经济学原理对应练习 01

1. The word that comes from the Greek word for \

household\a. market. b. consumer. c. producer. d. economy. 2. The word “economy” comes from the Greek word oikonomos, which

means

a. “environment.” b. “production.”

c. “one who manages a household.” d. “one who makes decisions.” 3. Resources are

a. scarce for households but plentiful for economies. b. plentiful for households but scarce for economies. c. scarce for households and scarce for economies. d. plentiful for households and plentiful for economies. 4. Economics deals primarily with the concept of

a. scarcity. b. poverty. c. change. d. power.

5. Which of the following questions is not answered by the decisions that

every society must make?

a. What determines consumer preferences? b. What goods will be produced? c. Who will produce the goods? d. Who will consume the goods? 6. The overriding reason as to 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.

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7. The phenomenon of scarcity stems from the fact that

a. most economies’ production methods are not very good.

b. in most economies, wealthy people consume disproportionate quantities of goods and services.

c. governments restricts production of too many goods and services. d. resources are limited. 8. Approximately what percentage of the world's economies experience

scarcity? a. 25% b. 50% c. 75% d. 100% 9. When a society cannot produce all the goods and services people wish to

have, it is said that the economy is experiencing a. scarcity. b. shortages. c. inefficiencies. d. inequities. 10. For society, a good is not scarce if

a. at least one individual in society can obtain all he or she wants of the good.

b. firms are producing the good at full capacity.

c. all members of society can have all they want of the good.

d. those who have enough income can buy all they want of the good. 11. Which of the following products would be considered scarce?

a. golf clubs

b. Picasso paintings c. apples

d. All of the above are correct. 12. 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.

Chapter 1/Ten Principles of Economics ? 3

14. 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. 15. The adage, \

the principle that a. goods are scarce.

b. people face tradeoffs.(to get something we like, we usually have to give up another thing we like) c. income must be earned.

d. households face many decisions. 18. Which of the following statements best represents the principle

represented by the adage, \a. Melissa can attend the concert only if she takes her sister with her. b. Greg is hungry and homeless.

c. Brian must repair the tire on his bike before he can ride it to class. d. Kendra must decide between going to Colorado or Cancun for spring break. 19. The principle that \

a. individuals. b. families. c. societies.

d. All of the above are correct.

20. A typical society strives to get the most it can from its scarce resources.

At the same time, the society attempts to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the society faces a tradeoff between a. guns and butter.

b. efficiency and equity.

c. inflation and unemployment. d. work and leisure. 21. Guns and butter are used to represent the classic societal tradeoff

between spending on

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a. durable and nondurable goods.

b. imports and exports.

c. national defense and consumer goods. d. law enforcement and agriculture.

22. When society requires that firms reduce pollution, there is

a. a tradeoff because of reduced incomes to the firms' owners and workers.

b. a tradeoff only if some firms are forced to close.

c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements.

d. no tradeoff, since everyone benefits from reduced pollution. 23. A tradeoff exists between a clean environment and a higher level of

income in that

a. studies show that individuals with higher levels of income actually pollute less than low-income individuals.

b. efforts to reduce pollution typically are not completely successful. c. laws that reduce pollution raise costs of production and reduce incomes.

d. by employing individuals to clean up pollution, employment and income both rise. 24. Which of the following phrases best captures the notion of efficiency?

a. absolute fairness b. equal distribution c. minimum waste d. equitable outcome 25. Which of the following is true?

a. Efficiency refers to the size of the economic pie; equity refers to how the pie is divided.

b. Government policies usually improve upon both equity and efficiency. c. As long as the economic pie continually gets larger, no one will have to go hungry.

d. Efficiency and equity can both be achieved if the economic pie is cut into equal pieces. 26. Efficiency means that

Chapter 1/Ten Principles of Economics ? 5

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. 27. Economists use the word equity 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. the benefits of society's resources are distributed fairly among society's members. 28. Senator Smith wants to increase taxes on people with high incomes and

use the money to help the poor. Senator Jones argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that a. we should agree with Senator Smith. b. we should agree with Senator Jones.

c. a good decision requires that we recognize both viewpoints. d. there are no tradeoffs between equity and efficiency. 29. Which of the following words and phrases best captures the notion of

equity?

a. minimum waste b. maximum benefit c. sameness d. fairness ANS: D DIF: 1 REF: 1-1 TOP: Equity MSC: Definitional

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30. When government policies are enacted,

a. equity can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without an equity loss.

b. efficiency can usually be enhanced without an equity loss, but equity can never be enhanced without an efficiency loss.

c. it is always the case that either efficiency and fairness are both enhanced, or efficiency and equity are both diminished. d. None of the above are correct. ANS: D DIF: 2 REF: 1-1

TOP: Government, Efficiency, Equity MSC: Applicative 31. A likely effect of government policies that redistribute income and

wealth from the wealthy to the poor is that those policies a. enhance equity. b. reduce efficiency.

c. reduce the reward for working hard. d. All of the above are correct. ANS: D DIF: 2 REF: 1-1 TOP: Government, Efficiency, Equity MSC: Interpretive 32. When the government implements programs such as progressive income

tax rates, which of the following is likely to occur? a. Equity is increased and efficiency is increased. b. Equity is increased and efficiency is decreased. c. Equity is decreased and efficiency is increased. d. Equity is decreased and efficiency is decreased. ANS: B DIF: 2 REF: 1-1 TOP: Government, Efficiency, Equity MSC: Interpretive

Chapter 1/Ten Principles of Economics ? 7

33. As a result of a successful attempt by government to cut the economic pie

into more equal slices,

a. it is easier to cut the pie, and therefore the economy can produce a larger pie.

b. the government can more easily allocate the pie to those most in need. c. the pie gets smaller, and there will be less pie overall.

