Chapters 1-3 Practice Quiz

Which of the following statements about markets is most accurate? a. Markets are usually a good way to organize economic activity. b. Markets are usually inferior to central planning as a way to organize economic activity. c. Markets fail and are therefor not an acceptable way to organize economic activity. d. Markets are a good way to organize economic activity in developed nations, but not in less developed nations.

a. Markets are usually a good way to organize economic activity.

The marginal benefit Colin gets from eating a fourth slice of pizza is a. the total benefit Colin gets from eating four slices of pizza minus the total benefit Colin gets from eating three slices of pizza. b. the same as the total benefit of eating four slices of pizza. c. less than the marginal cost of eating the fourth slice of pizza since he chose to eat the fourth slice. d. the total benefit Colin gets from eating five slices of pizza minus the total benefit Colin gets from eating four slices of pizza.

a. the total benefit Colin gets from eating four slices of pizza minus the total benefit Colin gets from eating three slices of pizza.

Comparative advantage is related most closely to which of the following? a. Output per hour. b. Opportunity cost. c. Efficiency. d. Bargaining strength in international trade.

b. Opportunity cost.

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 the society in a fair manner. In other words, the society faces a trade off between a. guns and butter. b. efficiency and equality. c. inflation and unemployment. d. work and leisure.

b. efficiency and equality.

A production possibilities frontier can shift outward if a. government increases the amount of money in the economy. b. there is a technological improvement. c. resources are shifted from the production methods in favor of efficient production methods.

b. there is a technological improvement.

Economists build economic models by a. generating data. b. conducting controlled experiments in a lab. c. making assumptions. d. reviewing statistical forecasts.

c. making assumptions.

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 trade offs. d. people respond to incentives.

c. people face trade offs.

Denise decides to spend three hours working overtime rather than watching a video with her friends. She earns $10 an hour. Her opportunity cost of working is a. the $30 she earns working. b. the $30 minus the enjoyment she would have received from watching the video. c. the enjoyment she would have received had she watched the video. d. nothing, since she would have received less than $30 of enjoyment from the video.

c. the enjoyment she would have received had she watched the video.