Micro Quiz 1

An automobile gets 40 miles per gallon, and a gallon of fuel costs $4.00. What is the marginal fuel cost for a typical mile of driving with this vehicle? $0.05 $0.10 $0.15 $0.20

.10

A cell phone plan costs $50 per month for 1,000 minutes, and $0.30 per minute for each additional minute after 1,000. What is the marginal fee for the 1,001st minute used? $0.25 $0.30 $0.35 $0.40

.30

A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker: should use a simple rule: once inflation is gone, it will always be gone. needs to know the causes of inflation, for example, the government's printing of too much money. should find out if people are really better off as a result of the inflation. should realize that inflation can be reduced without any costs.

needs to know the causes of inflation, for example, the government's printing of too much money.

A dependable legal system and competitive, open markets help to: shape incentives that induce economic growth. reduce liberty and varied freedoms. bring about honest government and political stability. increase inefficiencies.

shape incentives that induce economic growth

A period marked by falling wages, falling national output, and rising unemployment is called a recession True or False

True

A period marked by falling wages, falling national output, and rising unemployment is called a recession. True or False

True

America was so poor in past centuries that even George Washington caught malaria. True or false

True

An example of a case in which free markets do not align self-interest with social interest is pollution-emitting production: True or False

True

High inflation in Zimbabwe in 2009 was a result of the Zimbabwean government's printing too much money. True or False

True

Adam Smith coined the term "invisible hand" to mean: a physical hand that leads individuals to promote social interest by pursuing self-interest. a metaphorical hand that leads individuals to promote social interest by pursuing self-interest. a physical hand that leads individuals to promote self-interest by pursuing social interest. a metaphorical hand that leads individuals to promote self-interest by pursuing social interest.

a metaphorical hand that leads individuals to promote social interest by pursuing self-interest.

How are wealth and economic growth related? Increases in wealth help facilitate economic growth. Economic growth causes increases in wealth. Wealth and economic growth are negatively related. Economic growth causes resource depletion and reduces society's wealth.

Economic growth causes increases in wealth

Greater emphasis on self-sufficiency and trading less with foreign countries would increase incomes and living standards in the United States. True or False

False

If North and South Korea were both equally poor in 1950, why has South Korea developed so much faster since then? The two countries have different language, cultural, and historical backgrounds. North Korea has an economic system that develops incentives. South Korea has maintained a more market-based economic system. South Korea began with a higher per capita GDP.

South Korea has maintained a more market-based economic system.

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why? When jobs are difficult to find, the opportunity cost of going to grad school is high. When jobs are easy to find, there are strong incentives to go to grad school. The opportunity cost of going to graduate school is low when jobs are hard to find. Even if you have a job, the salary will be low that going to graduate school is worth the effort.

The opportunity cost of going to graduate school is low when jobs are hard to find.

A student at a party deciding whether to stay a few more minutes is: thinking on the margin. increasing the rate of unemployment. aligning her self-interest with the social interest. paying high interest rates.

Thinking on the margin

Adam Smith's metaphor of the "invisible hand" refers to the notion that: greed is always good when externally motivated. behavior based on self-interest can lead to an overall benefit to society. market incentive can lead to negative side effects. markets always align self-interest with social interest.

behavior based on self-interest can lead to an overall benefit to society.

A high-school graduate deciding to go to college makes that decision by: comparing the total income earned per year after graduating from college with the total cost of going to college. comparing the additional income earned per year after graduating from college with the additional cost of going to college. thinking about the benefit to society if she goes to college. following what her friends do.

comparing the additional income earned per year after graduating from college with the additional cost of going to college.

Among the most powerful institutions for supporting good incentives are: government price controls. monopolies. legal limits on excessive profits. property rights.

property rights

According to economists, when the Food and Drug Administration raises the approval requirements for new drugs: everyone will benefit and be better off. society potentially loses a new drug approval. everyone but the drug makers will lose. people will only demand more drug testing.

society potentially loses a new drug approval.