d. government will spend too much time cutting and it causes the economy to lose the ability to produce enough pie for everyone. ANS: C DIF: 3 REF: 1-1 TOP: Government, Efficiency, Equity MSC: Analytical 34. When the government attempts to improve equity in an economy the

result is often

a. an increase in overall output in the economy.

b. additional government revenue since overall income will increase. c. a reduction in equity. d. a reduction in efficiency. ANS: D DIF: 2 REF: 1-1 TOP: Government, Efficiency, Equity MSC: Interpretive 35. When the government redistributes income from the wealthy to the poor,

a. efficiency is improved, but equity is not.

b. both wealthy people and poor people benefit directly. c. people work less and produce fewer goods and services.

d. wealthy people consume fewer goods, but poor people consume more goods, resulting in no real change. ANS: C DIF: 2 REF: 1-1 TOP: Government, Efficiency, Equity MSC: Interpretive 36. In economics, the cost of something is

a. the dollar amount of obtaining it.

b. always measured in units of time given up to get it. c. what you give up to get it.

d. often impossible to quantify, even in principle. ANS: C DIF: 1 REF: 1-1 TOP: Opportunity cost MSC: Definitional

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37. What you give up to obtain an item is called your

a. opportunity cost. b. explicit cost. c. true cost. d. direct cost. ANS: A DIF: 1 REF: 1-1 TOP: Opportunity cost MSC: Definitional

38. The opportunity cost of going to college is

a.the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses.

b. the value of the best opportunity a student gives up to attend college. c. zero for students who are fortunate enough to have all of their college expenses paid by someone else.

d. zero, since a college education will allow a student to earn a larger income after graduation. ANS: B DIF: 2 REF: 1-1 TOP: Opportunity cost MSC: Interpretive 39. Maurice receives $100 as a birthday gift. In deciding how to spend the

money, he narrows his options down to four choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally he decides on Option B. The opportunity cost of this decision is

a. the value to Maurice of the option he would have chosen had Option B not been available.

b. the value to Maurice of Options A, C and D combined. c. $100. d. $300.

ANS: A DIF: 2 REF: 1-1 TOP: Opportunity cost MSC: Applicative

Chapter 1/Ten Principles of Economics ? 9

40. A furniture maker currently produces 100 tables per week and sells them

for a profit. She is considering expanding her operation in order to make more tables. Should she expand?

a. Yes, because making tables is profitable.

b. No, because she may not be able to sell the additional tables. c. It depends on the marginal cost of producing more tables and the marginal revenue she will earn from selling more tables.

d. It depends on the average cost of producing more tables and the average revenue she will earn from selling more tables. ANS: C DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Applicative 41. For most students, the largest single cost of a college education is

a. the wages given up to attend school. b. tuition, fees, and books. c. room and board.

d. transportation, parking, and entertainment. ANS: A DIF: 2 REF: 1-1 TOP: Opportunity cost MSC: Interpretive 42. For a college student who wishes to calculate the true costs of going to

college, the costs of room and board

a. should be counted in full, regardless of the costs of eating and sleeping elsewhere.

b. should be counted only to the extent that they are more expensive at college than elsewhere.

c. usually exceed the opportunity cost of going to college.

d. plus the cost of tuition, equals the opportunity cost of going to college. ANS: B DIF: 2 REF: 1-1 TOP: Opportunity cost MSC: Applicative

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43. For which of the following individuals would the opportunity cost of

going to college be highest?

a. a promising young mathematician who will command a high salary once she earns her college degree

b. a student with average grades who has never held a job

c. a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree

d. a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball ANS: C DIF: 2 REF: 1-1 TOP: Opportunity cost MSC: Applicative 44. When you calculate your true costs of going to college, what portion of

your room-and-board expenses should be included?

a. Your full room-and-board expenses should always be included. b. None of your room-and-board expenses should ever be included. c. You should include only the amount by which your room-and-board expenses exceed the income you earn while attending college.

d. You should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college. ANS: D DIF: 2 REF: 1-1 TOP: Opportunity cost MSC: Applicative 45. The opportunity cost of an item is

a. the number of hours needed 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. ANS: B DIF: 1 REF: 1-1 TOP: Opportunity cost MSC: Definitional

Chapter 1/Ten Principles of Economics ? 11

46. Mallory decides to spend three hours working overtime rather than

watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is

a. the $24 she earns working.

b. the $24 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 $24 of enjoyment from the video. ANS: C DIF: 3 REF: 1-1 TOP: Opportunity cost MSC: Applicative 47. Russell spends an hour studying instead of playing tennis. The

opportunity cost to him of studying is

a. the improvement in his grades from studying for the hour.

b. the improvement in his grades from studying minus the enjoyment of playing tennis.

c. the enjoyment and exercise he would have received had he played tennis.

d. zero. Since Russell chose to study rather than to play tennis, the value of studying must have been greater than the value of playing tennis. ANS: C DIF: 3 REF: 1-1 TOP: Opportunity cost MSC: Applicative 48. College-age athletes who drop out of college to play professional sports

a. are not rational decision makers.

b. are well aware that their opportunity cost of attending college is very high.

c. are concerned more about present circumstances than their future. d. underestimate the value of a college education. ANS: B DIF: 2 REF: 1-1 TOP: Opportunity cost MSC: Interpretive

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49. A rational decisionmaker

a. ignores marginal changes and focuses instead on “the big picture.” b. ignores the likely effects of government policies when he or she makes choices.

c. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.

d. takes an action only if the combined benefits of that action and

previous actions exceed the combined costs of that action and previous actions. ANS: C DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Interpretive 50. Rational people make decisions at the margin by

a. following marginal traditions. b. behaving in a random fashion. c. thinking in black-and-white terms.

