Chapter 1 Quiz

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

workers in the United States are highly productive

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

A student has a party in her dorm room

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 products would be least capable of producing an externality?

food

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

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

A rational person does not act unless

the action produces marginal benefits that exceed marginal costs

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

You have spent $1,000 building a hot-dog stand based on estimates of sales of $2,000. The hot-dog stand is nearly completed, but now you estimate total sales to be only $800. You can complete the hot-dog stand for another $300. Should you complete the hot-dog stand? (Assume that the hot dogs cost you nothing.)

Yes

Productivity can be increased by

improving the education of workers

Which of the following involve a trade-off?

All of these involve trade-offs. buying a new car. going to college. watching a football game on Saturday afternoon. taking a nap.

Suppose you find $20. If you choose to use the $20 to go to the football 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 hot-dog stand based on estimates of sales of $2,000. The hot-dog stand is nearly completed, but now you estimate total sales to be only $800. (Assume that the hot dogs are cost you nothing.) Using the information given your decision rule should be to complete the hot-dog stand as long as the cost to complete the stand is less than

$800

Which of the following situations describes the greatest market power?

Microsoft's impact on the price of desktop operating systems

In the short run,

a decrease in inflation temporarily increases unemployment

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 accountants increases by 50 percent while the average salary of teachers increases by 20 percent,

students will shift majors from education to accounting

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

the money you spent on food