Economics 1 - Practice Quiz Chapters 1 & 2

Suppose you find $20. If you choose to use the $20 to go to the football game, your opportunity cost of going to the game is

$20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game

In making which of the following statements is an economist acting more like a scientist?

A reduction in unemployment benefits will reduce the unemployment rate

Which of the following statements is true about a market economy?

Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being

You have spent $1,000 building a hot-dog stand based on estimates of sales of $2,000. The hot-dog stand is nearly completed, but now you estimate total sales to be only $800. You can complete the hot-dog stand for another $300. Should you complete the hot-dog stand? (Assume that the hot dogs cost you nothing.)

Yes

Economic growth is depicted by

a shift in the production possibilities frontier outward

Raising taxes and increasing welfare payments

improves equality at the expense of efficiency

If a central bank uses the tools of monetary policy to reduce the demand for goods and services, the likely result is ________ inflation and ________ unemployment in the short run.

lower, higher

Which of the following is not a factor of production?

money

Because people respond to incentives,

policymakers can alter outcomes by changing punishments or rewards policies can have unintended consequences society faces a trade-off between efficiency and equality All of the above

Trade-offs are required because wants are unlimited and resources are

scarce

Economics is the study of how

society manages its scarce resources

The main reason that some nations have higher average living standards than others is that

some nations have higher levels of productivity

Positive statements are

statements of description that can be tested

Adam Smith's "invisible hand" refers to

the ability of free markets to reach desirable outcomes, despite the self-interest of market participants

A rational person does not act unless

the action produces marginal benefits that exceed marginal costs

If a nation has high and persistent inflation, the most likely explanation is

the central bank creating excessive amounts of money

All of the following topics fall within the study of microeconomics EXCEPT

the influence of the government budget deficit on economic growth

Which of the following is not part of the opportunity cost of going on vacation?

the money you spent on food

As we move from point A to point D,

the opportunity cost of eggs in terms of bacon rises

Workers in the United States enjoy a high standard of living because

workers in the United States are highly productive