d. comparing marginal costs and marginal benefits. ANS: D DIF: 1 REF: 1-1 TOP: Marginal changes MSC: Interpretive 51. The word \

a. edge. b. distance. c. space. d. measure. ANS: A DIF: 1 REF: 1-1 TOP: Marginal changes MSC: Definitional

52. Making rational decisions \

a. make those decisions that do not impose a marginal cost.

b. evaluate how easily a decision can be reversed if problems arise. c. compare the marginal costs and marginal benefits of each decision. d. always calculate the marginal dollar costs for each decision. ANS: C DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Interpretive

Chapter 1/Ten Principles of Economics ? 13

53. A person’s willingness to pay for a good is based on

a. the availability of the good.

b. the marginal benefit that an extra unit of the good would provide for that person.

c. the marginal cost of producing an extra unit of the good.

d. esoteric factors, the study of which lies beyond the boundaries of economics. ANS: B DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Interpretive 54. To say that \

a. changes in costs (but not changes in benefits) influence people's decisions and their behavior.

b. changes in benefits (but not changes in costs) influence people's decisions and their behavior.

c. changes in benefits or changes in costs influence people's decisions and their behavior.

d. tradeoffs can be eliminated by rational people who think at the margin. ANS: C DIF: 1 REF: 1-1 TOP: Incentives MSC: Definitional 55. A marginal change is a

a. change that involves little, if anything, that is important. b. large, significant adjustment.

c. change for the worse, and so it is usually a short-term change. d. small, incremental adjustment. ANS: D DIF: 1 REF: 1-1 TOP: Marginal changes MSC: Definitional

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56. Which of the following is the best example of a marginal change?

a. After graduating college, Audrey's income increases from $500 per month to $3,000 per month.

b. Morgan gets a raise at her part-time job and is now paid $7.25 per hour instead of $7.00.

c. Housing prices in an area increase by 40 percent when a new interstate is built that passes nearby.

d. A hard freeze wipes out half of the orange crop in Florida and the price of orange juice doubles. ANS: B DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Applicative 57. Which of the following is the best example of a marginal change?

a. The price of housing in Denver increased by 6 percent last year.

b. Kim gets a big promotion at work. She also gets a raise from $35,000 per year to $55,000 per year.

c. Mark graduates from college and takes a job. His income increases from $10,000 per year to $35,000 per year.

d. A drought hits the upper Midwest and the price of wheat increases from $4.00 per bushel to $6.50 per bushel. ANS: A DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Applicative 58. A marginal change is best illustrated by which of the following?

a. Nancy retires and takes a part-time job. She was working 40 hours per week and now works 15 hours per week.

b. A large, state-supported university has announced that due to state budget deficits, tuition must rise by 20 percent next year.

c. Ryan moved to a new apartment and now pays 40 percent more rent than before.

d. Arizona, which usually receives 10 inches of rain per year, received 11 inches last year. ANS: D DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Interpretive

Chapter 1/Ten Principles of Economics ? 15

59. Teresa eats three oranges during a particular day. The marginal benefit

she enjoys from eating the third orange

a. can be thought of as the total benefit Teresa enjoys by eating three oranges minus the total benefit she would have enjoyed by eating just the first two oranges.

b. determines Teresa’s willingness to pay for the first, second, and third oranges.

c. does not depend on how many oranges Teresa has already eaten. d. All of the above are correct. ANS: A DIF: 3 REF: 1-1 TOP: Marginal changes MSC: Applicative 60. A rational decisionmaker takes an action if and only if

a. the marginal benefit of the action exceeds the marginal cost of the action.

b. the marginal cost of the action exceeds the marginal benefit of the action.

c. the marginal cost of the action is zero. d. the opportunity cost of the action is zero. ANS: A DIF: 1 REF: 1-1 TOP: Marginal changes MSC: Interpretive 61. After much consideration, you have chosen Cancun over Ft. Lauderdale

as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision? a. The marginal benefit of going to Cancun increases. b. The marginal cost of going to Cancun decreases.

c. The marginal benefit of going to Ft. Lauderdale decreases. d. The marginal cost of going to Ft. Lauderdale decreases. ANS: D DIF: 3 REF: 1-1 TOP: Marginal changes MSC: Applicative

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62. The average cost per seat on the 50-passenger Floating-On-Air Bus

company's trip from Kansas City to St. Louis, on which no refreshments are served, is $45. In advance of a particular trip, three seats remain unsold. The bus company could increase its profit only if it

a. charged any ticket price above $0 for the three remaining seats. b. charged at least $15 for each of the three remaining seats. c. charged at least $45 for each of the three remaining seats. d. paid three people to occupy the three remaining seats. ANS: A DIF: 2 REF: 1-1

TOP: Marginal cost MSC: Applicative

63. Warren drinks four cups of coffee during a particular day. The marginal

benefit he enjoys from drinking the fourth cup

a. can be thought of as the total benefit Warren enjoys by drinking four cups minus the total benefit he would have enjoyed by drinking just three cups.

b. determines Warren’s willingness to pay for the fourth cup.

c. is likely different from the marginal benefit provided to Warren by the third cup.

d. All of the above are correct. ANS: D DIF: 3 REF: 1-1 TOP: Marginal changes MSC: Applicative 64. A rational decision maker takes an action only if the

a. marginal benefit is less than the marginal cost. b. marginal benefit is greater than the marginal cost. c. average benefit is greater than the average cost.

d. marginal benefit is greater than both the average cost and the marginal cost.

