Econ mid term 1

When society requires that firms reduce pollution, there is... a. tradeoff because of reduced incomes to the firms' owners and workers. b. a tradeoff only if some firms are forced to close. c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements. d. no tradeoff, since everyone benefits from reduced pollution.

.a tradeoff because of reduced incomes to the firms' owners and workers.

The opportunity cost of obtaining 20 additional dryers by moving from point D to point A is... a. 0 washers. b 20 washers. c. 40 washers. d. None of the above; the economy cannot move from point D to point A.

a. 0 washers.

The opportunity cost of 1 unit of cheese for Spain is... a. 1/2 unit of bread. b. 2 hours of labor. c. 2 units of bread. d. 4 hours of labor.

a. 1/2 unit of bread.

The opportunity cost of 1 unit of cheese for England is... a. 1/4 unit of bread. b. 1 hour of labor. c. 4 units of bread. d. 4 hours of labor.

a. 1/4 unit of bread.

Assume that England and Spain each has 40 labor hours available. Originally, each country divided its time equally between the production of cheese and bread. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of cheese increased by... a. 15. b. 20. c. 25. d. 40.

a. 15

The opportunity cost of this economy moving from point A to point B is... a. 20 dryers. b. 20 washers. c. 20 dryers and 20 washers. d. 60 dryers.

a. 20 dryers.

Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between the two countries (with full specialization), and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Freedonia will now be able to consume a maximum of... a. 30 units of corn and 30 units of wheat. b. 40 units of corn and 30 units of wheat. c. 40 units of corn and 20 units of wheat. d. 10 units of corn and 40 units of wheat

a. 30 units of corn and 30 units of wheat

If England and Spain each spends all its time producing the good in which it has a comparative advantage and the countries agree to trade 2 units of bread for 6 units of cheese, then England will consume... a. 34 units of cheese and 2 units of bread and Spain will consume 6 units of cheese and 3 units of bread. b. 34 units of cheese and 2 units of bread and Spain will consume 16 units of cheese and 3 units of bread. c. 34 units of cheese and 12 units of bread and Spain will consume 6 units of cheese and 3 units of bread. d. 34 units of cheese and 12 units of bread and Spain will consume 16 units of cheese and 3 units of bread.

a. 34 units of cheese and 2 units of bread and Spain will consume 6 units of cheese and 3 units of bread.

It is possible for this economy to produce.. a. 60 dryers and 50 washers. b. 60 dryers and 60 washers. c. 80 dryers and 50 washers. d. All of the above.

a. 60 dryers and 50 washers

Efficient production is represented by which point(s)? a. A, B b. A, B, D c. A, B, C d. C

a. A, B

Both Dave and Caroline produce sweaters and socks. If Dave's opportunity cost of 1 sweater is 3 socks and Caroline's opportunity cost of 1 sweater is 5 socks, then... a. Dave has a comparative advantage in the production of sweaters. b. Caroline has a comparative advantage in the production of sweaters. c. Dave has a comparative advantage in the production of socks. d. Dave has a comparative advantage in the production of both sweaters and socks.

a. Dave has a comparative advantage in the production of sweaters.

Which of the following is an example of a normative, as opposed to positive, statement? a. Universal health care would be good for U.S. citizens. b. An increase in the cigarette tax would cause a decrease in the number of smokers. c. A decrease in the minimum wage would decrease unemployment. d. A law requiring the federal government to balance its budget would increase economic growth

a. Universal health care would be good for U.S. citizens.

The short-run tradeoff between inflation and unemployment implies that, in the short run,... a. a decrease in the growth rate of the quantity of money will accompanied by an increase in the unemployment rate b. an increase in the growth rate of the quantity of money will be accompanied by an increase in the unemployment rate. c.policymakers are able to reduce the inflation rate and, at the same time, reduce the unemployment rate. d.policymakers can influence the inflation rate, but not the unemployment rate.

a. a decrease in the growth rate of the quantity of money will accompanied by an increase in the unemployment rate

The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the... a. amount of the other good that must be given up. b. market price of the additional amount produced. c. amount of resources that must be devoted to its production. d. number of dollars that must be spent to produce it.

a. amount of the other good that must be given up.

