ECON Exam 1
Most countries on the planet use a market-based approach to organizing economic activity.
true
The government plays an important role in a market economy.
true
A fundamental concept in economics is the idea of a.scarcity. b.banking. c.poverty. d.money.
A
Suppose the state of Ohio increases the tax on a pack of cigarettes and, in response to the policy change, Ohio smokers decide to buy cigarettes in neighboring states. Which principle of economics does this illustrate? a.People respond to incentives. b.People face trade-offs. c.The cost of something is what you give up to get it. d.Rational people think at the margin.
A
A direct or positive relationship exists between a country's a.rate of population growth and its level of exports. b.productivity and its standard of living. c.government spending and its population. d.total population and its average citizen's income.
B
To measure a business cycle we look at what is happening to a.interest rates. b.the production of goods and services. c.average labor productivity. d.the 'invisible hand.'
B
If the Federal Reserve announces that it will be increasing the money supply through its monetary policy tools, it tells us the Federal Reserve is a.would like to slow down the pace of economic growth. b.concerned there is too much inflation. c.not concerned about the unemployment rate. d.hoping to stimulate demand for goods and services.
D
Which of the following situations describes the greatest market power? a. a farmer's impact on the price of corn b. a student's impact on college tuition c. Microsoft's impact on the price of desktop operating systems d. Volvo's impact on the price of autos
Microsoft's impact on the price of desktop operating systems
Former communist countries are an example of a centrally planned economy.
true
Germany's hyperinflation after World War I was primarily due to the rapid increase in the supply of money.
true
When a society gets the most it can from its scarce resources
efficiency
When economic benefits are distributed uniformly across society
equality
A student using an e-cigarette in a library emits clouds of vapor that disrupt others working close to them.
externality
Because low-income people are _______ likely to have adequate healthcare, guaranteeing everyone in society the best healthcare would likely_________ equality.
less, increase
A single gas station has exclusive rights to operate along a private toll-road. As a result, the company can set the price of gasoline.
market power
Suppose you find $20. If you choose to use the $20 to go to the football game, your opportunity cost of going to the game is a. nothing, because you found the money. b. $20 (because you could have used the $20 to buy other things). c. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game. d. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchased at the game. e. none of the above.
$20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game.
A reason for government involvement in a market economy is: a.All of these answers are correct. b.markets sometimes fail to produce a fair distribution of economic resources. c.markets sometimes fail to produce an efficient allocation of resources. d.property rights have to be enforced to promote innovation in an economy.
A
According to the FYI insert in your textbook, in The Wealth of Nations, Adam Smith made which of the following observations? a.Households and firms, acting in their own self-interest, seem guided by an "invisible hand" that leads them to desirable market outcomes. b.There is no such thing as a free lunch. c.People will buy more of an item when its price is low than at a higher price. d.The more people make, the more they spend.
A
Eileen registered a startup graphic design company. About a month after opening, Eileen strikes a deal to revamp a law firm's brand image in exchange for a tax lawyer's help filing for the upcoming year. -Which of the following principles of economic interaction best describes this scenario? A. Trade can make everyone better off. B. When markets do not achieve efficiency, government intervention can improve overall welfare. C. All costs are opportunity costs. D. Markets allocate goods effectively.
A
In economics, the phrase "no such thing as a free lunch" means a.people face tradeoffs. b.rational people think at the margin. c.there is an unlimited supply of resources. d.everyone is always acting in his or her own self-interest.
A
In the short run, if the money supply increases, which of the following is NOT likely to happen? a.Lead to a lower rate of inflation. b.Increase the demand for goods and services. c.Encourage firms to hire more workers. d.Lead to increased inflation.
A
In the short run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy? a.2 percent per year b.5 percent per year c.4 percent per year d.3 percent per year
A
It once took 90 percent of our population to grow our food but now it takes around 3 percent of the population. Which of the following statements is true? a.This is good for our economy because those who would have been farmers years ago can now invent new things and produce other goods. b.This loss of agricultural jobs has caused the unemployment rate to increase by 87 percentage points. c.The government should provide subsidies to encourage more people to become farmers. d.This reduction in the number of farmers has decreased our productivity and standard of living.
A
Marginal thinking involves: a.weighing the small incremental benefits against the small incremental cost of a decision. b.accurately calculating the opportunity cost of a decision. c.comparing the total benefit and total cost of a decision. d.always acting in your own self-interest.