ANS: B DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Interpretive

Chapter 1/Ten Principles of Economics ? 17

65. A construction company has built 50 houses so far this year at a total cost

to the company of $8 million. If the company builds a 51st house, its total cost will increase to $8.18 million. Which of the following statements is correct?

a. For the first 50 houses, the average cost per house was $160,000. b. The marginal cost of the 51st house, if it is built, will be $180,000. c. If the company can experience a marginal benefit of $190,000 by building the 51st house, then the company should build it. d. All of the above are correct. ANS: D DIF: 3 REF: 1-1 TOP: Marginal cost, Marginal benefit MSC: Applicative 66. Mike has spent $500 purchasing and repairing an old fishing boat, which

he expects to sell for $800 once the repairs are complete. Mike discovers that, in addition to the $500 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $800 to potential buyers. He can sell the boat as it is now for $300. What should he do?

a. He should sell the boat as it is now for $300.

b. He should keep the boat since it would not be rational to spend $900 on repairs and then sell the boat for $800.

c. He should complete the repairs and sell the boat for $800.

d. It does not matter which action he takes; the outcome is the same either way.

ANS: C DIF: 3 REF: 1-1

TOP: Marginal cost MSC: Analytical

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67. A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day.

The shop does not sell day-old donuts, so all unsold donuts are thrown away at 3 p.m. each day. The cost of making and selling a dozen donuts is $1.50; there are no costs associated with throwing donuts away. If the manager has 10 dozen donuts left at 2:30 p.m. on a particular day, which of the following alternatives is most attractive?

a. Lower the price of the remaining donuts, even if the price falls below $1.50 per dozen.

b. Lower the price of the remaining donuts, but under no circumstances should the price fall below $1.50 per dozen.

c. Throw the donuts away and produce 10 fewer dozen donuts tomorrow. d. Starting tomorrow, lower the price on all donuts so they will all be sold earlier in the day. ANS: A DIF: 3 REF: 1-1 TOP: Marginal changes MSC: Analytical 68. Stan buys a 1966 Mustang for $2,000, planning to restore and sell the car.

He goes on to spend $8,000 restoring the car. At this point he can sell the car for $9,000. As an alternative, he can spend an additional $3,000 replacing the engine. With a new engine the car would sell for $12,000. Stan should

a. complete the repairs and sell the car for $12,000. b. sell the car now for $9, 000.

c. never try such an expensive project again.

d. be indifferent between (i) selling the car now and (ii) replacing the engine and then selling it. ANS: D DIF: 3 REF: 1-1

TOP: Marginal cost MSC: Analytical

Chapter 1/Ten Principles of Economics ? 19

69. Sarah buys and sells real estate. Two weeks ago, she paid $140,000 for a

house on Oak Street, intending to spend $20,000 on repairs sell the house for $175,000. Last week, the city government announced a plan to build a “halfway house” for convicted criminals on Oak Street. As a result of the city’s announced plan, Sarah is weighing two alternatives: She can go ahead with the $20,000 in repairs and then sell the house for $135,000, or she can forgo the repairs and sell the house as it is for $120,000. Sarah should

a. keep the house and live in it.

b. go ahead with the $20,000 in repairs and sell the house for $135,000. c. forgo the repairs and sell the house as it is for $120,000.

d. move the house from Oak Street to a more desirable location, irrespective of the cost of doing so. ANS: C DIF: 3 REF: 1-1

TOP: Marginal cost MSC: Analytical

70. People are willing to pay more for a diamond than for a bottle of water

because

a. the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water.

b. the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.

c. producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices.

d. water prices are held artificially low by governments, since water is necessary for life. ANS: B DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Interpretive

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71. Economists are particularly adept at understanding that people respond

to

a. laws.

b. incentives.

c. punishments more than rewards. d. rewards more than punishments. ANS: B DIF: 1 REF: 1-1 TOP: Incentives MSC: Interpretive 72. Government policies can change the costs and benefits that people face.

Those policies have the potential to a. alter people’s behavior.

b. alter people’s decisions at the margin.

c. produce results that policymakers did not intend. d. All of the above are correct. ANS: D DIF: 2 REF: 1-1 TOP: Incentives MSC: Interpretive 73. Ralph Nader's book Unsafe at Any Speed caused Congress to require

a. safety glass in all new cars. b. seat belts in all new cars. c. air bags in all new cars.

d. stricter drunk driving laws in all states. ANS: B DIF: 1 REF: 1-1 TOP: Incentives MSC: Interpretive 74. U.S. laws requiring that drivers wear seat belts have resulted in

a. a reduction in both driver deaths and pedestrian deaths. b. fewer accidents and fewer deaths per accident.

c. fewer driver deaths, fewer accidents and fewer pedestrian deaths. d. little change in the number of driver deaths, but more accidents and more pedestrian deaths. ANS: D DIF: 2 REF: 1-1 TOP: Incentives MSC: Interpretive

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168. Almost all variation in living standards is attributable to differences in

countries'

a. population growth rates. b. productivity.

c. systems of public education. d. taxes.

ANS: B DIF: 2 REF: 1-3 TOP: Standard of living MSC: Interpretive 169. Productivity is defined as the

a. amount of goods and services produced from each hour of a worker's time.

b. number of workers required to produce a given amount of goods and services.

c. amount of labor which can be saved by replacing workers with machines.

d. actual amount of effort workers put into an hour of working time. ANS: A DIF: 2 REF: 1-3

TOP: Productivity MSC: Definitional

170. The amount of goods and services produced from each hour of a

worker's time is called a. total output. b. productivity. c. marginal product. d. efficiency. ANS: B DIF: 1 REF: 1-3

TOP: Productivity MSC: Definitional

171. A direct or positive relationship exists between a country's

a. productivity and its standard of living.

b. amount of government spending and its productivity. c. total population and its average citizen’s income.

d. rate of population growth and the extent of its trade with other countries. ANS: A DIF: 2 REF: 1-3 TOP: Productivity, Standard of living MSC: Interpretive

Chapter 1/Ten Principles of Economics ? 47

172. The historical rise in living standards of American workers is primarily

a result of

a. the influence of labor unions in America.