England has a comparative advantage in the production of... a. cheese and Spain has a comparative advantage in the production of bread. b. bread and Spain has a comparative advantage in the production of cheese. c. both goods and Spain has a comparative advantage in the production of neither good. d. neither good and Spain has a comparative advantage in the production of both goods.

a. cheese and Spain has a comparative advantage in the production of bread

England should specialize in the production of... a. cheese and Spain should specialize in the production of bread. b. bread and Spain should specialize in the production of cheese. c. both goods and Spain should specialize in the production of neither good. d. neither good and Spain should specialize in the production of both goods.

a. cheese and Spain should specialize in the production of bread.

The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that... a. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scare resources b. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits c.equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. d. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.

a. equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scare resources

If an externality is present in a market, economic efficiency may be enhanced by... a. government intervention. b. a decrease in foreign competition. c. fewer market participants. d. weaker property rights.

a. government intervention.

For two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to... a. have a comparative advantage in both activities. b. have an absolute advantage in both activities. c. be more productive per unit of time in both activities. d. gain from trade with each other.

a. have a comparative advantage in both activities.

In the markets for the factors of production in the circular-flow diagram... a. households are sellers and firms are buyers. b. households are buyers and firms are sellers. c. households and firms are both buyers. d. households and firms are both sellers.

a. households are sellers and firms are buyers.

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good... a. increases as more of the good is produced. b. decreases as more of the good is produced. c. does not change as more of the good is produced. d. may increase, decrease, or not change as more of the good is produced.

a. increases as more of the good is produced.

Production is efficient if the economy is producing at a point... a. on the production possibilities frontier. b. outside the production possibilities frontier. c. on or inside the production possibilities frontier. d. inside the production possibilities frontier.

a. on the production possibilities frontier

The phrase "no such thing as a free lunch" means... a. people must face tradeoffs. b. rational people think at the margin. c. people respond to incentives. d. trade can make everyone better off.

a. people must face tradeoffs.

Unemployment would cause an economy to... a. produce inside its production possibilities frontier. b. produce on its production possibilities frontier. c. produce outside its production possibilities frontier. d. experience an inward shift of its production possibilities frontier.

a. produce inside its production possibilities frontier.

Almost all economists agree that tariffs and import quotas... a. reduces general economic welfare. b. increases general economic welfare. c. have no effect on general economic welfare. d. stimulate a less than fully employed economy.

a. reduces general economic welfare

The overriding reason why households and societies face many decisions is that: a. resources are scarce. b. goods and services are not scarce. c. incomes fluctuate with business cycles. d. people, by nature, tend to disagree.

a. resources are scarce.

Economics deals primarily with the concept of: a. scarcity. b. money. c. poverty. d. banking.

a. scarcity.

When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing... a. scarcity. b. surpluses. c. inefficiencies. d. inequalities.

a. scarcity.

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should... a. sell the ticket because the marginal benefit exceeds the marginal cost. b. sell the ticket because the marginal benefit exceeds the average cost. c. not sell the ticket because the marginal benefit is less than the marginal cost. d. not sell the ticket because the marginal benefit is less than the average cost.

a. sell the ticket because the marginal benefit exceeds the marginal cost.

For most students, the largest single cost of a college education is... a. the wages given up to attend school. b. tuition, fees, and books. c. room and board. d. transportation, parking, and entertainment.

a. the wages given up to attend school

If an economy is producing efficiently, then... a. there is no way to produce more of one good without producing less of another good. b. it is possible to produce more of both goods without increasing the quantities of inputs that are being used. c. it is possible to produce more of one good without producing less of another good. d. it is not possible to produce more of any good at any cost.

a. there is no way to produce more of one good without producing less of another good.