A
Public policy such as changes in the amount of taxes and subsidies can alter people's behavior by: a.All of these answers are correct. b.offering an incentive or a disincentive to engage in an activity. c.changing the benefits and the costs of an activity. d.changing the opportunity cost of an activity.
A
Reasons why we need government, even in a market economy, include a.these are all reasons we need a government in a market economy. b.the market may sometimes fail to allocate resources properly. c.property rights need to be protected to serve as an incentive for innovation. d.the invisible hand is not perfect.
A
Suppose that before you began your college application process, you were offered a job to work as a floor-trainer at a local climbing gym, accompanied by a yearly salary of $29,000 (after taxes). Assume however that you decided to turn down this offer and instead attend a year of college. The total monetary cost of the year of college, including tuition, fees, and room and board expenses, is $43,000. -You likely chose to attend college because A. you value a year of college at more than $72,000 B. you value a year of college less than $43,000 C. you value a year of college at $29,000 D. you value a year of college at $43,000
A
The idea that trade can make everyone better off applies to which of the following? a.Different countries, states within the United States, and families b.Families only c.Different countries only d.Different countries and states within the United States only
A
The main reason households and societies must make many decisions is because a.resources are scarce. b.people, by nature, tend to disagree. c.incomes fluctuate with business cycles. d.goods and services are unlimited.
A
US citizens have better nutrition, better healthcare, and a longer life expectancy than citizens of Nigeria. Which of the following conclusions can be drawn from this statement? a.All of these conclusions are correct. b.Average income in the US is higher than the average income Nigeria. c.US citizens have a higher standard of living than Nigerians. d.Productivity in the US is higher than productivity in Nigeria.
A
Which of the following is an important cause of inflation? a.growth in the quantity of money b.increases in productivity c.the influence of negative externalities d.when individuals fail to respond appropriately to incentives
A
Which of the following is not a policy typically used in the United States to exploit the relationship between inflation and unemployment? a.Reducing immigration. b.Reducing taxes c.Increasing government spending d.Increasing the supply of money
A
Which of the following is true about market economies? a.Market economies are more efficient than centrally planned economies. b.Market economies provide an equal distribution of goods and services. c.Market economies allow the government to allocate all resources. d.Market economies solve the problem of scarcity.
A
Which of the following will happen in the short run if the money supply decreases? a.Decreasing the money supply will lead to a lower rate of inflation. b.Decreasing the money supply will increase the demand for goods and services. c.Decreasing the money supply will encourage firms to hire more workers. d.Decreasing the money supply will lead to increased inflation.
A
Which of the following are trade-offs faced by a family deciding whether to buy a new car? Check all that apply. A. An increase in the family's car payment means the family will be unable to afford a vacation. B. A newer model offers better protection and functions but is more expensive than an older model. C. The vehicle is available in several colors.
A and B
Which of the following activities is most likely to produce an externality? a. A student has a party in her dorm room. b. A student sits at home and watches television. c. A student reads a novel for pleasure. d. A student eats a hamburger in the student union.
A student has a party in her dorm room.
Which of the following are trade-offs faced by a company president deciding whether to open a new factory? Check all that apply. A. The firm can either pay out more of its profit to shareholders or earn additional profit next year by increasing production. B. The firm can either open a new factory or upgrade existing equipment. C. The firm can either open a new factory or expand its current factory.
A, B, C
Which of the following statements support the notion that your standard of living is different from that of your parents or grandparents when they were your age? Check all that apply. A. A cutting-edge television comes with 4K, HD, and SmartTV technology, while your grandparents likely enjoyed at most a black-and-white television in their early years. B. In the United States, the average person's life expectancy was roughly 79 years in 2018, but only 70 years in 1960. C. Many families have two or more cars, whereas having any motor vehicle was a luxury in the early 20th century.
A, B, C
Which of the following government activities is motivated by a concern about efficiency? Check all that apply. A. Regulating cable TV prices B. Breaking up Standard Oil (which once owned 90% of all oil refineries) into several smaller companies C. Prohibiting smoking in public places D. Imposing higher personal income tax rates on people with higher incomes E. Providing some low-income people with vouchers that can be used to buy food F. Instituting laws against driving while intoxicated
A, B, C, F
Which of the following are trade-offs faced by a recent college graduate deciding whether to go to graduate school? Check all that apply. A. Graduate school means fewer years of on-the-job experience. B. Many of her friends decide to go to graduate school. C. If she goes to graduate school, she won't be able to start a new job and repay her existing student loans.