b. tariff protection imposed by the American government. c. the enactment of minimum-wage laws in America. d. the rise in American productivity. ANS: D DIF: 2 REF: 1-3 TOP: Productivity, Standard of living MSC: Interpretive 173. The fact that different countries experience different standards of living

is largely explained by differences in those countries' a. populations.

b. productivity levels. c. locations.

d. none of the above; economists are puzzled by differences in standards of living around the world. ANS: B DIF: 1 REF: 1-3 TOP: Standard of living, Productivity MSC: Interpretive 174. The slow growth of U.S. incomes during the 1970s and 1980s can best

be explained by

a. unstable economic conditions in Eastern Europe. b. increased competition from abroad.

c. a decline in the rate of increase in U.S. productivity. d. a strong U.S. dollar abroad, hurting U.S. exports. ANS: C DIF: 3 REF: 1-3 TOP: Productivity, Income MSC: Applicative

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175. Incomes of U.S. households in the 1970s and 1980s

a. grew rapidly, due to the widespread success of labor unions in pushing up wages during those decades.

b. grew rapidly, due to several increases in the minimum wage during those decades.

c. grew rapidly, due to government policies that discouraged the importation of foreign products during those decades.

d. grew slowly, due to slow growth of the output of goods and services per hour of U.S. workers' time during those decades. ANS: D DIF: 2 REF: 1-3 TOP: Productivity, Income MSC: Applicative 176. To improve living standards, policymakers should

a. impose restriction on foreign competition.

b. formulate policies designed to increase productivity. c. impose tougher immigration policies. d. provide tax breaks for the middle class. ANS: B DIF: 2 REF: 1-3 TOP: Productivity, Standard of living MSC: Applicative

177. Policies to enhance living standards should be designed to ensure that

workers

a. have access to the best available methods of producing goods and services.

b. have the appropriate equipment to produce goods and services. c. receive good educations. d. All of the above are correct. ANS: D DIF: 2 REF: 1-3

TOP: Productivity MSC: Interpretive

Chapter 1/Ten Principles of Economics ? 49

178. To increase living standards, public policy should

a. ensure that workers are well educated and have the necessary tools and technology.

b. make unemployment benefits more generous. c. move workers into jobs directly from high school.

d. ensure a greater degree of equity, taking all income-earners into account. ANS: A DIF: 2 REF: 1-3 TOP: Productivity, Standard of living MSC: Applicative 179. To raise productivity, policymakers could

a. increase spending on education.

b. provide tax credits to firms for capital improvements. c. fund research and development. d. All of the above are correct. ANS: D DIF: 3 REF: 1-3

TOP: Productivity, Government MSC: Applicative

180. An increase in the overall level of prices in an economy is referred to as

a. economic growth. b. inflation.

c. the price effect. d. the demand effect. ANS: B DIF: 1 REF: 1-3 TOP: Inflation MSC: Definitional 181. Inflation is defined as

a. a period of rising productivity in the economy. b. a period of rising income in the economy.

c. an increase in the overall level of output in the economy. d. an increase in the overall level of prices in the economy. ANS: D DIF: 1 REF: 1-3 TOP: Inflation MSC: Definitional

50 ? Chapter 1/Ten Principles of Economics

182. In the early 1920s,

a. Germany experienced a very high rate of inflation. b. the quantity of German money was declining rapidly. c. the value of German money remained almost constant. d. All of the above are correct. ANS: A DIF: 2 REF: 1-3 TOP: Inflation, Money MSC: Interpretive

183. In Germany in the early 1920s, on average,

a. prices were rising 50 percent every month, while the quantity of money was rising 20 percent every month.

b. prices were doubling every month, while the quantity of money fell 10 percent every month.

c. prices were tripling every month, while the quantity of money remained almost constant every month.

d. prices and the quantity of money both tripled every month. ANS: D DIF: 2 REF: 1-3 TOP: Inflation, Money MSC: Interpretive 184. During the early 1920s in Germany, prices

a. doubled annually. b. doubled monthly. c. tripled monthly. d. tripled annually. ANS: C DIF: 2 REF: 1-3 TOP: Inflation MSC: Definitional

185. One of the 20th century’s worst episodes of inflation occurred in

a. the United States in the 1960s. b. Italy in the 1950s. c. Russia in the 1930s. d. Germany in the 1920s. ANS: D DIF: 1 REF: 1-3 TOP: Inflation MSC: Definitional

Chapter 1/Ten Principles of Economics ? 21

75. Evidence indicates that seat belt laws have led to

a. fewer pedestrian deaths. b. fewer automobile accidents.

c. fewer deaths per automobile accident. d. All of the above are correct. ANS: C DIF: 1 REF: 1-1

TOP: Seat belt laws MSC: Definitional

76. One effect of the government-imposed seat belt law in the U.S. has been

a. a dramatic decrease in the number of pedestrian deaths. b. safer driving.

c. an increase in the number of accidents.

d. a dramatic decrease in the number of driver deaths. ANS: C DIF: 2 REF: 1-1 TOP: Incentives MSC: Interpretive 77. Based on what we know about the effects of mandatory seat belt laws,

which of the following groups would be most likely to mount a campaign to repeal those laws?

a. Owners of collision-repair shops. b. People who walk rather than drive.

c. Policemen who have better things to do than investigate collisions. d. All of the above are correct. ANS: B DIF: 3 REF: 1-1 TOP: Incentives MSC: Analytical 78. Based on the available evidence, which of the following groups benefits

most from mandatory seat belt laws? a. automakers b. pedestrians c. drivers

d. owners of collision-repair shops ANS: D DIF: 3 REF: 1-1 TOP: Incentives MSC: Analytical