Suppose the Federal Reserve announces that it will be making a change to a key interest rate to decrease the money supply. This is likely because the Federal Reserve is... a. worried about inflation. b. worried about unemployment. c. hoping to increase the demand for goods and services. d. d.worried that the economy is growing too slowly.

a. worried about inflation.

Consider Mandy's decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. Mandy's cost of going to college is... a. $32,000. b. $42,000. c. $50,000. d. $58,000.

b. $42,000.

Without trade, England produced and consumed 32 units of cheese and 2 units of bread and Spain produced and consumed 6 units of cheese and 2 units of bread. Then, each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 7 units of cheese for 2.5 units of bread. As a result, England gained... a. 0 units of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit of bread. b. 1 unit of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit of bread. c. 7 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5 units of bread. d. 33 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5 units of bread

b. 1 unit of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit of bread.

What is the opportunity cost to Picnicland of increasing the production of hotdogs from 450 to 900? a. 150 burgers b. 225 burgers c. 300 burgers d. 450 burgers

b. 225 burgers

Which of the following statements about the circular-flow diagram is correct? a. One must imagine that the economy operates without money in order to make sense of the diagram. b. The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms. c. The government cannot be excluded as a decision maker in a circular-flow diagram. d. All of the above are correct.

b. The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as.. a. productivity. b. an externality. c. market power. d. property rights.

b. an externality.

Total output in an economy increases when each person specializes because... a. there is less competition for the same resources. b. each person spends more time producing that product in which he or she has a comparative advantage. c. a wider variety of products will be produced within each country due to specialization. d. government necessarily plays a larger role in the economy due to specialization.

b. each person spends more time producing that product in which he or she has a comparative advantage.

When the government redistributes income from the wealthy to the poor... a. efficiency is improved, but equality is not. b. equality is improved, but efficiency is not. c. both efficiency and equality are improved. d. neither efficiency nor equality are improved.

b. equality is improved, but efficiency is not

Large or persistent inflation is almost always caused by... a. excessive government spending. b. excessive growth in the quantity of money. c. foreign competition. d. higher-than-normal levels of productivity.

b. excessive growth in the quantity of money

In the simple circular-flow diagram, the participants in the economy are... a. firms and government. b. households and firms. c. households and government. d. households, firms, and government

b. households and firms.

Economics is the study of... a. production methods. b. how society manages its scarce resources. c. how households decide who performs which tasks. d. the interaction of business and government.

b. how society manages its scarce resources.

In the circular-flow diagram, which of the following items flows from households to firms through the markets for the factors of production? a. goods and services b. land, labor, and capital c. dollars spent on goods and services d. wages, rent, and profit

b. land, labor, and capital

In the short run, an increase in the money supply is likely to lead to... a. lower unemployment and lower inflation. b. lower unemployment and higher inflation. c. higher unemployment and lower inflation. d. higher unemployment and higher inflation.

b. lower unemployment and higher inflation.

A rational decision maker takes an action only if the... a. marginal benefit is less than the marginal cost. b. marginal benefit is greater than the marginal cost. c. average benefit is greater than the average cost. d. marginal benefit is greater than both the average cost and the marginal cost.

b. marginal benefit is greater than the marginal cost.

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that... a. trade can make everyone better off. b. people face trade-offs. c. rational people think at the margin. d. decisions made at the margin are not particularly important.

b. people face trade-offs.

The production possibilities frontier is a graph that shows the various combinations of output that an economy can possibly produce given the available factors of production and... a. society's preferences. b. the available production technology. c. a fair distribution of the output. d. the available demand for the output.

b. the available production technology

The "invisible hand" refers to... a. the government. b. the free market. c. central planners. d. large businesses.

b. the free market.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that... a. the nation is producing beyond its capacity, so inflation will occur. b. the nation is not using all available resources or is using inferior technology or both. c. the nation is producing an efficient combination of goods. d. there will be a large opportunity cost if the nation tries to increase production of any good.

b. the nation is not using all available resources or is using inferior technology or both.

