Download Quizz 1

1. "There is no such thing as a free lunch." This expression means
a. no decision is cost-free.
b. if Jan and Jim go out to eat lunch, one of them must pay for the lunch or the
restaurant will call the police.
c. while some actions involve a cost, others do not.
d. that scarcity exists in some situations, but does not in others.
2. What ever must be given up to obtain some item is
a. an explicit cost.
b. an opportunity cost.
c. an historical cost.
d. an accounting cost.
3. The problem of market power arises when:
a. production costs increase.
b. all firms in an industry produce exactly the same good.
c. buyers have no influence on market prices.
d. a single economic actor (or small group of actors) has substantial influence on
market prices.
4. When economists say, "There is no such thing as a free lunch," they mean
any of the following EXCEPT
a. scarce resources have alternative uses.
b. if resources are used to make the lunch, they are not available for other
purposes.
c. in a profit-motivated economy, lunchmakers always charge for their services.
d. the resources used to make the lunch might have been used to make dinner.
5. When economists say people think at the margin
a. they are referring to the culling out of inferior units of a product.
b. they are referring to the small, incremental adjustments to a plan of action.
c. they mean that buying stocks and bonds on margin can be very risky.
d. they are recommending maximization of total output.
6. Which of the following is an appropriate function of government?
a. making a market less competitive by forcing firms from the market
b. redistributing income to make a market outcome more equitable or fair
c. increasing the level of externalities in the economy
d. performing central control functions in a market economy
7. Which of the following variables is the key ingredient in improving the
standard of living of the average citizen?
a. low inflation
b. low unemployment rates
c. productivity increases
d. population growth
8. Which of the following is an example of an externality?
a. Karen consumes a McDonald's cheeseburger.
b. Sparrow Cable is the only cable company providing services to Canonville.
c. Brooke discovers a vaccine for the HIV virus.
d. Casey's and Quicktrip, two convenience stores, compete with each other.
9. Trade between two countries
a. makes both countries better off.
b. can benefit one country but not both.
c. causes one country to gain and the other country to lose.
d. is a zero-sum game.
10. According to the text, which of the following improves living standards?
a. redistributing income from the rich to the poor
b. minimum wage laws
c. reducing foreign competition
d. productivity growth
11. Your instructor announces that anyone with perfect attendance will receive
an "A" for the class. You would expect this policy to cause
a. an increase in attendance.
b. a decrease in attendance.
c. no change in attendance.
d. most people to withdraw from the class.
12. A market economy relies on
a. decentralized choices coordinated by Adam Smith's "invisible hand."
b. centralized choices coordinated by Adam Smith's "invisible hand."
c. decentralized choices coordinated by the "visible hand" of authority.
d. centralized choices coordinated by the "visible hand" of authority.
13. Which of the following is correct?
a. When Jan and Kim engage in voluntary trade, one will gain and one will lose.
b. When Jan and Kim engage in voluntary trade, both will gain.
c. If Japan and the United States trade with each other, one of the countries will
be made worse off.
d. When countries trade with each other, there will be less of a variety of goods
and services to consume.
14. Inflation refers to
a. a continuing decrease in the overall level of prices in the economy.
b. an increase in the overall level of prices in the economy.
c. a persistent increase in the amount of goods which can be purchased with a
given amount of money.
d. an increase in some individual prices in the economy.
15. Economics is the study of:
a. marketing channels for goods.
b. how income may be redistributed in a society.
c. successful ways of becoming a millionaire.
d. how society manages its scarce resources.
16. When economists say that individuals respond to incentives, they mean that
a. if the benefit of an activity increases, people will engage in more of that activity.
b. once individuals have made a mistake, they will never make the same mistake
again.
c. individuals act very quickly when faced with a problem.
d. individuals respond to positive stimuli, but not to negative stimuli.
17. According to the Phillips curve,
a. there is no tradeoff between inflation and unemployment.
b. if inflation increases, so does unemployment.
c. increases in unemployment are associated with a rise in prices.
d. there is a short-run tradeoff between inflation and unemployment.
18. Which of the following illustrates IRRATIONAL decisionmaking?
a. A student compares the costs and benefits of additional study for an
economics exam and concludes that the costs exceed the benefits.
b. A firm decides to produce an additional unit of output because this will increase
profits.
c. A worker agrees to work overtime on Saturday even though he values the
additional income less than the value of the leisure he must give up.
d. A consumer buys a dress that goes on sale one week later.
19. Almost all differences in living standards among countries can be explained
by differences in
a. inflation rates.
b. the growth of the money supply.
c. natural resources.
d. productivity.
20. To say that people make decisions at the margin means that they
a. wait until the last minute before making a decision.
b. weigh the additional costs and additional benefits of small changes.
c. make decisions that determine whether or not they will live their lives on the
edge of subsistence.
d. make decisions on issues that are relatively unimportant for their economic
well-being.