A, C
Now suppose you had been planning to spend the day working on your garden. -What is the cost of going rock climbing in this case? Check all that apply. A. The rental of any rock climbing equipment you need B. The cost of your rock climbing shoes you purchased last year C. The value of your time spent gardening D. The cost of hiring a guide
A, C, D
You were planning to spend Sunday working at your part-time job, but a friend asks you to go rock climbing. Which of the following are included in the true cost of going rock climbing? Check all that apply. A. The rental of any rock climbing equipment you need B. The cost of your rock climbing shoes you purchased last year C. The wages you forgo by going rock climbing D. The cost of hiring a guide
A, C, D
Which of the following involve a trade-off? 1. Going to college 2. Correct All of these involve trade-offs. 3. Taking a nap 4. Buying a new car 5. Watching a football game on Saturday afternoon
All of these involve trade-offs
Adam has $200 to spend and wants to buy either a new amplifier for his guitar or a new cell phone. Both the amplifier and the cell phone cost $200, so he can only buy one. This illustrates the basic concept that: a.everyone is always acting in his or her own self-interest. b.people face trade-offs. c.people respond to incentives. d.everyone has an unlimited supply of resources.
B
Alex is training for a biathlon, a winter racing sport that combines cross-country skiing and rifle shooting. -Consider the following scenario: Alex has only 15 hours available to devote to his training this week. Each hour he spends skiing is one hour that cannot be spent working onhis shooting. -Which basic principle of individual choice do these statements best illustrate? A. Alex can use time most efficiently by spending the same amounts of time on skiing and shooting. B. People face trade-offs. C. Alex has an incentive to spend more time on skiing than on shooting. D. People usually exploit opportunities to make themselves better off.
B
Fluctuations in economic activity are known as the a.ten principles of economics. b.business cycle. c.broken window fallacy. d.'invisible hand.'
B
If the Federal Reserve announces it will be decreasing the money supply through its monetary policy tools, it tells us the Federal Reserve is a.concerned that the economy is not growing quickly enough. b.concerned about inflation. c.attempting to decrease the unemployment rate. d.hoping to stimulate the demand for goods and services.
B
Monica has $500 to spend and wants to buy either a new snowboard or a new laptop. Both the snowboard and the laptop cost around $500, so she can only buy one. This illustrates the basic concept that: a.everyone is always acting in his or her own self-interest. b.people face trade-offs. c.people respond to incentives. d.everyone has an unlimited supply of resources.
B
One of the reasons that people tend to eat more in an "all you can eat" buffet is because the a.opportunity cost of the extra plate of food is negative. b.marginal benefit from an extra plate of food is greater than the marginal cost of the additional food. c.marginal cost of an extra plate of food is greater than the marginal benefit. d.opportunity cost of the additional food is greater than the marginal benefit from the extra food.
B
Productivity is defined as the a.total number of hours worked in an economy. b.amount of output produced from each unit of labor input. c.number of workers required to produce a given amount of goods and services. d.hours of labor that can be saved by replacing workers with new technology.
B
Suppose a publishing company is deciding whether or not to print 50,000 additional copies of an economic textbook. The company should print the textbooks if: a.the cost of printing the additional textbooks is zero. b.the marginal benefit (additional revenue) from selling the extra books is greater than the marginal cost of printing the books. c.the marginal cost of printing the extra books is greater than the marginal benefit (additional revenue) of selling the books. d.they can get a good deal on the paper used to print the additional textbooks.
B
Thousands of people develop asthma and breathing problems from exposure to air pollution. This is an example a: a.a perfectly functioning market. b.a market failure caused by an externality. c.a market failure caused by market power. d.a market failure caused by equality.
B
When the government intervenes in the economy to promote equality, it means that the government is trying to: a.create a more unequal distribution of income. b.create a more fair distribution of income. c.change the way we produce goods and services. d.increase the size of the economic pie.
B
Which of the following are trade-offs faced by a member of Congress deciding how much to spend on national parks? Check all that apply. A. National parks are essential to protecting wildlife from extinction. B. Money spent on national parks benefits park visitors, but alternatively the money could be spent on highways to benefit drivers. C. Dog ownership will surge as a result of better national parks.
B
Which of the following statements about trade is the most accurate? a.International trade helps rich nations while hurting poor nations. b.International trade has the potential to make all countries better off. c.Trade makes some better off and others worse off. d.International trade can only make a country better off if the country cannot produce the good itself.