22 ? Chapter 1/Ten Principles of Economics

79. In the former Soviet Union, producers were paid for meeting output

targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

a. to produce good quality products so that society would benefit from the resources used

b. to conserve on costs, so as to maintain efficiency in the economy c. to produce enough to meet the output target, without regard for quality or cost

d. to produce those products that society desires most ANS: C DIF: 2 REF: 1-1 TOP: Incentives MSC: Interpretive 80. Your professor loves her work, teaching economics. She has been

offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal a. cost of teaching increased. b. benefit of teaching increased. c. cost of teaching decreased.

d. cost of a corporate job increased. ANS: A DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Interpretive 81. Suppose your management professor has been offered a corporate job

with a 30 percent pay increase. He has decided to take the job. For him, the marginal

a. cost of leaving was greater than the marginal benefit. b. benefit of leaving was greater than the marginal cost. c. benefit of teaching was greater than the marginal cost. d. All of the above are correct. ANS: B DIF: 2 REF: 1-1 TOP: Marginal changes MSC: Interpretive

Chapter 1/Ten Principles of Economics ? 23

82. When policymakers implement policies that alter incentives, they

usually

a. have carefully weighed the direct and indirect effects of the policy. b. do not observe the intended result of the policies.

c. have considered all possible effects of the incentive changes when they developed the policy, which will make the policy effective. d. correctly anticipate the indirect effects, but often miss the direct effects. ANS: B DIF: 2 REF: 1-1 TOP: Incentives MSC: Interpretive 83. Which of the following principles is not one of the four principles of

individual decisionmaking? a. People face tradeoffs.

b. Trade can make everyone better off. c. People respond to incentives.

d. Rational people think at the margin. ANS: B DIF: 1 REF: 1-1, 1-2 TOP: Tradeoffs, Trade, Marginal changes MSC: Definitional 84. Which of the following is a principle concerning how people interact?

a. Markets are usually a good way to organize economic activity. b. Rational people think at the margin. c. People respond to incentives. d. All of the above are correct. ANS: A DIF: 2 REF: 1-1, 1-2 TOP: Markets MSC: Interpretive 85. Which of the following statements exemplifies a principle of individual

decisionmaking?

a. Trade can make everyone better off.

b. Governments can sometimes improve market outcomes. c. The cost of something is what you give up to get it. d. All of the above are correct. ANS: C DIF: 2 REF: 1-1, 1-2 TOP: Opportunity cost MSC: Interpretive

24 ? Chapter 1/Ten Principles of Economics

86. Which is the most accurate statement about trade?

a. Trade can make every nation better off.

b. Trade makes some nations better off and others worse off.

c. Trading for a good can make a nation better off only if the nation cannot produce that good itself.

d. Trade helps rich nations and hurts poor nations. ANS: A DIF: 2 REF: 1-2 TOP: Trade MSC: Interpretive 87. The principle that \

interactions and trade between a. families.

b. states within the United States. c. nations.

d. All of the above are correct. ANS: D DIF: 1 REF: 1-2 TOP: Trade MSC: Applicative 88. Which of the following statements about trade is false?

a. Trade increases competition.

b. With trade, one country wins and one country loses.

c. Bulgaria can benefit, potentially, from trade with any other country. d. Trade allows people to buy a greater variety of goods and services at lower cost. ANS: B DIF: 2 REF: 1-2 TOP: Trade MSC: Interpretive 89. Senator Smart, who understands economic principles, is trying to

convince workers in her district that trade with other countries is beneficial. Senator Smart should argue that trade can be beneficial

a. only if it allows us to obtain things that we couldn't make for ourselves. b. because it allows specialization, which increases total output. c. to us if we can gain and the others involved in the trade lose.

d. in only a limited number of circumstances because others are typically self-interested. ANS: B DIF: 2 REF: 1-2 TOP: Trade MSC: Interpretive

Chapter 1/Ten Principles of Economics ? 25

90. Benefits from trade would not include

a. the ability of people and nations to specialize.

b. a greater variety of goods and services becoming available. c. less competition. d. lower prices. ANS: C DIF: 2 REF: 1-2 TOP: Trade MSC: Interpretive

91. Trade between the United States and India

a. benefits both the United States and India.

b. is a losing proposition for the United States because India has cheaper labor.

c. is a losing proposition for India because capital is much more abundant in the U.S. than in India.

d. is a losing proposition for India because U.S. workers are more productive. ANS: A DIF: 2 REF: 1-2 TOP: Trade MSC: Interpretive 92. Canada can benefit from trade

a. only with nations that can produce goods Canada cannot produce. b. only with less developed nations.

c. only with nations outside of North America. d. with any nation. ANS: D DIF: 2 REF: 1-2 TOP: Trade MSC: Interpretive 93. If Japan chooses to engage in trade, it

a. will only benefit if it trades with countries that produce goods Japan cannot produce.

b. cannot benefit if it trades with less developed countries. c. should first attempt to produce the good itself. d. can benefit by trading with any other country. ANS: D DIF: 2 REF: 1-2 TOP: Trade MSC: Interpretive

36 ? Chapter 1/Ten Principles of Economics

131. A company that formerly produced software went out of business

because too many potential customers bought illegally-produced copies of the software instead of buying the product directly from the company. This instance serves as an example of a. market power. b. market failure.

c. inadequate enforcement of property rights. d. the invisible hand at work. ANS: C DIF: 2 REF: 1-2

TOP: Property rights MSC: Interpretive

132. A rationale for government involvement in a market economy is as

follows:

a. Markets sometimes fail to produce a fair distribution of economic well-being.

b. Markets sometimes fail to produce an efficient allocation of resources. c. Property rights have to be enforced. d. All of the above are correct. ANS: D DIF: 1 REF: 1-2 TOP: Government, Markets MSC: Interpretive 133. The term market failure refers to

a. a situation in which the market on its own fails to allocate resources efficiently.

b. an unsuccessful advertising campaign which reduces demand for a product.

c. a situation in which competition among firms becomes ruthless. d. a firm which is forced out of business because of losses. ANS: A DIF: 1 REF: 1-2

