Economics Quiz Number One (WITH multiple choice)

Which of the following is true: a) Efficiency refers to the size of the economic pie, equity refers to how the pie is divided. b) Fortunately, government policies are designed to promote both equity and efficiency. c) Efficiency and equity can both be achieved if the economic pie is cut into equal pieces. d) As long as the economic pie continually gets larger, no one will have to go hungry.

a) Efficiency refers to the size of the economic pie, equity refers to how the pie is divided.

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

a) People must face tradeoffs.

An economically rational person does not act unless the action: a) Produces marginal benefits that exceed marginal cost. b) Makes money for the person. c) Is ethical. d) Produces marginal costs that exceed marginal benefits.

a) Produces marginal benefits that exceed marginal cost.

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

b) An increase in the overall level of prices in the economy.

Which of the following is an example of an externality? a) David watches a scary movie. b) Bob's dog barks loudly during the night waking his neighbours. c) Clark sells a book to Calvin. d) David watches a scary movie.

b) Bob's dog barks loudly during the night waking his neighbours.

Economics is defined as the study of: a) Business b) How society manages its scarce resources. c) Government regulation d) Central planning

b) How society manages its scarce resources.

The word economy comes from the Greek word for: a) "One who participates in a market" b) "Conservation" c) "One who manages a household" d) "Conservation"

c) " One who manages a household"

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

c) Productivity

Since people respond to incentives, we would expect that, if the average salary of accountants increases by 50% while the average salary of teachers increases by 20%: a) Fewer students will attend college b) Students will shift majors from accounting to education. c) Students will shift majors from education to accounting. d) None of the above.

c) Students will shift majors from education to accounting.

Economist use the word equity to describe a situation in which: a) Society is getting the most it can from its scarce resources. b) Each members of society has the same income. c) The benefits of society's resources are distributed fairly among society's members. d) Those in society who have the least will receive the most.

c) The benefits of society's resources are distributed fairly among society's members.

The opportunity cost of an item is: a) The number of hours needed to earn money to buy it. b) Usually less than the dollar value of the item. c) What you give up to get that item. d) The dollar value of an item.

c) What you give up to get that item.

The principle that trade can make everyone better off applied to: a) Families b) Individuals c) Countries d) All of the above.

d) All of the above.

Which of the following is the most correct statement about the relationship between inflation and unemployment? a) In the short run, falling inflation is associated with rising unemployment. b) In the short run, falling inflation is associated with falling unemployment. c) In the long run, falling inflation is associated with falling unemployment. d) In the long run, falling inflation is associated with rising unemployment.

d) In the long run, falling inflation is associated with rising unemployment.

Economist deals primarily with the concept of: a) Change b) Power c) Poverty d) Scarcity

d) Scarcity