B
A main cause of large or persistent inflation is a.increasing worker productivity. b.too much government spending. c.excessive growth in the money supply. d.foreign competition.
C
A marginal change is best described as: a.a change for the better. b.a large, significant change from the present situation. c.a small, incremental change from the present situation. d.a change for the worse.
C
Adam Smith's 'invisible hand' refers to: a.how governments allocate economic resources. b.how central planners made economic decisions. c.how households and firms, acting in their own self-interest, manage to make everyone better off. d.the control that large firms have over the economy.
C
Every time we choose to do one thing, we give up doing something else. This best describes the economic principle of: a.self-interest. b.marginal thinking. c.opportunity cost. d.monetary cost.
C
High inflation imposes various costs on society. What can policymakers do to keep inflation at a low level? A. Expand welfare benefits and fund these expenses by printing money. B. Increase government expenditures to boost employment. C. Maintain a slow growth in the quantity of money.
C
In the 1990s, inflation in the United States was a.referred to as "public enemy number one". b.extremely high. c.about 3 percent per year. d.zero
C
In the short run, an increase in the money supply will likely cause a.an increase in the unemployment rate and an increase in inflation. b.a decrease in the unemployment rate and a decrease in inflation. c.a decrease in the unemployment rate and an increase in inflation. d.an increase in the unemployment rate and a decrease in inflation.
C
Kurt decides to spend 2 hours working rather than hanging out with his friends. He earns $10 per hour for work. His opportunity cost of working is a.$20 minus the value of the time spent with friends. b.the $20 he earned working the extra two hours. c.the utility or enjoyment he would have gotten from hanging out with his friends. d.nothing as he has given nothing up to work the extra hours.
C
The concept of guns vs. butter represents the classic societal trade-off between spending on a.goods vs. services. b.imports vs. exports. c.military goods vs. consumer goods. d.health care vs. agriculture
C
The standard of living in a country is most closely tied to its a.public health care system. b.population growth rate. c.productivity. d.public education system.
C
Which of the following are trade-offs faced by a professor deciding how much time to spend preparing for class? Check all that apply. A. The professor likes the students a lot. B. The professor has taught the same subject for 4 years. C. The better the lecture, the better the professor's chances of tenure, but time spent preparing the lecture decreases the time the professor has available to work on research.
C
Which of the following best summarizes a basic difference between market economies and centrally planned economies? a.A market economy has a "more equal" distribution of resources than a centrally planned economy. b.Centrally planned economies rely more on self-interest and prices to allocate resources than market-based economies. c.Self-interest and prices serve to allocate resources in a market economy while a central planner typically attempts to allocate resources in a centrally planned economy. d.The government plays a larger role in a market economy than in a centrally planned economy.
C
Which of the following factors played the biggest role in the slow growth of average incomes in the United States during the 1970s and 1980s? A. Increased competition from Japan B. Increased competition from India C. Slow growth in productivity D. Disinflation of the dollar
C
Which of the following is a way in which the government helps enforce property rights? a.Providing public parks and recreation facilities b.Requiring property owners to pay property taxes c.Providing the court system d.Forcing people to own property
C
You are trying to decide whether to take a vacation. Most of the costs of the vacation (airfare, hotel, and forgone wages) are measured in dollars, but the benefits of the vacation are psychological. Suppose you had to work for one month in order to save enough for the vacation. -Which of the following is true if you decide to take the vacation? A. The opportunity cost of going on the vacation is the forgone wages you could have earned. B. You are not being rational because it is impossible to compare the benefits of going on the vacation to the costs. C. The benefits of going on the vacation exceed the cost of working for a month to pay for the vacation.
C
You have $20 in your wallet. You have a choice between using this amount to enter a baseball pool, which will give you the opportunity to win $80, and spending the money on buying something else. -Which of the following is the opportunity cost of entering a baseball pool with $20? A. The opportunity of winning $80 B. Nothing, because you would spend the money anyway C. The value you could obtain by spending the money on buying something else
C
A key feature of market economies is that market economies: a.are based solely on consumer spending. b.always elect their government officials. c.have government planners to allocate all economic resources. d.allocate resources by everyone acting in their own self-interest.
D
A record company went out of business because too many of its customers downloaded its music illegally from the internet rather than purchasing the digital copy from the record company. This instance serves as an example of: a.the invisible hand at work. b.market power. c.inefficient trade. d.inadequate enforcement of property rights.
