Economics Chapter 1 Quiz

Which of the following products would be least capable of producing an externality? a.) Stereo equipment b.) Food c.) Education d.) Inoculations against disease e.) Cigarettes

b.) Food

In the short run, ________. a.) an increase in inflation temporarily increases unemployment b.) a decrease in inflation temporarily increases unemployment c.) inflation and unemployment are unrelated d.) the business cycle has been eliminated e.) none of the answer choices are correct

b.) a decrease in inflation temporarily increases unemployment

An increase in the price of beef provides ________. a.) no information because prices in a market system are managed by planning boards b.) information that tells producers to produce more beef c.) information that tells consumers to buy less chicken d.) information that tells consumers to buy more beef

b.) information that tells producers to produce more beef

Which of the following involve a trade-off? a.) Buying a new car b.) Going to college c.) Watching a football game on Saturday afternoon d.) Taking a nap e.) All of the answer choices involve trade-offs

e.) All of the answer choices involve trade-offs

Foreign trade ________. a.) makes the members of a country more equal b.) is none of the answer choices c.) allows a country to avoid trade-offs d.) increases the scarcity of resources e.) allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

e.) allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

Economics is the study of how _________. a.) to avoid having to make trade-offs b.) to reduce our wants until we are satisfied c.) to fully satisfy our unlimited wants d.) society manages its unlimited resources e.) society manages its scarce resources

e.) society manages its scarce resources

Which of the following activities is most likely to produce an externality? a.) A student has a party in their dorm room. b.) A student eats a sandwich in the student union. c.) A student sits at home and watches television. d.) A student reads a novel for pleasure.

a.) A student has a party in their dorm room.

Which of the following situations describes the greatest market power? a.) Apple's impact on the price of smartphones b.) A student's impact on college tuition c.) A farmer's impact on the price of corn d.) Mitsubishi's impact on the price of autos

a.) Apple's impact on the price of smartphones

Productivity can be increased by ________. a.) improving the education of workers b.) raising union wages c.) restricting trade with foreign countries d.) raising minimum wages

a.) improving the education of workers

Trade-offs are required because wants are unlimited and resources are ________. a.) scarce b.) unlimited c.) economical d.) efficient e.) marginal

a.) scarce

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, ________. a.) students will shift majors from education to engineering b.) students will shift majors from engineering to education c.) fewer students will attend college d.) none of the answer choices are correct

a.) students will shift majors from education to engineering

Which of the following statements is true about a market economy? a.) The strength of a market system is that it tends to distribute resources evenly across the population. b.) Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being. c.) With a large enough computer, central planners could guide production more efficiently than markets. d.) Taxes help prices communicate costs and benefits to producers and consumers.

b.) Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being.

High and persistent inflation is caused by ________. a.) regulations raising the cost of production too much b.) governments increasing the quantity of money too much c.) unions increasing wages too much d.) OPEC raising the price of oil too much

b.) governments increasing the quantity of money too much

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 ________. a.) nothing, because you found the money b.) $20 (because you could have used the $20 to buy other things) c.) $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game d.) $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchased at the game e.) none of the answer choices

c.) $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 ________. a.) $500 b.) you should not complete the snow cone stand. c.) $800 d.) $300 e.) $100

c.) $800

Which of the following is not part of the opportunity cost of going on vacation? a.) The money you spent on a Broadway show b.) The money you could have made if you had stayed home and worked c.) The money you spent on food d.) The money you spent on airline tickets

c.) The money you spent on food

Raising taxes and increasing welfare payments ________. a.) reduces market power b.) proves that there is such a thing as a free lunch c.) does none of the answer choices d.) improves equality at the expense of efficiency e.) improves efficiency at the expense of equality

d.) improves equality at the expense of efficiency

A rational person does not act unless _________. a.) the action makes money for the person b.) the action is ethical c.) the action produces marginal costs that exceed marginal benefits d.) the action produces marginal benefits that exceed marginal costs e.) none of the answer choices are correct

d.) the action produces marginal benefits that exceed marginal costs

Adam Smith coined the phrase "invisible hand" to suggest that ________. a.) workers should unite and overthrow the capitalist b.) we are unable to see how improvements in technology move the economy to higher levels of production c.) markets work like an invisible hand which reaches into the pockets of consumers and induces them to spend their income d.) the pursuit of self-interest can promote the good of society as a whole

d.) 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 ________. a.) unions in the United States keep the wage high b.) we have protected our industry from foreign competition c.) employers in the United States are particularly generous d.) workers in the United States are highly productive e.) none of the answer choices are correct

d.) workers in the United States are highly productive