TOP: Market failure MSC: Definitional

Chapter 1/Ten Principles of Economics ? 37

134. Which of the following is not generally regarded as a legitimate reason

for the government to intervene in a market? a. to promote efficiency b. to promote equity

c. to enforce property rights

d. to protect an industry from foreign competition ANS: D DIF: 2 REF: 1-2 TOP: Government, Markets MSC: Interpretive 135. Causes of market failure include

a. externalities and market power.

b. market power and incorrect forecasts of consumer demand. c. externalities and foreign competition.

d. incorrect forecasts of consumer demand and foreign competition. ANS: A DIF: 2 REF: 1-2

TOP: Market failure MSC: Interpretive

136. Which of the following statements is not true?

a. In the presence of a market failure, government action will always improve on the market outcome.

b. In the presence of a market failure, government action can sometimes improve on the market outcome.

c. In the presence of a market failure, government action might not improve on the market outcome because some leaders are not fully informed about the effects of their actions.

d. In the presence of a market failure, government action might not improve on the market outcome because sometimes public policies simply reward the politically powerful. ANS: A DIF: 2 REF: 1-2 TOP: Market failure, Government MSC: Interpretive 137. Market failure can be caused by

a. low consumer demand.

b. government intervention and price controls. c. externalities and market power. d. high prices and foreign competition. ANS: C DIF: 2 REF: 1-2

TOP: Market failure MSC: Interpretive

38 ? Chapter 1/Ten Principles of Economics

138. The term \

a. means the same thing as \

b. refers to the dissolution of a market when firms decide to quit producing a certain product.

c. refers to the failure of a market to produce an efficient allocation of resources.

d. refers to government's failure to enforce the property rights of households or firms that participate in a certain market. ANS: C DIF: 2 REF: 1-2

TOP: Market failure MSC: Interpretive

139. An example of an externality is the impact of

a. John’s actions on Jane’s well-being.

b. John’s actions on John’s own well-being. c. society's decisions on society’s well-being. d. society's decisions on John’s well-being. ANS: A DIF: 1 REF: 1-2

TOP: Externalities MSC: Definitional

140. An example of an externality is the impact of

a. bad weather on the income of farmers.

b. the personal income tax on a person's ability to purchase goods and services.

c. pollution from a factory on the health of people in the vicinity of the factory.

d. increases in health care costs on the health of individuals in society. ANS: C DIF: 2 REF: 1-2

TOP: Externalities MSC: Interpretive

141. If an externality is present in a market, economic efficiency may be

enhanced by

a. government intervention. b. increased competition.

c. better informed market participants. d. weaker property rights. ANS: A DIF: 2 REF: 1-2

TOP: Externalities, Efficiency MSC: Interpretive

Chapter 1/Ten Principles of Economics ? 39

142. Which of these statements concerning externalities is correct?

a. There would be no justification for government involvement in the economy if it were not for externalities.

b. An externality can only arise when one person (or a small group of persons) has the ability to unduly influence market prices.

c. An externality can arise only when two or more countries are engaged in trade with one another.

d. An externality arises when one person's actions have an impact on the well-being of others. ANS: D DIF: 2 REF: 1-2 TOP: Government, Markets MSC: Interpretive 143. If a copper refinery does not bear the entire cost of the smoke it emits, it

will

a. not emit any smoke so as to avoid the entire cost of the smoke. b. emit lower levels of smoke.

c. emit an acceptable level of smoke. d. emit too much smoke. ANS: D DIF: 2 REF: 1-2

TOP: Externalities MSC: Interpretive

144. Laws that restrict the smoking of cigarettes in public places are

examples of government intervention that is intended to reduce a. the influence of the invisible hand. b. trade.

c. externalities. d. market power. ANS: C DIF: 2 REF: 1-2

TOP: Externalities, Government MSC: Applicative

145. A market economy rewards people according to their

a. need for goods and services. b. willingness to work.

c. ability to produce things that other people are willing to pay for. d. ability to produce things of cultural importance. ANS: C DIF: 2 REF: 1-2 TOP: Market economy MSC: Interpretive

40 ? Chapter 1/Ten Principles of Economics

146. Market economies are distinguished from other types of economies

largely on the basis of

a. the political affiliations of government officials.

b. the process by which government officials are elected or appointed. c. the ways in which scarce resources are allocated. d. the number of retail outlets available to consumers. ANS: C DIF: 2 REF: 1-2 TOP: Market economy MSC: Interpretive 147. Which of these consumption activities will most likely impose an

external cost?

a. An executive plays a vigorous game of golf.

b. A student in a dorm plays her CDs at 120 decibels late at night. c. A young mother exercises to an aerobics video.

d. A construction worker eats a sandwich during his lunch break. ANS: B DIF: 2 REF: 1-2

TOP: Externalities MSC: Interpretive

148. Which of these activities will most likely result in an external benefit?

a. A college student buys a deck of cards to play solitaire in her dorm room.

b. An elderly woman plants a flower garden on the vacant lot next to her house.

c. An executive purchases a book to read on a business trip. d. A ten-year-old uses his allowance to buy new Nike shoes. ANS: B DIF: 2 REF: 1-2

TOP: Externalities MSC: Interpretive

149. If education produces external benefits for society, which of the

following might NOT be an appropriate policy for society to adopt regarding education?

a. tax incentives for schooling

b. mandatory minimum levels of education

c. programs which promote the hiring of high school dropouts d. public subsidies of education ANS: C DIF: 2 REF: 1-2

TOP: Externalities MSC: Applicative

Chapter 1/Ten Principles of Economics ? 41

150. When a single person (or small group) has the ability to influence

market prices, there is a. competition. b. market power. c. an externality.

d. a lack of property rights. ANS: B DIF: 1 REF: 1-2

TOP: Market power MSC: Definitional

151. Market power refers to the

a. power of a single person or small group to influence market prices. b. ability of a person or small group to successfully market new products. c. power of the government to regulate a market.

