Chapter 1 MindTap

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

a. A student has a party in her dorm room.

Which of the following situations describes the greatest market power? a. Volvo's impact on the price of autos b. Microsoft's impact on the price of desktop operating systems c. a student's impact on college tuition d. a farmer's impact on the price of corn

b. Microsoft's impact on the price of desktop operating systems

Adam Smith's "invisible hand" refers to a. the ability of government regulation to benefit consumers even if the consumers are unaware of the regulations. b. the ability of free markets to reach desirable outcomes, despite the self-interest of market participants. c. the way in which producers or consumers in unregulated markets impose costs on innocent bystanders. d. the subtle and often hidden methods that businesses use to profit at consumers' expense.

b. the ability of free markets to reach desirable outcomes, despite the self-interest of market participants.

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

a. governments increasing the quantity of money too much.

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

a. scarce.

Economics is best defined as the study of a. how to predict inflation, unemployment, and stock prices. b. how society manages its scarce resources. c. how to run a business most profitably d. how the government can stop the harm from unchecked self-interest.

b. how society manages its scarce resources.

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

b. society manages its scarce resources.

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 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 above.

c. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game.

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

c. improving the education of workers.

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. the United States has a high minimum wage. d. workers in the United States are highly productive. e. None of the above is true.

d. workers in the United States are highly productive.

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 above involve trade-offs.

e. All of the above involve trade-offs.

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

d. improves equality at the expense of efficiency.

A marginal change is one that a. makes an outcome inefficient. b. is not important for public policy. c. does not influence incentives. d. incrementally alters an existing plan.

d. incrementally alters an existing plan.

If a central bank uses the tools of monetary policy to reduce the demand for goods and services, the likely result is ________ inflation and ________ unemployment in the short run. a. lower, lower b. higher, higher c. higher, lower d. lower, higher

d. lower, higher

If a nation has high and persistent inflation, the most likely explanation is a. unions bargaining for excessively high wages. b. the central bank creating excessive amounts of money. c. the government imposing excessive levels of taxation. d. firms using their market power to enforce excessive price hikes.

b. the central bank creating excessive amounts of money.

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

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

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

a. information that tells producers to produce more beef.

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, a. students will shift majors from education to accounting. b. students will shift majors from accounting to education. c. fewer students will attend college. d. None of the above is true.

a. students will shift majors from education to accounting.

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

a. the money you spent on 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 above is true.

b. a decrease in inflation temporarily increases unemployment.

Your opportunity cost of going to a movie is a. the price of the ticket plus the cost of any soda and popcorn you buy at the theater. b. the total cash expenditure needed to go to the movie plus the value of your time. c. the price of the ticket. d. zero, as long as you enjoy the movie and consider it a worthwhile use of time and money.

b. the total cash expenditure needed to go to the movie plus the value of your time.

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 consumers. b. Taxes help prices communicate costs and benefits to producers and consumers. c. Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being. d. With a large enough computer, central planners could guide production more efficiently than markets.

c. 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.) a. No. b. There is not enough information to answer this question. c. Yes.

c. Yes.

International trade benefits a nation when a. its revenue from selling abroad exceeds its outlays from buying abroad. b. its trading partners experience reduced economic well-being. c. all nations are specializing in producing what they do best. d. no domestic jobs are lost because of trade.

c. all nations are specializing in producing what they do best.

The main reason that some nations have higher average living standards than others is that a. the richer nations have exploited the poorer ones. b. the central banks of some nations have created more money. c. some nations have higher levels of productivity. d. some nations have stronger laws protecting worker rights.

c. some nations have higher levels of productivity.

Referring to question 17, your decision rule should be to complete the hot-dog stand as long as the cost to complete the stand is less than a. $100. b. $300. c. $500. d. $800. e. none of the above.

d. $800.

Because people respond to incentives, a. policymakers can alter outcomes by changing punishments or rewards. b. policies can have unintended consequences. c. society faces a trade-off between efficiency and equality. d. All of the above.

d. All of the above.

Governments may intervene in a market economy in order to a. protect property rights. b. correct a market failure due to externalities. c. achieve a more equal distribution of income. d. All of the above.

d. All of the above.

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

d. Food

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 above is true.

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