Chapter 1 Quick Quiz (1-3)

Your opportunity cost of going to a movie is

the total cash expenditure needed to go to the movie plus the value of your time

Because people respond to incentives,

a. policymakers can alter outcomes by changing punishments or rewards b. policies can have unintended consequences c. society faces a trade-off between efficiency and equality Answer: all of the answer choices are correct

Governments may intervene in a market economy in order to

a. protect property rights b. correct a market failure due to externalities c. achieve a more equal distribution of income Answer: all of the answer choices are correct

International trade benefits a nation when

all nations are specializing in producing what they do best

Economics is best defined as the study of

how society manages its scarce resources

A marginal change is one that

incrementally alters an existing plan

If a government 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

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

some nations have higher levels of productivity

Adam Smith's "invisible hand" refers to

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

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

the government creating excessive amounts of money