Microeconomics ch1 quiz

All government policies are designed to promote both equality and efficiency since a trade-off between the two is typically nonexistent.

false

Government action that reduces benefits in public assistance programs in order to create an incentive for recipients to seek employment opportunities will, in general, promote efficiency even though it may increase inequality if job seekers are unable to secure employment.

false

If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be irrational for the railroad to allow any passenger to ride for less than $75.

false

Rick buys a 1966 Mustang for $3,000, planning to restore and sell the car. He goes on to spend $8,000 restoring the car. At this point he can sell the car for $9,500. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $12,000. It is obvious that Rick should replace the engine and then sell it.

false

Taxing high incomes at a lower rate than low incomes is likely to create an incentive for individuals to reduce their work effort in order to avoid paying taxes.

false

The opportunity cost of going to college is zero for students who are fortunate enough to have all of their college expenses paid by someone else.

false

Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's productivity

false

Trade can make everyone better off except in the case where one person is better at doing everything.

false

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

false

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

false

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

false

All of the world's economies, including the richest countries of Asia, Europe and North America, experience scarcity because wants are unlimited and resources are limited.

true

Efficiency means that society is getting the most it can from its scarce resources and equality means that the benefits of society's resources are distributed uniformly among the members of society.

true

If government did not provide protection of property rights then businesses would have less incentive to provide goods and services.

true

If the average income of a Mexican is higher than the average income of a Canadian, it is most likely because productivity is higher in Mexico than in Canada.

true

If wages for high school graduates rise, but college tuition does not change, then the opportunity cost of attending college increases.

true

In the long run the primary effect of increasing the quantity of money is higher prices.

true

Making decisions "at the margin" means that people compare the marginal costs and marginal benefits of each decision.

true

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

true

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

true