MICROeconomics Chapter 1

Productivity can be increased by

. raising minimum wages. b. raising union wages. c. improving the education of workers. d. restricting trade with foreign countries. Hide Feedback

High and persistent inflation is caused by

. unions increasing wages too much. b. regulations raising the cost of production too much. c. OPEC raising the price of oil too much. d. governments increasing the quantity of money too much.

Which of the following government activities is motivated by a concern about efficiency? The market failure causes by the concentration of oil refineries by Standard Oil is known as___________ .

Check all that apply. Breaking up Standard Oil (which once owned 90% of all oil refineries) into several smaller companies Providing some low-income people with vouchers that can be used to buy food Prohibiting smoking in public places Imposing higher personal income tax rates on people with higher incomes Regulating cable TV prices Instituting laws against driving while intoxicated Market Power or Externality

What can the government do to boost living standards?

Check all that apply. Encourage research and development to ensure workers have access to the best available technology Impose trade restrictions to reduce competition from abroad Improve education and expand literacy among its citizens to ensure workers are well educated

Which of the following government activities is motivated by a concern about equality? Driving while intoxicated creates an ____________ because of the increased likelihood of accidents by drunk drivers.

Check all that apply. Regulating cable TV prices Instituting laws against driving while intoxicated Prohibiting smoking in public places Providing some low-income people with vouchers that can be used to buy food Breaking up Standard Oil (which once owned 90% of all oil refineries) into several smaller companies Imposing higher personal income tax rates on people with higher incomes Externality or Market Power

Suppose that the government believes the economy is producing goods and services beyond its optimal level. The government therefore decides to decrease the quantity of money in the economy. This monetary policy action decreases demand for goods and services in the economy, leading to ____________ prices for products. In the short run, the change in prices induces firms to produce_____________ goods and services. This, in turn, leads to a____________ unemployment level. Based on this analysis, the economy faces the following trade-off between inflation and unemployment: Lower inflation leads to_________ unemployment.

LOWER, FEWER, HIGHER, HIGHER

A 1996 bill reforming the federal government's antipoverty programs limited many welfare recipients to only two years of benefits. This change gives people the incentives to find a job__________ quickly than if welfare benefits lasted forever. As a result of the change in working incentives led by the 1996 bill reform, the economy will be__________ efficient.

More, More

The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $1.5 million. If it would cost $2 million to finish development and make the product, you_______ go ahead and do so. The most you should pay to complete development is $______ million.

Should NOT, 1.5MM

The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $2 million. If it would cost $4 million to finish development and make the product, you_________ go ahead and do so. The most you should pay to complete development is $________ million.

Should NOT, 2 MM

Which of the following activities is most likely to produce an externality?

a. A student has a party in her dorm room. b. A student reads a novel for pleasure. c. A student sits at home and watches television. d. A student eats a hamburger in the student union.

Which of the following products would be least capable of producing an externality?

a. Food b. Stereo equipment c. Education d. Cigarettes

Which of the following products would be least capable of producing an externality?

a. Food b. Stereo equipment c. Education d. Cigarettes e. Inoculations against disease

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.) your decision rule should be to complete the hot-dog stand as long as the cost to complete the stand is less than

a. No. b. There is not enough information to answer this question. c. Yes. a. $100. b. $300. c. $500. d. $800.

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

a. The strength of a market system is that it tends to distribute resources evenly across consumers. b. Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being. c. With a large enough computer, central planners could guide production more efficiently than markets. d. Taxes help prices communicate costs and benefits to producers and consumers.

Which of the following situations describes the greatest market power?

a. Volvo's impact on the price of autos b. a farmer's impact on the price of corn c. a student's impact on college tuition d. Microsoft's impact on the price of desktop operating systems-how people interact

In the short run,

a. an increase in inflation temporarily increases unemployment. b. a decrease in inflation temporarily increases unemployment. c. inflation and unemployment are unrelated. d. the business cycle has been eliminated.

An increase in the price of beef provides

a. no information because prices in a market system are managed by planning boards. b. information that tells consumers to buy less pork. c. information that tells producers to produce more beef. d. information that tells consumers to buy more beef.

Because people respond to incentives, we would expect that if the average salary of accountants increases by 50 percent while the average salary of teachers increases by 20 percent,

a. students will shift majors from education to accounting. b. students will shift majors from accounting to education. c. fewer students will attend college.

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

a. the money you spent on food b. the money you spent on airline tickets c. the money you spent on a Broadway show d. the money you could have made if you had stayed home and worked

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

a. unions in the United States keep the wage high. b. we have protected our industry from foreign competition. c. the United States has a high minimum wage. d. workers in the United States are highly productive.