D
In economics, we measure the cost of something as a.usually impossible to quantify. b.the dollar price you pay to buy it. c.always measured in units of time given up to get it. d.what you give up to get it.
D
Nick is a guitar teacher and Raul is an accountant. If Nick teaches Raul to play the guitar in exchange for Raul helping with Nick's bookkeeping: a.neither Nick nor Raul are made better off by the trade. b.only Nick is made better off by the trade. c.only Raul is made better off by the trade. d.both Nick and Raul are made better off by the trade.
D
The increase in living standards of Americans over the past century is mainly due to a.increasing foreign competition. b.the success of labor unions. c.minimum-wage laws. d.improvements in productivity.
D
The term "productivity" a.refers to new technology. b.means the same thing as "utility." c.is seldom used by economists, as it is not important in any economic sense. d.refers to the quantity of goods and services each unit of labor can produce.
D
When the government intervenes in the economy to promote efficiency, it means that the government is trying to: a.create a more unequal distribution of income. b.create a more fair distribution of income. c.change the way in which the economic pie is divided. d.increase the size of the economic pie.
D
Which of the following is something an economist might study? a.Phil decides to work overtime to earn extra income for his upcoming family vacation. b.Claire sells her physics textbook from last semester to her roommate for half the price she paid for it. c.Roger reads a newspaper article about the decline of the unemployment rate in the United States over the past few years. d.All of these answers are correct.
D
Which of the following is the reason behind the slow growth in U.S. incomes during the 1970s and 1980s? A. Minimum-wage laws were not in place to protect the livelihoods of workers. B. The United States experienced an increase in competition from abroad. C. Labor unions were relatively weak. D. There was a slowdown in productivity growth.
D
Which of the following is true? a.Efficiency and equality occur only when our economic pie is cut into equal pieces. b.Government policies always improve upon both equality and efficiency. c.As long as our economic pie continues to grow, everyone will automatically get a bigger piece. d.Efficiency refers to the size of the economic pie; equality refers to how the pie is divided.
D
In the United States, real incomes have increased about 2 percent per year. At this growth rate, average income doubles every a.45 years. b.15 years c.25 years. d.35 years.
D (70/2)
Foreign trade a. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home. b. allows a country to avoid trade-offs. c. makes the members of a country more equal. d. increases the scarcity of resources. e. is none of the above.
a. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home.
In the short run, a. an increase in inflation temporarily increases unemployment. b. a decrease in inflation temporarily increases unemployment. c. inflation and unemployment are unrelated. d. the business cycle has been eliminated. e. None of the above is true.
b. a decrease in inflation temporarily increases unemployment.
Factory owners will _______ from the change in productivity growth because they will receive a _______ return on their investments.
benefit, higher
Which of the following statements is true about a market economy? a. Taxes help prices communicate costs and benefits to producers and consumers. b. The strength of a market system is that it tends to distribute resources evenly across consumers. c. With a large enough computer, central planners could guide production more efficiently than markets. d. Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being.
d. Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being.
High and persistent inflation is caused by a. regulations raising the cost of production too much. b. OPEC raising the price of oil too much. c. unions increasing wages too much. d. governments increasing the quantity of money too much.
d. governments increasing the quantity of money too much.
Productivity can be increased by a. restricting trade with foreign countries. b. raising minimum wages. c. raising union wages. d. improving the education of workers.
d. improving the education of workers.
An increase in the price of beef provides a. information that tells consumers to buy more beef. b. no information because prices in a market system are managed by planning boards. c. information that tells consumers to buy less pork. d. information that tells producers to produce more beef.
d. information that tells producers to produce more beef.
Which of the following is not part of the opportunity cost of going on vacation? a. the money you spent on a Broadway show b. the money you could have made if you had stayed home and worked c. the money you spent on airline tickets d. the money you spent on food
d. the money you spent on food
Workers in the United States enjoy a high standard of living because a. unions in the United States keep the wage high. b. we have protected our industry from foreign competition. c. the United States has a high minimum wage. d. workers in the United States are highly productive. e. None of the above is true.
d. workers in the United States are highly productive.
