Econ exam 1

Which of the following observations was made famous by Adam Smith in his book the wealth nations?

B. people buy more when prices are high than when prices are low

In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker...

B. remained unchanged between 1998 and 2008

You go to the movieplex where movies ordinarily cost 9. You are intending to see a movie for which you have 3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost

B. the amount you value the first movie +9

The primary determinant of a country's standard of living is...

B. the countries ability to prevail over a foreign competition

Which of the following firms is likely to have the greatest market power?

A. a utility company

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit

true

Equality means distributing society's resources in the most efficient manner

true

Trade between countries tends to...

C. increase both competition and specialization

Productivity is defined as the...

D. amount of goods and services produced from each unit of labor input

Suppose the cost of flying a 200 seat plane for an airline is 100,000 and there are 10 empty seats on a flight. If the marginal cost of flying is 200 and a standby passenger is willing to pay 300, the airline should...

A. Not sell the ticket because the marginal benefit is less than the marginal cost

Chloe's college raises the cost of room and board per semester. This increase raises Chloe's opportunity of attending college...

A. Only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Chloe's incentive to attend college.

When the government prevents prices from adjusting naturally to supply and demand, it...

A. equates the amount buyers want to buy with the amount sellers want to sell

The basic principles of economics suggest that...

A. government should become involved in markets when those markets fail to produce efficient or fair outcomes

Suppose that in brazil total annual output is worth 600 million and people work 30 million hours. In Peru, total annual output is worth 800 million and people work 50 million hours. Productivity is higher...

A. in peru. Differences in productivity explain very little of the variation in the standard of living across countries

Suppose the cost of operating a 75 room hotel for a night is 600 and there are five rooms for tonight. If the marginal cost of operating one room for the night is 40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay

A. more than 80, because the average benefit will exceed the marginal cost

Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate?

A. people respond to incentives

Market power refers to the...

A. power of the government to regulate a market

Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is intended to reduce...

B. externalities

To improve living standards, policymakers should...

B. impose restrictions on foreign competition

A worker in vietnam can earn 6 per day making cotton cloth on a hand loom. A worker in the United States can earn 85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

B. labor is more productive making cotton cloth with a mechanical loom than with a hand loom

For a number of years country A has inflation of 3% but for the last five years has had inflation of 6%, country B has inflation of 4% for many years but recently inflation unexpectedly rose to 9%. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

B. neither country A nor country B

Consider Luis' decision to go to college. If he goes to college, he will spend 21,000 on tuition and 11,000 on room and board, and 1,800 on books. If he does not go to college, he will earn 16,000 working in a store and spend 7,2000 on room and board. Luis's cost of going to college is...

C. 42,6000

Prior to the collapse of communism, communist countries worked on the premise that economic well being could be best attained by...

C. a strong reliance on prices and individuals self interests

Which of these activities will most likely result in an external belief?

C. a ten year old uses his allowance to buy new nike shoes

A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts to distribute the benefits of those resources to the members of society in a fair manner. However , redistributing income from rich to poor reduces the reward for working hard. Therefore, society faces a tradeoff between...

C. efficiency and equality

Candice is planning her day, she wants to go to the local swimming pool and see the latest movie but she can only get tickets for the movie the same time the pool is open she can only choose one. This illustrates the basic principle that?

C. improvements in efficiency sometimes come at the expense of equality

Which of the following statements best represent the principle represented by the adage, "there ain't no such thing as a free lunch"?

C. justin is hungry and homeless

The slow growth of the US incomes during the 1970s and 1980s can best be explained by...

D. a decline in the rate of increase in US productivity

The property of society getting the most it can from its scarce resources is called?

D. efficiency

Which of the following claims are consistent with the views of mainstream economists?

D. if we increase the rate of inflation from 3% to 6%, then the rate of unemployment will temporarily fall

In a market economy, economic activity is guided by

D. the government

Thousands of people develop lung cancer from second hand exposure to cigarette smoke. This is an example of...

D. there is no market failure in this case

One of the effects of gas pricing rising from 2 to 4 per gallon was airlines ordering new, fuel efficient aircraft

false

In the short-run, society faces a tradeoff between inflation and unemployment

false

A marginal change is small incremental adjustment to an existing plan or action

false

Efficiency means everyone in the economy should receive an equal share of the goods and services produced

false

Market power and externalities are two possible causes of market failure

true

The cost of an action is measured in terms of foregone opportunities

true

The government can potentially improve market outcomes if market inequalities or market failure exists

true

Trade allows each person to specialize in the activities he or she does best, this increasing each individuals productivity

true