Chapter 1 ECH Quiz

For an economist, the cost of something is:

what you gave up to get it.

Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college.

The best measure of the opportunity cost of any choice is:

whatever you have given up to make that choice, even if no monetary costs are involved.

One day, Martha wakes up and in frustration yells, "Decisions, decisions, decisions! Why do I have to make decisions about everything?" Martha's frustrations stem from the fact that:

like all economic beings, she faces constraints and cannot have everything she wants.

An increase in efficiency means that an economy has:

made more people better off without making others worse off.

You are planning to study eight hours this week for your economics final and are considering studying a ninth hour. You should:

make your decision based on the cost of the next best alternative use of your time compared to the benefit of one more hour of study.

The concept of the margin deals with:

making incremental choices.

Your neighbor is mowing her yard one afternoon when she stops to have some lemonade. She drinks one glass and is considering having a second glass. This is an example of

marginal analysis.

Your neighbor is mowing her yard one afternoon when she stops to have some lemonade. She drinks one glass and is considering having a second glass. This is an example of:

marginal analysis.

The government of a small town has decided to ban smoking in all restaurants, stores, and government offices. This is an example of the principle that:

when markets fail to achieve efficiency, government intervention can improve society's welfare.

Which of these is one of the four principles of individual choice?

Resources are scarce.

Which of the following statements is CORRECT?

An economic situation is in equilibrium when no individual would be better off taking a different action.

How people choose among the alternatives available to them is:

the study of microeconomics.

Although freshwater is very abundant in most places, it is scarce because:

there is not enough of it to meet all needs.

Which of the following is an example of individual choice?

Lauren spends her allowance on pillows for her bed.

Two neighbors, Molly and Sandy, are separated by a white picket fence. Each neighbor has a garden that grows tomatoes and peppers. To gain from trade, _____ can trade _____ to _____ for _____ if _____ is the more efficient grower of peppers.

Molly; peppers; Sandy; tomatoes; Molly

Which of the following statements is NOT true?

Most opportunity costs are zero.

You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. This statement best represents this economic concept:

The real cost of something is what you must give up to get it.

Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before they can go to the high school football game. Nate mows the lawn and Dylan picks up the rooms, and they make it to the football game on time. This statement best represents this economic concept:

There are gains from trade.

The problem of scarcity is confronted by:

all societies.

A trade-off between equity and efficiency may exist because of all of the following EXCEPT that:

allocating resources fairly may cause efficiency.

The trade-off between equity and efficiency occurs because:

allocating resources fairly may cause inefficiency.

If all of the opportunities to make someone better off (without making someone else worse off) have been exploited, an economy is:

efficient.

Suppose a local community decides to give all of its citizens over age 60 a parking pass that will enable them to park in the front of parking lots. For people over 60, this policy is:

equitable but not efficient, since it applies to all citizens over 60.

Equity means that:

everyone gets his or her fair share of the goods and services produced.

The problem of determining what goods and services society should produce:

exists because there are not enough resources to provide all of the goods and services that people want.

When the nations that constitute the Organization of Petroleum Exporting Countries (OPEC) restrict the supply of oil to increase their profits, the oil market:

fails because there is no longer an efficient allocation of resources.

The primary emphasis in macroeconomics is on:

he national economy.

Which is NOT an example of a resource?

land

Your elderly grandma tells you: "I haven't been taking my beloved walks because I'm concerned about falling and getting hurt. See, there is always a cost to doing something. But if you don't do anything, then there is no cost." Your grandma does not understand the economic concept of:

opportunity cost.

Zoe's grandparents are excited about finally paying off their mortgage, because, as they say, "Our cost of housing is now zero." Zoe should explain to them the economic principle of:

opportunity cost: by living in the house, they are giving up the opportunity to sell the house, buy a smaller one, and pocket the difference.

When a market is in equilibrium:

people have exploited all opportunities to make themselves better off.

I know when I shop at the local grocery store, I am helping my community. This statement best represents this economic concept:

One person's spending is another person's income.

