Chapter 1 quizes

Another definition of opportunity cost is the value of the next best alternative. True False

True

Suppose that a store sells candy bars for $0.89 for one and $1.50 for two. The marginal cost of the second candy bar is $0.61. $0.75. $0.89. $1.50.

.61

Which example represents incentives for decisions? investment tax credits for businesses tax deductions for individual retirement accounts All of these are incentives. tax deductions for education saving accounts

ALL

_____ people are forced to make tradeoffs. All Only wealthy Only poor Only middle-class

All

Specialization leads to gains for: only the seller in a transaction. only the buyer in a transaction. both the buyer and the seller involved in a transaction. neither the buyer or seller in a transaction, but the government that is authorizing the transaction.

BOTH

Which of these is NOT an example of market failure? Air is polluted by a manufacturing firm. Water is polluted by a paper company located by the river. Consumers must buy water from one local water utility. Competition leads firms to provide products at the lowest possible price.

Competition leads firms to provide products at the lowest possible price.

An airline finds that its morning flights are half-empty, but the mid-afternoon flights are full. Which would be the MOST plausible statement for an economist to make? Nothing can be done because travelers are inflexible with their schedules. Cut the prices of early morning flights and raise the prices of afternoon flights. Nothing can be done to rectify the situation because of consumer sovereignty. Fewer flights should be scheduled in the afternoon to force travelers to take morning flights.

Cut the prices of early morning flights and raise the prices of afternoon flights.

Which of the following statements is true? A government free of corruption is an example of a bad institution. Human creativity allows for existing products to improve. Wealthy countries tend to have fewer innovative individuals. Wealthy nations tend to have weak institutions.

Human creativity allows for existing products to improve.

Resources are limited, but efficiency is unlimited. unlimited, but wants are limited. unlimited, but efficiency is limited. limited, but wants are unlimited.

limited, but wants are unlimited.

The core problem in economics is

scarcity.

Human creativity is fostered by a(n) _____ and _____. sizable budget deficit; strong financial institutions. extensive museum network; widely available patrons. strong educational system; incentives for people to work hard. government managing the economy; docile citizens.

strong educational system; incentives for people to work hard.

Positive questions are questions about how things ought to be. True False

False

Which of the following statements is true of markets? Government intervention in markets should always be avoided. There are no disadvantages of having free markets. Markets discourage competition among firms. Free markets sometimes fail to produce best results for society, but such failure can be reduced by government intervention.

Free markets sometimes fail to produce best results for society, but such failure can be reduced by government intervention.

The _____ the opportunity cost of an activity, the _____ a person will do that activity. higher; less lower; less higher; more It doesn't matter. Price alone will determine the action.

Higher; Less

Which statement is a key idea in economic thinking? -Scarcity exists for the poor but not for the rich. -All of these are key ideas in economic thinking. -Incentives matter. -The value of a good can be objectively measured and is the same for everyone.

Incentives Matter

he situation in which markets fail to provide efficiently is called market failure. government failure. market collapse. uneconomic efficiency.

Market Failure

A question whose answer is based on what should or should not take place is a _____ question.

Normative

Economic goals such as economic growth, low inflation and low unemployment are: under the direct control of businesses. not always aligned. ignored by policy-makers. unachievable objectives.

Not always aligned

_____ costs include the time and money that could have been spent on another highly valued activity. Opportunity Marginal Total Social

Opportunity

When a customer chooses to accept an item of value from a business because it requires no incremental spending on the part of the customer, the customer is demonstrating the principle that: markets are an efficient way to organize economic activity. specialization produces benefits for society. customers are smarter than businesses. rational people think at the margin.

Rational People think at the margin

Which of the following statements is true of incentives? People respond to financial incentives only. People respond to good incentives but ignore bad incentives. Rules can be established to prevent people from acting on certain incentives. Stealing is an outcome of a response to a good incentive.

Rules can be established to prevent people from acting on certain incentives.

Which statement does NOT involve thinking at the margin? Sally worked eight hours today. If Jill works on her day off, she will make an additional $300. Dylan's supervisor asked him to work an extra four hours this week. If John works another hour, he will beat the rush hour traffic.

Sally worked eight hours today.

Which is the BEST example of a microeconomic issue? The production of automobiles decreased last year. The country's price level has increased over the last quarter. The Federal Reserve will raise interest rates this week. The unemployment rate will exceed 6% this month

The production of automobiles decreased last year.

Suppose you have a choice between studying one more hour for your history exam or studying one more hour for your psychology exam. Your decision on what to study should be based on: a) the additional benefits of studying for each class. b) which class you like the most. c) how much time you have already studied for each class. d) your current average scores in each class.

a) the additional benefits of studying for each class.

A trade‑off analysis entails: consideration of purely financial values in decision‑making. exchanging one good for another at a similar price. gaining data on terms of trade for a given transaction. assessing the costs and benefits of different alternatives.

assessing the costs and benefits of different alternatives.

The opportunity cost of undertaking an activity is defined as the _____ activity. benefit forgone by not undertaking the next best monetary cost of undertaking that cost forgone by not undertaking another monetary benefit of undertaking that

benefit forgone by not undertaking the next best

Suppose you and your roommate have the following agreement when it comes to cleaning your apartment: each person washes her or his own dishes after each meal. The principle of trade you just learned tells you that it would be more efficient if: a) both of you wash your own dishes after each meal. b) neither of you wash the dishes after eating. c) each of you wash half of all the dirty dishes. d) one of you wash all the dishes while the other does a different chore.

d) one of you wash all the dishes while the other does a different chore.

Tyrone has three options on how to spend his Saturday afternoon: to go out with friends, watch a movie, or wash his car. Tyrone's opportunity cost of washing his car would be: a) the value of going out with friends. b) the value of watching a movie. c) the value of going out with friends AND watching a movie. d) the value of going out with friends OR watching a movie.

d) the value of going out with friends OR watching a movie.

A person will decide to take the day off work if the person has additional sick days to spare. person can make up the missed work the next day. marginal cost is less than the marginal benefit. marginal cost exceeds the marginal benefit.

marginal cost is less than the marginal benefit.

The extra cost associated with undertaking some action is its total cost. marginal benefit. net cost. marginal cost.

marginal cost.

Employers give stock options to full-time employees who have been on the job more than three years. This is an example of opportunity costs. thinking on the margin. irrational behavior. people following incentives.

people following incentives.

Markets tend to be efficient because entrepreneurs always try to produce at the lowest possible cost. decisions are always made at the margin. Adam Smith created markets. people respond to incentives.

people respond to incentives.

Economics is defined as:

the study of how individuals, businesses, and societies make decisions to maximize their well-being given limited resources.

Hitting your snooze alarm before you get out of bed is an example of thinking at the margin. market equilibrium. efficiency. equity.

thinking at the margin.

Opportunity costs exist because sellers are unwilling to give up their product without a price. there are opportunities to find ways to reduce costs. buyers always have an opportunity to go to another seller. using resources for one activity means that their use elsewhere must be given up.

using resources for one activity means that their use elsewhere must be given up.