ECON 2113 Test 1 Review: Chapter 1

1PHW.15) Central planning refers to:

Government guiding economic activity. Today many countries that had this system have abandoned it

1HW.14) Trade

A) Allows specialization, which reduces costs

1HW.13) Suppose two countries - the United States and Mexico decide to enter a free trade agreement. We know that:

A) Mexico and the United States will both benefit

1HW.12) Suppose that ECU parking and transit employees that are paid based on the number of tickets that they write compared to being paid by the hour. If this is the case then such a result is an example of which principle of economics?

A) People respond to incentives

1HW.15) When Economists discuss central planning what does this mean?

A) The government guides economic activity. Today many countries that had this system have abandoned it

1PHW.20) The historical rise in living standards of American workers is primarily a result of:

A) The rise in American productivity

1HW.6) When Economists discuss efficiency what are they referring to?

A) When society is getting the maximum benefits from its scarce resources

1HW.1) What is scarcity?

A) a permanent problem faced by society due to limited resources

1PHW.18) 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) an externality

1PHW.21) Inflation is defined as:

A) an increase in the overall level of prices in the economy

1HW.3) How are most resources allocated in the United States?

A) by interactions between individual consumers and firms

1PHW.5) Economists use the word equality to describe a situation in which A) each member of society has the same income B) each member of society has access to abundant quantities of goods and services, regardless of his or her income C) society is getting the maximum benefits from its scarce resources D) society's resources are used efficiently

A) each member of society has the same income

1HW.5) What do Economists mean when they talk about equality?

A) fairness

1HW.17) Should markets not allocate resources efficiently then economists call this situation:

A) market failure

1PHW.17) The term used to describe a situation in which markets do not allocate resources efficiently is:

A) market failure

1PHW.19) When a single person (or small group) has the ability to influence market prices, there is:

A) market power

1HW.7) When the government redistributes income from the wealthy to the poor,

A) people work less and produce fewer goods and services

1HW.16) The "invisible hand" directs economic activity through:

A) prices

1PHW.16) The "invisible hand" directs economic activity through:

A) prices

CHAPTER 1: PRACTICE HOMEWORK = (1PHW) 1PHW.1) The overriding reason why households and societies face many decisions is that A) resources are scarce B) goods and services are not scarce C) incomes fluctuate with business cycles D) people, by nature, tend to disagree

A) resources are scarce

1HW.9) If Jenna opts to work three more hours as a Lifeguard at the Rec rather than watching the Bachelor with her friends, and if she earns $10 an hour as a lifeguard, then the opportunity cost of working is:

A) the enjoyment she would have received had she been watching the Bachelor with her friends

1HW.11) You go the Michaelangelo's pizza and decide to order a third slice of pizza. The marginal benefit that you get from the third slice of pizza is:

A) the total benefit that you get from purchasing three slices of pizza minus the total benefit you received from purchasing two slices of pizza

1HW.2) The purpose of Economics is:

A) to learn how society allocates scarce resources

1HW.8) The opportunity cost of a Joey burrito at Moe's is:

A) what you give up to get the burrito

1PHW.14) Trade A) allows specialization. which increases costs B) allows specialization, which reduces costs C) reduces specialization, which increases costs D) reduces specialization, which reduces costs

B) allows specialization, which reduces costs

1PHW.2) Economics is the study of A) production methods B) how society manages its scarce resources C) how households decide who performs which tasks D) the interaction of business and government

B) how households decide who performs which tasks

1PHW.8) The opportunity cost of an item is A) the number of hours need to earn money to buy the item B) what you give up to get that item C) usually less than the dollar value of the item D) the dollar value of the item

B) what you give up to get that item

1HW.4) Which of these statements is most accurate about markets? A) Markets fail since there are homeless people in the U.S. B) Markets are usually inferior to central planning since a central planner looks after everyone C) Markets typically perform well in allocating scarce resources D) In developed nations markets are successful, yet in undeveloped nations markets fail E) Markets fail since they aren't equitable

C) Markets typically perform well in allocating scarce resources

1PHW.13) If the United States decides to trade with Mexico, we know that A) Mexico will benefit, but trade with a less developed country would not benefit the United States B) it will not benefit Mexico because workers in the United States are more productive C) Mexico and the United States can both benefit D) it will not benefit either country because their cultural differences are too vast

C) Mexico and the United States can both benefit

1PHW.4) The adage, "There is no such thing as a free lunch," means A) even people on welfare have to pay for food B) the cost of living is always increasing C) people face tradeoffs D) all costs are included in the price of a product

C) people face tradeoffs

1PHW.7) When the government redistributes income from the wealthy to the poor, A) efficiency is improved, but equality is not. B) both wealthy people and poor people benefit directly C) people work less and produce fewer goods and services D) the government collects more revenue in total

C) people work less and produce fewer goods and services

1PHW.9) 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

1PHW.11) The marginal benefit Claire gets from purchasing a third pair of flip-flops is A) the same as the total benefit of purchasing three pairs of flip flops B) more than the marginal cost of purchasing the third pair of flip-flops C) the total benefit Claire gets from purchasing three pairs of flip-flops minus the total benefit she gets from purchasing two pairs of flip-flops D) The total benefit Claire gets from purchasing four pairs of flip-flops minus the total benefit she gets from purchasing three pairs of flip-flops

C) the total benefit Claire gets from purchasing three pairs of flip-flops minus the total benefit she gets from purchasing two pairs of flip-flops

1PHW.12) According to a recent study of Chilean bus drivers, drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour. This result is an example of which principle of economics? A) people face tradeoffs B) the cost of something is what you give up to get it C) rational people think at the margin D) people respond to incentives

D) People respond to incentives

1PHW.10) When calculating the cost of college, which of the following should you probably not include? A) The cost of tuition B) The cost of books required for college classes C) The income you would have earned had you not gone to college D) The cost of rent for your off-campus apartment

D) The cost of rent for your off-campus apartment

1PHW.6) Efficiency means that A) society is conserving resources in order to save them for the future B) society's goods and services are distributed equally among society's members C) society's goods and services are distributed fairly, though not necessarily equally, among society's members D) society is getting the maximum benefits from its scarce resources

D) society is getting the maximum benefits from its scarce resources

1PHW.3) In most societies, resources are allocated by A) a single central planner B) a small number of central planners C) those firms that use resources to provide goods and services D) the combined actions of millions of households and firms

D) the combined actions of millions of households and firms

1HW.10) When calculating the cost of ECU, which of the following should you probably not include? A) the cost of tuition B) the cost of books required for ECU classes C) the income you would have earned had you not gone to college D) the cost of renting your off-campus apartment at the Boundary E) None of the above since all of these should be included as costs of attending ECU

D) the cost of renting your off-campus apartment at the Boundary