Which of the following is NOT a reason that markets usually lead to efficiency?

People are naturally efficient.

You notice that when a new yoga class is offered at the student recreation center at a highly desirable time, some students from the other yoga classes go to the new class instead. This statement best represents this economic concept:

People usually exploit opportunities to make themselves better off.

Which of the following principles underlies the gains from trade?

Resources should be used as efficiently as possible to achieve society's goals.

For which of the following decisions would marginal analysis be MOST relevant?

Should Hong work an additional hour or take a short nap?

For which of the following decisions would marginal analysis be most relevant?

Should I eat another doughnut?

According to the textbook, markets usually lead to efficiency.

True

An economic situation is in equilibrium when no individual would be better off taking a different action.

True

An economy is efficient if one person can be made better off by reallocating resources without making anyone else worse off.

True

As long as individuals know that they can find the goods and services they want in the market, they are willing to forgo being self-sufficient and are willing to specialize.

True

Because of the opportunity cost, if the United States spends $87 billion in the rebuilding of Iraq, it has to forgo the opportunity to spend $87 billion on some other program.

True

Because one person's spending is another person's income, if one group in the economy spends more, the incomes of other groups will increase.

True

Economists make predictions about individual behavior based on the assumption that people exploit opportunities to make themselves better off. The fact that different individuals make different choices when confronted with the same situation implies that this assumption is often violated.

True

Equity is the same as efficiency.

True

Handicapped-designated parking spaces are an example of the market economy achieving efficiency.

True

In 2003, Congress passed a tax cut. The country did NOT incur any opportunity cost from this decision.

True

Market equilibrium will always be efficient even if it is not equitable.

True

Market failure occurs when the pursuit of self-interest leads to bad results.

True

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behavior.

True

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

True

Which of the following is a question of marginal analysis

What additional output does a family business produce when it hires one more worker?

All children have to be immunized against polio, measles, mumps, and other diseases. If you don't have enough money to pay for the immunizations, they will be provided free at the county health clinic. This statement best represents this economic concept:

When markets don't achieve efficiency, government intervention can improve society's welfare.

The federal government regulates how much carbon dioxide a factory can emit. This statement best represents this economic concept:

When markets don't achieve efficiency, government intervention can improve society's welfare.

Which of the following policies is MOST likely to reduce traffic congestion in a large metropolitan area because people usually exploit opportunities to make themselves better off?

a toll road that requires each car to pay a fee to enter the city center

Economists believe that resources should be used as efficiently as possible to:

achieve society's goals.

If resources are scarce, it means that they:

are insufficient to provide enough goods and services to satisfy all human material wants and needs.

A choice made _____ is a choice whether to do a little more or a little less of something.

at the margin

The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of buying a burger is your enjoyment of the:

bagel.

A bank offers two compensation plans to its tellers. Plan A provides an hourly wage of $12. Plan B offers $10 per hour plus additional compensation if customers sign up for a related bank product. If a teller chooses plan B, most likely this person would:

be more helpful to customers than if he or she chose plan A.

A resource is anything that:

can be used in production.

Thinking in economic terms, when Mary Sweet-Tooth is deciding whether to eat another brownie, she:

compares all of the benefits and costs of eating another brownie.

Which of the following can best be considered to be a resource used in the production of computers?

computer engineers

You are analyzing a trade-off when you compare the _____ and _____ of doing something.

costs; benefits

If all of the opportunities to make someone better off (without making someone else worse off) have been exploited, an economy is:

efficient

Manny is attending college and majoring in economics. By doing so, Manny is improving his

human capital.

Manny is attending college and majoring in economics. By doing so, Manny is improving his:

human capital.

If Allison drives to a large city 100 miles from her small community to do her back-to-school shopping, this will:

hurt Allison's community because Allison's spending will be income for people in the large city

If Allison drives to a large city 100 miles from her small community to do her back-to-school shopping, this will:

hurt Allison's community because Allison's spending will be income for people in the large city.