As a result of a successful attempt by government to cut the economic pie into more equal slices... a. the pie gets larger, and there will be more pie overall. b. the pie gets smaller, and there will be less pie overall. c. it increases the reward for working hard, resulting in people producing more goods and services. d. those who earn more income pay less in taxes.

b. the pie gets smaller, and there will be less pie overall.

The opportunity cost of going to college is... a. the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses. b. the value of the best opportunity a student gives up to attend college. c. zero for students who are fortunate enough to have all of their college expenses paid by someone else. d. zero, since a college education will allow a student to earn a larger income after graduation.

b. the value of the best opportunity a student gives up to attend college.

A production possibilities frontier can shift outward if... a. government increases the amount of money in the economy. b. there is a technological improvement. c. resources are shifted from the production of one good to the production of the other good. d. the economy abandons inefficient production methods in favor of efficient production methods.

b. there is a technological improvement

At which of the following prices would both England and Spain gain from trade with each other? a. 16 units of bread for 16 units of cheese b. 16 units of bread for 24 units of cheese c. 16 units of bread for 48 units of cheese d. England and Spain could not both gain from trade with each other at any price.

c. 16 units of bread for 48 units of cheese

The opportunity cost of 1 unit of bread for Spain is... a. 1/2 unit of cheese. b. 1/2 hour of labor. c. 2 units of cheese. d. 8 hours of labor.

c. 2 units of cheese.

The opportunity cost of 1 unit of bread for England is... a. 1/4 unit of cheese. b. 1/4 hour of labor. c. 4 units of cheese. d. 4 hours of labor.

c. 4 units of cheese

If this economy devotes all of its resources to the production of dryers, then it will produce... a. 0 dryers and 100 washers. b. 60 dryers and 50 washers. c. 80 dryers and 0 washers. d. 80 dryers and 50 washers.

c. 80 dryers and 0 washers

Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person. Which country can benefit? a. only the one with a low level of output per person. b. only the one with a high level of output per person c. Both d. neither

c. Both

It is not possible for this economy to produce at point.. a. A. b. B. c. C. d. D.

c. C.

England has an absolute advantage in the production of... a. cheese and Spain has an absolute advantage in the production of bread. b. bread and Spain has an absolute advantage in the production of cheese. c. both goods and Spain has an absolute advantage in the production of neither good. d. neither good and Spain has an absolute advantage in the production of both goods.

c. both goods and Spain has an absolute advantage in the production of neither good.

The principle of comparative advantage does not provide answers to certain questions. One of those questions is... a. Do specialization and trade benefit more than one party to a trade? b. Is it absolute advantage or comparative advantage that really matters? c. How are the gains from trade shared among the parties to a trade? d. Is it possible for specialization and trade to increase total output of traded goods?

c. How are the gains from trade shared among the parties to a trade?

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages? a. U.S. textile workers belong to a union, whereas Vietnamese textile workers do not belong to a union. b. There is little demand for cotton cloth in Vietnam and great demand in the U.S. c. Labor is more productive making cotton cloth with a mechanical loom than with a hand loom. d. Vietnam has a low-wage policy to make its textile industry more competitive in world markets.

c. Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.

Which of the following is an example of a positive, as opposed to normative, statement? a. Inflation is more harmful to the economy than unemployment is. b. If welfare payments increase, the world will be a better place. c. Prices rise when the government prints too much money. d. When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency.

c. Prices rise when the government prints too much money.

Suppose this economy is producing at point D. Which of the following statements would best explain this situation? a. The economy has insufficient resources to produce at a more desirable point. b. The economy's available technology prevents it from producing at a more desirable point. c. There is widespread unemployment in the economy. d. Any of the above statements would be a legitimate explanation for this situation.

c. There is widespread unemployment in the economy.

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that... a. Ken has an absolute advantage in chairs. b. Ken has a comparative advantage in tables. c. Traci has an absolute advantage in chairs. d. Traci has a comparative advantage in chairs.

c. Traci has an absolute advantage in chairs.

