.

b

Which of these activities will most likely impose an external cost? a. An athlete works out at a gym. b. A postal worker smokes a cigarette in a crowded break room. c. A young father pushes his baby in a stroller. d. A construction worker eats a hotdog during her lunch break.

b

A rational decisionmaker a. ignores marginal changes and focuses instead on "the big picture." b. ignores the likely effects of government policies when he or she makes choices. c. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. d. takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.

c

Efficiency a. and equality both refer to how much a society can produce with its resources. b. and equality both refer to how fairly the benefits from using resources are distributed between members of a society. c. refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society. d. refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources.

c

Which of the following statements exemplifies a principle of individual decision making? a. Trade can make everyone better off. b. Governments can sometimes improve market outcomes. c. The cost of something is what you give up to get it. d. Prices rise when the government prints too much money.

c

50. Which of the following statements does not apply to a market economy? a. Firms decide whom to hire and what to produce. b. The "invisible hand" usually maximizes the income of society as a whole. c. Households decide which firms to work for and what to buy with their incomes. d. Government policies are the primary forces that guide the decisions of firms and households.

d

61. Which of the following is an important cause of inflation in an economy? a. Increases in productivity in the economy b. The influence of positive externalities on the economy c. Lack of property rights in the economy d. Growth in the quantity of money in the economy

d

The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that

equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. However, redistributing income from rich to poor reduces the reward for working hard. Therefore, society faces a tradeoff between

efficiency and unemployment

To improve living standards, policymakers should

formulate policies designed to increase productivity

The "invisible hands" ability to coordinate the decisions of the firms and households in the economy can be hindered by

government actions that distort prices

If an externality is present in a market, economic efficiency may be enhanced by

government intervention

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

the Federal Reserve is worried about unemployment

Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by

the actions of government central planners

You have driven 850 miles on a vacation and then you notice that you are only 50 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

the cost of driving the next 50 miles, but not the cost of driving the first 850 miles

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

the cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise

the primary determinant of a country's standard of living is

the country's ability to produce goods and services

People are willing to pay more for a diamond than for a bottle of water because

the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water

When computing the opportunity cost of attending a professional football game as a spectator, you should include

the price you pay for the ticket and the value of your time

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

the rate of growth of the quantity of money was slower in the UK than in Turkey

The marginal benefit Joseph gets from purchasing a fourth pair of shoes is

the total benefit he gets from purchasing 4 pairs of shoes minus the total benefit he gets from purchasing 3 pairs

Nevaeh decides to spend four hours playing video games rather than attending her classes. Her opportunity cost of playing video games is

the value of the knowledge that she would have received had she attended her classes

Savion's aunt gave him $25 for his birthday with the condition that Savion buys himself something. In deciding how to spend the money, Savion narrows his options down to four choices: Option 1, Option 2, Option 3, and Option 4. Each option costs $25. Finally, he decides on Option 2. The opportunity cost of this decision is

the value to Savion of the option he would have chosen had Option 2 been available

Aiden and Zaria charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, six people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have six or five cars parked on their lawn does not affect their costs. From this information it follows that

they would do better charging $15 than $10

Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper. This scenario is an example of which principle of economics?

trade can make everyone better off

Which of the following is not an example of a group responding to an incentive?

universities offer fewer online classes when they generate more revenue at the same cost than traditional classes