d. importance of a certain market in relation to the overall economy. ANS: A DIF: 1 REF: 1-2

TOP: Market power MSC: Definitional

152. Which is the most correct statement about the invisible hand?

a. The invisible hand always ensures both equity and efficiency. b. The invisible hand is more effective at ensuring equity than it is at ensuring efficiency.

c. The invisible hand is more effective at ensuring efficiency than it is at ensuring equity.

d. Market power is the instrument with which the invisible hand directs economic activity. ANS: C DIF: 2 REF: 1-2

TOP: Invisible hand MSC: Interpretive

153. According to Adam Smith, the success of decentralized market

economies is primarily due to

a. the basic benevolence of society. b. society's legal system.

c. individuals' pursuit of self-interest.

d. partnerships that are forged between business and government. ANS: C DIF: 2 REF: 1-2

TOP: Invisible hand MSC: Interpretive

42 ? Chapter 1/Ten Principles of Economics

154. The self-interest of the participants in an economy is guided into

promoting general economic self-interest by a. the invisible hand. b. market power.

c. government intervention. d. oikonomos. ANS: A DIF: 1 REF: 1-2

TOP: Invisible hand MSC: Interpretive

155. In the United States, higher income tax rates on rich people could be

justified on the basis of

a. superior decision-making by market participants. b. superior resource allocation. c. enhanced market efficiency. d. enhanced equity for society. ANS: D DIF: 2 REF: 1-2 TOP: Taxes MSC: Applicative 156. The basic principles of economics imply that policymakers should

a. rely on markets to guide economic activity, except when markets produce inefficient or inequitable outcomes.

b. enact policies that discourage people from specializing in particular economic activities.

c. enact policies that lead to high rates of growth of the quantity of money.

d. All of the above are correct. ANS: A DIF: 2 REF: 1-2, 1-3 TOP: Efficiency, Specialization, Inflation MSC: Analytical 157. The primary determinant of a country's standard of living is

a. the country’s ability to prevail over foreign competition. b. the country’s ability to produce goods and services. c. the total supply of money in the economy. d. the average age of the country's labor force. ANS: B DIF: 2 REF: 1-3 TOP: Standard of living MSC: Interpretive

Chapter 1/Ten Principles of Economics ? 43

158. In 2000 the average American had an income of about

a. $28,400. b. $34,100. c. $39,800. d. $44,500. ANS: B DIF: 1 REF: 1-3 TOP: Income MSC: Definitional

159. In the United States, incomes historically have grown about 2 percent

per year. At this rate, average income doubles every a. 10 years. b. 25 years. c. 35 years. d. 50 years. ANS: C DIF: 2 REF: 1-3 TOP: Income MSC: Interpretive 160. The income of a typical worker in a country is most closely linked to

which of the following? a. population b. productivity c. market power

d. government policies ANS: B DIF: 2 REF: 1-3 TOP: Producitvity, Income MSC: Interpretive 161. The term \

a. means the same thing as \

b. is seldom used by economists, as its meaning is not precise.

c. refers to the quantity of goods and services produced from each hour of a worker's time.

d. refers to the variety of goods and services from which households can choose when they shop. ANS: C DIF: 1 REF: 1-3

TOP: Productivity MSC: Definitional

44 ? Chapter 1/Ten Principles of Economics

162. If the average income of an Australian is higher than the average

income of a Russian, it is most likely because

a. productivity is higher in Australia than in Russia. b. Australia has a more industrial economy than Russia. c. there is more competition in Australia than in Russia.

d. labor unions are more powerful in Australia than in Russia. ANS: A DIF: 2 REF: 1-3 TOP: Productivity, Income MSC: Interpretive 163. Suppose that the average income of a Kenyan is higher than the average

income of a South African. You might conclude that

a. South African firms are faced with stricter government regulations than Kenyan firms.

b. total income is divided among fewer workers in Kenya since it has a smaller labor force than South Africa.

c. Kenya's climate allows for longer growing seasons and therefore Kenya can produce large quantities of grain and other crops. d. productivity in Kenya is higher than in South Africa. ANS: D DIF: 2 REF: 1-3 TOP: Productivity, Income MSC: Applicative 164. A typical worker in Italy can produce 24 units of product in an

eight-hour day, while a typical worker in Poland can produce 25 units of product in a 10-hour day. We can conclude that

a. worker productivity in Poland is higher than in Italy.

b. the standard of living will likely be higher in Italy than in Poland. c. productivity is 3 units per hour for the Polish worker and 21/2 units per hour for the Italian worker.

d. there will be no difference between the standard of living in Italy and Poland. ANS: B DIF: 3 REF: 1-3 TOP: Productivity, Standard of living MSC: Applicative

Chapter 1/Ten Principles of Economics ? 45

165. A worker in Bangladesh can earn $1 per day making cotton cloth on a

hand loom. A worker in the United States can earn $100 per day making cotton cloth with a mechanical loom. What accounts for the difference in wages?

a. U.S. textile workers belong to a union.

b. There is little demand for cotton cloth in Bangladesh and great demand in the U.S.

c. Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.

d. Bangladesh has a low-wage policy to make its textile industry more competitive in world markets. ANS: C DIF: 3 REF: 1-3

TOP: Productivity MSC: Applicative

166. Over the past century, the average income in the United States has risen

about

a. twofold. b. fivefold. c. eightfold. d. tenfold. ANS: C DIF: 1 REF: 1-3 TOP: Income MSC: Definitional 167. In the United States, incomes have historically grown

a. about 10 percent per year. b. about 5 percent per year. c. about 2 percent per year. d. about 0.5 percent per year. ANS: C DIF: 1 REF: 1-3 TOP: Income MSC: Definitional

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