Chapter 1 Quiz

A rational person does not act unless

The action produces marginal benefits that exceed marginal cost

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

The money you spent on food

Suppose you find $20. If you choose to use the $20 to go to the baseball 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

You have spent $1,000 building a snow cone stand based on estimates of sales of $2,000. The snow cone stand is nearly completed, but now you estimate total sales to be only $800. You estimate that you can complete the snow cone stand for another $300. (Assume that snow cones cost you nothing.) Your decision rule should be to complete the snow cone stand as long as the cost to complete the stand is less than

$800

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

A student has a party in their dorm room

Which of the following involve a trade-off?

All of the answer choices involve trade-offs.

Foreign trade

Allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

Which of the following situations describes the greatest market power?

Apple's impact on the price of smartphones

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

Food

In the short run,

a decrease in inflation temporarily increases unemployment

High and persistent inflation is caused by

governments increasing the quantity of money too much

Raising taxes and increasing welfare payments

improves equality at the expense of efficiency

Productivity can be increased by

improving the education of workers

An increase in the price of beef provides

information that tells producers to produce more beef

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

scarce

Economics is the study of how

society manages its scarce resources

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

students will shift majors from education to engineering

Adam Smith coined the phrase "invisible hand" to suggest that

the pursuit of self-interest can promote the good of society as a whole

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

workers in the United States are highly productive.

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.