Econ test 1

Self-sufficiency: is the key to prosperity. is not a popular idea. results in poverty and death. means being able and willing to trade.

results in poverty and death.

If there was no ______, the "invisible hand" would not function as Adam Smith describes. money self-interest trade inflation

self-interest

When deciding whether or not to undertake an activity, economists compare: the total cost of the activity against the total benefit received. the total benefit of the activity against the total cost of production. the additional cost of the activity against the additional benefits received. the average cost of the activity versus the total benefits received

the additional cost of the activity against the additional benefits received.

The better a person is at producing one good: the worse he is at producing other goods. the higher the opportunity cost to him of producing other goods . the lower the incentive he has to trade with other people. the better he is at producing other goods.

the higher the opportunity cost to him of producing other goods.

Trades are considered zero-sum transactions since when one person gains, the other loses an equal amount.

False

True or False, In a world with trade, no one can afford to specialize.

False

True or False, One of the limitations of economics is that the principles only apply to the American economic system and not foreign economies.

False

True or False, The opportunity cost of playing two hours of Super Mario Galaxy 2 is the value of all the opportunities lost from the two hours of play.

False

True or False, Trade makes people better off only when they all have the same preferences.

False

Economists assume that people respond to: other people. social interest. benevolence. Incentive

Incentive

If prices rise, what happens to producer surplus (all other things being equal)? You Answered It falls, because fewer people buy goods. It falls, because it encourages competition, which reduces profits. It rises, because each producer is getting more surplus per good sold. It stays the same, because the forces increasing the surplus counteract the forces reducing it.

It rises, because each producer is getting more surplus per good sold.

Joe runs a landscape business. He knows that providing landscaping services costs him $100 per hour on average, while the cost of providing such services is $150 per hour after 5 PM (due to overtime pay, reduced productivity, and the added wear and tear on his equipment). A potential client offers Joe $130 per hour to provide services but needs him to provide the services after 5 PM due to circumstances at the property. Joe should take the job, since $130 exceeds his average cost of production. Joe should take the job, since he is making a $30 profit per hour. Joe should decline the job, since he would lose $150 per hour worked on the job. Joe should decline the job, since he would lose $20 per hour worked.

Joe should decline the job, since he would lose $20 per hour worked.

Since the end of the Great Recession, the supply of housing has increased. All else equal, how did this change affect the market for housing? You Answered Prices and quantity demanded should have decreased. Prices and demand should have decreased. Prices and quantity demanded should have increased. Prices and demand should have increased.

Prices and quantity demanded should have increased.

Everyone, from the most to the least skilled to the most and least educated, can benefit from trade.

True

True or False, Individuals can benefit from trading with one another because trade allows each individual to specialize in doing what they do best.

True

True or False, Trade creates value by moving goods from people that value them less to people that value them more.

True

True or False, Trade leads to increased productivity because trade allows people to specialize.

True

n the 1800s, the federal government paid railroad companies for each mile of track built. This payment scheme created incentives for railroad companies to lay track: between points A and B using the most direct route. between points A and B using the most indirect. as slowly as possible. using the best materials possible.

between points A and B using the most indirect route.

When two people voluntarily trade with each other: one person will be better off and the other person will be worse off. both of them will be better off. both of them will be worse off. whether they will be better off or worse off depends on how they negotiate with each other.

both of them will be better off.

Demand slopes down because: You Answered supply slopes up, and supply and demand must intersect. consumers focus too much on the price of goods when they choose the quantity to demand. goods usually only have a single use. consumers will choose to use goods only in their most valuable uses when prices are high.

consumers will choose to use goods only in their most valuable uses when prices are high.

During a recession, when there are fewer job opportunities, we expect that the opportunity cost of attending college: rises. falls. remains the same. cannot be determined from the information given.

falls

Many companies pay their sales employees based on commissions—the more they sell, the more they get paid. This practice highlights the role of: marginal thinking. incentives. trade-offs. sunk costs.

incentives.

Cell phone data plans are most useful when used with a smartphone, and smartphones are most useful when used with a data plan. As the price of data plans falls, the demand for smartphones will: decrease, because smartphones and data plans are substitutes. increase, because smartphones and data plans are complements. decrease, because smartphones and data plans are complements. increase, because smartphones and data plans are substitutes.

increase, because smartphones and data plans are complements.

A farmer can grow soy or sorghum. If the price of soy increases, the opportunity cost of growing sorghum ______, shifting the supply curve of sorghum ______. decreases; up and to the left increases; up and to the left decreases; down and to the right increases; down and to the right

increases; up and to the left

Economics is a science, because it theorizes about human behavior. it uses a methodology to produce statements of fact. it uses a methodology to produce falsifiable statements. it assumes individuals are rational.

it uses a methodology to produce falsifiable statements.

eBay creates value by: helping sellers trick buyers into purchasing broken items. moving goods like broken laser pointers from people who don't want them to people who do. helping people with the same preferences find each other. moving toys from children who want them to children who don't.

moving goods like broken laser pointers from people who don't want them to people who do.

Trade creates value because: people get what they want. raw materials are transformed into finished products. people exchange things they do not want for things they do. idle resources are put to use.

people exchange things they do not want for things they do.

The opportunity cost of a choice is: the value of the opportunities lost. the net value of the opportunities gained. the difference between the benefits and costs of the choice. sometimes positive or negative.

the value of the opportunities lost.

Everyone can benefit from trade through increased specialization, division of knowledge, and productivity. True False

true

If instead of specialized doctors (neurologists, cardiologists, gastroenterologists, etc.) we had doctors who each knew the same things about all aspects of medicine, it would be: better because then we could just go to one doctor with no loss of quality in medical care. better because total medical knowledge in society would increase. worse because the human brain is limited. worse because total medical knowledge in society would decrease.

worse because total medical knowledge in society would decrease.