ECO 201 chapter 1

differences in the productivity of each country

Almost all variations in living standards between countries is attributable to:

every child will get one dose

Imagine an island economy that is periodically struck by an epidemic disease that affects only children. Suppose that the island has 1,000 children and that at the first sign of a new outbreak of this disease, the people have produced 1,000 doses of the antidote. If the island operates as a command economy, then

false

In a command economy, almost all resources are privately owned.

true

In a market economy the lowest cost inputs are used to produce a good because producers want to maximize profits and they will try to be as efficient as possible.

4 hours (8-4 hours)

Judy spends 8 hours studying for an ECO201 exam. Normally, she would have spent that time watching TV instead of studying. She figures that she could have made a "B" after only studying 4 hours, but she really wants an "A." What is Judy's marginal cost in terms of TV viewing to improve her grade from a "B" to an "A?"

a situation in which a market left on its own fails to allocate resources efficiently

Market failure refers to:

true

Over the past few decades many economies around the world have transitioned from command-oriented toward a more market-oriented structure.

true

The three economic questions of allocation that might be answered by all economics involve what to produce, how to produce and ultimately who gets the things that are produced in the economy.

what goods will be produced; how will goods be produced; for whom will goods be produced?

Three basic decisions must be made by all economies. What are they?

the cost of food (you will face this whether or not you go to college)

When calculating the cost/benefit of dropping out of college, which of the following should you probably not include? a) the cost of food b) the cost of tuition c) the cost of student loans d) the income you would have earned if you had completed your degree

equality is improved, but efficiency is not

When the government redistributes income from the wealthy to the poor,

Jason does not buy a beer because the price of a beer at the bar increased by $1 per beer and he is not willing to pay the higher price.

Which of the following is the best illustration of the invisible hand at work?

government policies are the primary forces that guide the decision of firms and households

Which of the following statements does NOT apply to a market economy? a) Households decide which firms to work for and what to buy with their incomes. b)Government policies are the primary forces that guide the decisions of firms and households. c) The "invisible hand" usually maximizes the well¬being of society as a whole. d)Businesses face "hard" budget constraints. e) Firms decide whom to hire and what to produce.

capital

a large piece of assembling line equipment used in a Toyota factory to produce cars would be considered which of the following types of resources

all of the other answers are correct

if state government officials want to decrease the amount of cigarette smoking in Kentucky by increasing the cost of smoking for smokers, legislators can a) reduce the number of places where cigarettes can be purchased b) impose a tax on cigarettes c) charge fines for smoking in certain places

false

poverty and scarcity are the same thing?

the desire for goods and services exceeds our ability to produce them with the limited resources available

scarcity occurs when

Adam smith

the economist who described economic coordination through market forces as the Invisible hand was

tuition you have to pay to go to class

when deciding whether or not you will attend your ECO 201 class (on any given day) which of the following is NOT one of the costs that you would consider? a) sleep you would lose by going to class b) tuition you have to pay to go to class c) gas money spent to get to class d) money you could have made if you had worked instead of going to class