chater 1-3 econ practice

. The "invisible hands" ability to coordinate the decisions of the firms and households in the economy can be hindered by a. government actions that distort prices. b. increased competition in markets. c. enforcement of property rights. d. too much attention paid to efficiency.

a

10. Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that a. in order to consume beyond its PPF, the United States should produce more pork than what it requires and export some of it to Mexico. b. in order to consume beyond its PPF, the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico. c. in order to consume beyond its PPF, the United States should refrain altogether from producing pork and import all of what it requires from Mexico. d. Mexico has nothing to gain from importing United States pork. -

a

15. Duties of the Council of Economic Advisers include a. advising the president and writing the annual Economic Report of the President. b. implementing the president's tax policies. c. managing of the nation's money supply. d. managing the Social Security program.

a

4. According to the circularflow diagram, if Christopher is the owner of a landscaping business and he just received $50 for mowing Mrs. Pendleton's lawn, a. Christopher acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton. b. the $50 represents a cost of production for Christopher's firm. c. the $50 represents wages, rent, and profit to Christopher's firm. d. Christopher acts as a firm who interacted in the markets for factors of production with Mrs. Pendleton.

a

If an externality is present in a market, economic efficiency may be enhanced by a. government intervention. b. a decrease in foreign competition. c. fewer market participants. d. weaker property rights

a

The term market failure refers to a. a situation in which the market on its own fails to allocate resources efficiently. b. an unsuccessful advertising campaign which reduces demand for a product. c. a situation in which competition among firms becomes ruthless. d. a firm that is forced out of business because of losses.

a

When computing the opportunity cost of attending a professional football game as a spectator, you should include a. the price you pay for the ticket and the value of your time. b. the price you pay for the ticket, but not the value of your time. c. the value of your time, but not the price you pay for the ticket. d. neither the price of the ticket nor the value of your time

a

Which of the following is true? a. Efficiency refers to the size of the economic pie; equality refers to how the pie is divided. b. Government policies usually improve upon both equality and efficiency. c. As long as the economic pie continually gets larger, no one will have to go hungry. d. Efficiency and equality can both be achieved if the economic pie is cut into equal pieces.

a

3. In the circular-flow diagram, in the markets for a. goods and services, households and firms are both sellers. b. the factors of production, households are sellers and firms are buyers. c. goods and services, households are sellers and firms are buyers. d. the factors of production, households and firms are both sellers.

b

6. Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that a. the nation is producing beyond its capacity, so inflation will occur. b. the nation is not using all available resources or is using inferior technology or both. c. the nation is producing an efficient combination of goods. d. there will be a large opportunity cost if the nation tries to increase production of any good.

b

Large or persistent inflation is almost always caused by a. excessive government spending. b. excessive growth in the quantity of money. c. foreign competition. d. higher

b

The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is known as a. productivity. b. an externality. c. market power. d. property rights

b

7. The production possibilities frontier provides an illustration of the principle that a. trade can make everyone better off. b. governments can sometimes improve market outcomes. c. people face tradeoffs. d. people respond to incentives.

c

9. If Mike can produce more donuts in one day than Sue can produce in one day, then a. Mike has a comparative advantage in the production of donuts. b. Sue has a comparative advantage in the production of donuts. c. Mike has an absolute advantage in the production of donuts. d. Sue has an absolute advantage in the production of donuts.

c

Efficiency a. and equality both refer to how much a society can produce with its resources. b. and equality both refer to how fairly the benefits from using resources are distributed between members of a society. c. refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society. d. refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources.

c

In a market economy, who makes the decisions that guide most economic activity? a. Firms only b. Households only c. Firms and households d. Government

c

Resources are a. scarce for households but plentiful for economies. b. plentiful for households but scarce for economies. c. scarce for households and scarce for economies. d. plentiful for households and plentiful for economies.

c

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that a. trade can make everyone better off. b. rational people think at the margin. c. people face tradeoffs. d. people respond to incentives

c

You are considering staying in college another semester so that you can complete a major in finance. In deciding whether or not to stay you should a. compare the total cost of your education to the total benefits of your education. b. compare the total cost of your education to the benefits of staying one more semester. c. compare the cost of staying one more semester to the benefits of staying one more semester. d. compare the total benefits of your education to the cost of staying one more semester.

c

1. How are economists not like mathematicians, physicists, and biologists? a. Economists do not apply the scientific method. b. Economists do not try to address their subject with a scientist's objectivity. c. Economists only use data to refute theories. d. Economists typically pay closer attention to natural experiments through history than lab experiments.

d

14. Sometimes economists disagree because their scientific judgments differ. Which of the following instances best reflects this source of disagreement? a. One economist believes everyone should pay the same percentage of their income in taxes; another economist believes that wealthier citizens should pay a higher percentage of their income in taxes. b. One economist believes that manufacturing firms should face greater regulation to preserve the environment; another economist believes the government should not intervene in free markets. c. One economist believes that equality should be valued over efficiency in policy decisions; another economist believes that efficiency should be valued over equality in policy decisions. d. One economist believes the government should tax a household's income; another economist believes the government should tax a household's consumption because it will cause households to save more.

d

2. Which of the following steps does an economist not take when studying the economy? a. Devise theories b. Collect data c. Analyze data d. Conduct a laboratory experiment in order to generate data

d

Consider two individuals, Tanek and Kalene each of whom knits sweaters and makes hotdogs, respectively. The gains from trade between Tanek and Kalene are most obvious in which of the following cases? a. Tanek is very good at knitting sweaters and at making hotdogs, but Kalene's skills in both of these activities are very poor. b. Tanek and Kalene both are very good at making hotdogs, but neither has the necessary skills to knit sweaters. c. Tanek's cooking and knitting skills are very poor, and Kalene's cooking and knitting skills are also very poor. d. Tanek's skills are such that he can only knit sweaters, and Kalene's skills are such that she can only make hotdogs.-

d

Suppose that you have received $650 as a birthday gift. You can spend it today or you can put the money in a savings account for a year and earn 2 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is a. $0. b. $13.00. c. $652.00. d. $663.00.

d

Trade between countries tends to a. reduce both competition and specialization. b. reduce competition and increase specialization. c. increase competition and reduce specialization. d. increase both competition and specialization.

d

Which of the following statements best represents the principle represented by the adage, "There ain't no such thing as a free lunch"? a. Bo can go swimming only if he takes his brother with him b. Jada is starving and homeless. c. Alivia must put gas in her truck before she can drive it to school. d. Benjamin must decide between going to Florida or Brazil for summer vacation.

d