All societies face a trade-off between efficiency and equality. If the government raises income taxes on Americans in the top one percent of earners, while increasing welfare payments to citizens with incomes below the federal poverty threshold, the most likely result is a _________ in efficiency and an ________ in equality in the United States.
decrease, increase
Suppose that an increasing number of traffic collisions observed on state roads lead the governor to implement the rule that all registered vehicles must be equipped with front and side airbags. These airbags reduce the probability of serious injury in a motor vehicle collision by 62%. The new airbags _______ the probability that a driver will be injured in a traffic collision, but also give motorists an incentive to drive more _________ , which could potentially ________ the number of car accidents that occur on state roads.
decrease, recklessly, increase
Suppose that the government believes the economy is producing goods and services beyond its optimal level. The government therefore decides to decrease the quantity of money in the economy. This monetary policy action ________ demand for goods and services in the economy, leading to _______ prices for products. In the short run, the change in prices induces firms to produce ______ goods and services. This, in turn, leads to a ______ unemployment level. Based on this analysis, the economy faces the following trade-off between inflation and unemployment: Lower inflation leads to ______ unemployment.
decreases, lower, fewer, higher, higher
Efficiency means our economic pie is divided into equal slices.
false
In the United States, inflation was much higher during the 1990s than it was during the 1970s.
false
Incentives are not important in economics.
false
Inflation and unemployment both decrease as the money supply increases.
false
Normal cost of living expenses, such as room and board, are included in the opportunity cost of attending college.
false
Productivity is not important in economics.
false
Suppose that you have already spent 45 minutes grocery shopping, but upon arriving at the checkout line, you realize it's going to be another 15 minutes just to purchase your groceries. Marginal thinking tells you that the decision of whether or not to wait in line depends on the cost of an hour of your time.
false
The business cycle refers to the level of growth in the money supply.
false
The last time the United States experienced high inflation was during the 1990s.
false
There is no need for a government in a market economy.
false
There is no relationship between a country's productivity and its standard of living.
false
True or False: Society can receive a "free lunch" when it builds new factories.
false
When countries trade, one country wins and the other country loses.
false
Which of the following products would be least capable of producing an externality? a. Inoculations against disease b. Stereo equipment c. Food d. Cigarettes e. Education
food
Raising taxes and increasing welfare payments a. proves that there is such a thing as a free lunch. b. reduces market power. c. improves efficiency at the expense of equality. d. improves equality at the expense of efficiency. e. does none of the above.
improves equality at the expense of efficiency
Paying laid-off workers unemployment benefits until they find a new job will likely ________ equality and ________ efficiency.
increase, decrease
The market failure causes by the concentration of oil refineries by Standard Oil is known as
market power
Graphic designers are much ______ likely to supply art to the market if property rights are enforced.
more
A 1996 bill reforming the federal government's antipoverty programs limited many welfare recipients to only two years of benefits. This change gives people the incentives to find a job ______ quickly than if welfare benefits lasted forever. Points: 1 / 1 As a result of the change in working incentives led by the 1996 bill reform, the economy will be ______ efficient.
more, more
Suppose Americans decide to save more of their incomes, providing banks with more funds to lend to businesses for investment. This allows for faster growth in ________ , thereby ________ the overall standard of living.
productivity, raising
Trade-offs are required because wants are unlimited and resources are
scarce
The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $1.5 million. If it would cost $2 million to finish development and make the product, you_______ go ahead and do so. The most you should pay to complete development is ______ million.
should not, 1.5 million
Economics is the study of how
society manages its scarce resources
Because people respond to incentives, we would expect that if the average salary of accountants increases by 50 percent while the average salary of teachers increases by 20 percent a. students will shift majors from education to accounting. b. students will shift majors from accounting to education. c. fewer students will attend college. d. None of the above is true.
students will shift majors from education to accounting.
A rational person does not act unless a. the action makes money for the person. b. the action is ethical. c. the action produces marginal costs that exceed marginal benefits. d. the action produces marginal benefits that exceed marginal costs. e. None of the above is true
the action produces marginal benefits that exceed marginal costs
An incentive is anything that is designed to change behavior.
true
Both the production of goods and services and the unemployment rate are used to measure the business cycle.
true
Economics is the study of the choices people make in attempting to manage their scarce resources.
true
Historically, real income in the United States has risen about 2 percent per year.
true
When countries trade, it is possible for both countries to benefit.
true
You have spent $1,000 building a hot-dog stand based on estimates of sales of $2,000. The hot-dog stand is nearly completed, but now you estimate total sales to be only $800. You can complete the hot-dog stand for another $300. Should you complete the hot-dog stand? (Assume that the hot dogs cost you nothing.)
yes