If the United States decides to trade with Yemen, we know that... a. Yemen will benefit, but trade with a less developed country could not benefit the United States. b. it will not benefit Yemen because workers in the United States are more productive. c. Yemen and the United States can both benefit. d. it will not benefit either country because their cultural differences are too vast.

c. Yemen and the United States can both benefit.

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that... a. we should agree with Senator Brown. b. we should agree with Senator Johnson. c. a good decision requires that we recognize both viewpoints. d. there are no tradeoffs between equity and efficiency.

c. a good decision requires that we recognize both viewpoints.

Which of the following concepts cannot be illustrated by the production possibilities frontier? a. efficiency b. opportunity cost c. equality d. trade-offs

c. equality

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce a. efficiency. b. equality. c. externalities. d. productivity.

c. externalities.

Central planning refers to... a. markets guiding economic activity. Today many countries that had this system have abandoned it. b. markets guiding economic activity. Today many countries that did not have this system have implemented it. c. government guiding economic activity. Today many countries that had this system have abandoned it. d. government guiding economic activity. Today many countries that did not have this system have implemented it

c. government guiding economic activity. Today many countries that had this system have abandoned it.

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth... a. is more efficient and more equal for society. b. is more efficient but less equal for society. c. is more equal but less efficient for society. d. is less equal and less efficient for society

c. is more equal but less efficient for society.

This economy cannot currently produce 70 washers and 70 dryers because... a. it is not using all of its resources. b. it is not using the most efficient production process. c. it does not have the resources and technology to produce that level of output. d. All of the above are correct.

c. it does not have the resources and technology to produce that level of output.

Which markets are represented in the simple circular-flow diagram? a. markets for goods and services and markets for financial assets b. markets for factors of production and markets for financial assets c. markets for goods and services and markets for factors of production d. markets for goods and services and markets for imports and exports

c. markets for goods and services and markets for factors of production

The production possibilities frontier provides an illustration of the principle that... a. trade can make everyone better off. b. governments can sometimes improve market outcomes. c. people face trade-offs. d. people respond to incentives.

c. people face trade-offs.

The "invisible hand" works to promote general well-being in the economy primarily through... a. government intervention. b. the political process. c. people's pursuit of self-interest. d. altruism.

c. people's pursuit of self-interest.

What is the most important factor that explains differences in living standards across countries? a. the quantity of money b. the level of unemployment c. productivity d. equality

c. productivity

The term "productivity"... a. means the same thing as "efficiency." b. is seldom used by economists, as its meaning is not precise. c. refers to the quantity of goods and services produced from each unit of labor input. d. refers to the variety of goods and services from which households can choose when they stop

c. refers to the quantity of goods and services produced from each unit of labor input.

What term refers to the property that society has limited resources and therefore cannot produce all the goods and services people wish to have? a. inefficiency b. inequality c. scarcity d. market failure

c. scarcity

The production possibilities frontier illustrates... a. the combinations of output that an economy should produce. b. the combinations of output that an economy should consume. c. the combinations of output that an economy can produce. d. All of the above are correct.

c. the combinations of output that an economy can produce.

A production possibilities frontier is a straight line when... a. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. b. an economy is interdependent and engaged in trade instead of self-sufficient. c. the rate of tradeoff between the two goods being produced is constant. d. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced

c. the rate of tradeoff between the two goods being produced is constant.

High-school athletes who skip college to become professional athletes... a. obviously do not understand the value of a college education. b. usually do so because they cannot get into college. c. understand that the opportunity cost of attending college is very high. d. are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes.

c. understand that the opportunity cost of attending college is very high

An economy's production possibilities frontier is also its consumption possibilities frontier... a. under all circumstances. b. under no circumstances. c. when the economy is self-sufficient. d. when the rate of tradeoff between the two goods being produced is constant.

c. when the economy is self-sufficient.