Which of the following methods of encouraging recycling is likely to be MOST effective because people usually exploit opportunities to make themselves better off?

imposing a tax per unit of garbage generated

Because people usually exploit opportunities to make themselves better off, which of the following methods of reducing pollution is likely to be most effective?

imposing a tax per unit of pollution generated

In an attempt to reduce shooting deaths, some cities have offered money to people who turn in illegal guns. This program is an example of the government using _____ to influence behavior.

incentives

In most cases, economic efficiency is achieved through:

incentives built into a market economy.

Which of the following methods of discouraging speeding is likely to be MOST effective because people usually exploit opportunities to make themselves better off?

increasing the fine associated with speeding tickets

Market failure occurs when:

individual actions have side effects that are not properly taken into account.

Scarcity exists when:

individuals can have more of one good but only by giving up something else.

If government decided to increase taxes or decrease its spending, most likely this was to correct:

inflation.

The existence of government intervention often suggests that:

markets may not be able to provide for efficient results all of the time.

The incentives built into the market economy ensure that resources are put to good use and that opportunities to make people better off are not wasted. This means that:

markets usually lead to efficiency.

If the state government allocates additional spending on education, the opportunity cost is:

measured in terms of the best alternative uses for that money.

The study of a single firm and how it determines prices falls under the study of:

microeconomics.

Which of the following is NOT a resource in the production of rice?

money

The phrase gains from trade refers to the:

ncrease in total output that is realized when individuals specialize in particular tasks and trade with each other.

Equilibrium exists when:

no individual has an incentive to change his or her behavior.

An economy is efficient if it is:

not possible to produce more of one good without producing less of another good.

Individuals gain from trade because:

of specialization in production.

At various times, the nations that constitute the Organization of Petroleum Exporting Countries (OPEC) have restricted the supply of oil to increase their profits. This is an example of:

one party preventing mutually beneficial trades in an attempt to capture a greater share of resources for itself.

Economists define an efficient use of resources as a situation in which:

one person can be made better off but only by making another person worse off.

Which is NOT an example of a resource?

production

One consequence of equilibrium is that when trying to figure out which checkout line at the college bookstore is the fastest, one should choose:

randomly; if one line were truly faster, everyone would move to it and it would no longer be faster.

Which of the following is studied in macroeconomics?

recessions

To encourage people to retire later, because people usually exploit opportunities to make themselves better off, the government could:

reduce Social Security benefits.

A popular train station has free parking for commuters who take the train. This often results in many people being unable to find a parking spot and missing their train. To solve this problem, all commuters should be:

required to pay for parking.

We have to make choices because:

resources are scarce.

When we are forced to make choices, we are facing the concept of:

scarcity

When we are forced to make choices, we are facing the concept of:

scarcity.

Specialization and trade usually lead to:

the exchange of goods and services in markets.

The primary emphasis in macroeconomics is on:

the national economy.

The cost of leaving the skating championship before it ends is _____, while the cost of staying for the entire match is _____.

the opportunity cost of not seeing the perfect 10 performance; the opportunity cost of whatever else you could have done during that time

When a chef prepares a dinner for a customer, which of the following is physical capital?

the oven

Everyone benefits from street lighting, yet the marginal benefit to any one individual usually falls short of the marginal cost. This is an example of:

the unsuitability of some goods for efficient management by markets.

One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner. This is an example of the principle that:

there are gains from trade.

If equilibrium exists:

there will be no remaining opportunities for individuals to make themselves better off.

The basic concern of microeconomics is:

to study the choices people make.

The provision of disabled-parking passes to those with disabilities often requires that more than enough spaces be available for those with disabilities. As a result, many of these spaces are vacant quite often when they could be used by able-bodied individuals. Such a situation illustrates the:

trade-off between efficiency and equity.

While buying refreshments for an upcoming party, you notice that a six-pack of Americana Beer costs $2 and a six-pack of Bavarian Beer costs $4. You buy the six-pack of Bavarian Beer, although you wonder if maybe two six-packs of Americana Beer would have been a better choice. The opportunity cost of the Bavarian Beer is:

two six-packs of Americana Beer.