What is the opportunity cost to Picnicland of increasing the production of burgers from 450 to 750? a. 150 hotdogs b. 225 hotdogs c. 300 hotdogs d. 450 hotdogs

d. 450 hotdogs

Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour. a. Susan has an absolute advantage over Paul in washing windows. b. Susan has a comparative advantage over Paul in washing windows. c. Paul has a comparative advantage over Susan in ironing shirts. d. All of the above are correct.

d. All of the above are correct

A rationale for government involvement in a market economy is... a. markets sometimes fail to produce a fair distribution of economic well-being. b. markets sometimes fail to produce an efficient allocation of resources. c. property rights have to be enforced. d. All of the above are correct.

d. All of the above are correct.

A society allocates its scarce resources to various jobs. These scarce resources include... a. land. b. people. c. machines. d. All of the above are correct.

d. All of the above are correct.

The country of Gerance produces two goods, cars and wine. Last year, it produced 1,000 cars and 15,000 cases of wine. This year, it produced 1,300 cars and 20,000 cases of wine. Given no other information, which of the following events could not explain this change? a. Gerance experienced a reduction in unemployment. b. Gerance experienced an improvement in car-making technology. c. Gerance acquired more resources. d. Any of these events could explain the change

d. Any of these events could explain the change

Inefficient production is represented by which point(s)? a. A, B b. C c. C, D d. D

d. D

Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then... a. Tom must have an absolute advantage in the production of baseball bats. b. Jim must have an absolute advantage in the production of baseball bats. c. Tom has a comparative advantage in the production of baseball bats. d. Jim has a comparative advantage in the production of baseball bats.

d. Jim has a comparative advantage in the production of baseball bats.

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate? a. People face tradeoffs. b. The cost of something is what you give up to get it. c. Rational people think at the margin. d. People respond to incentives.

d. People respond to incentives.

Inflation is defined as... a. a period of rising productivity in the economy. b. a period of rising income in the economy. c. an increase in the overall level of output in the economy. d. an increase in the overall level of prices in the economy.

d. an increase in the overall level of prices in the economy.

In the circular-flow diagram, which of the following is not a factor of production? a. labor b. land c. capital d. money

d. money

In the circular-flow diagram, which of the following items does not flow from households to firms? a. revenue b. land, labor, and capital c. factors of production d. profit

d. profit

In a market economy, economic activity is guided by... a. the government. b. corporations. c. central planners. d. self-interest and prices.

d. self-interest and prices.

Efficiency means that... a.society is conserving resources in order to save them for the future. b. society's goods and services are distributed equally among society's members. c.society's goods and services are distributed fairly, though not necessarily equally, among society's members. d. society is getting the maximum benefits from its scarce resources

d. society is getting the maximum benefits from its scarce resources

In most societies, resources are allocated by... a. a single central planner. b. a small number of central planners. c. those firms that use resources to provide goods and services. d. the combined actions of millions of households and firms.

d. the combined actions of millions of households and firms.

The two loops in the circular-flow diagram represent... a. the flow of goods and the flow of services. b. the flow of dollars and the flow of financial assets. c. the flow of inputs into production processes and the flow of outputs from production processes. d. the flows of inputs and outputs and the flow of dollars.

d. the flows of inputs and outputs and the flow of dollars.

Which of the following firms is most likely to have market power? a. a grocery store in a metropolitan area b. a convenience store in a suburb c. a pub in a college town d. the only gasoline station in a rural area

d. the only gasoline station in a rural area

A production possibilities frontier is bowed outward when... a. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. b. an economy is self-sufficient instead of interdependent and engaged in trade. c. the rate of tradeoff between the two goods being produced is constant. d. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

d. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

If labor in Mexico is less productive than labor in the United States in all areas of production... a. then neither nation can benefit from trade. b. then Mexico can benefit from trade but the United States cannot. c. then the United States will have a comparative advantage relative to Mexico in the production of all goods. d. then both Mexico and the United States still can benefit from trade.

d. then both Mexico and the United States still can benefit from trade.

In the circular-flow diagram, which of the following items flows from firms to households through the markets for the factors of production? a. goods and services b. land, labor, and capital c. dollars spent on goods and services d. wages, rent, and profit

d. wages, rent, and profit