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chapter 1 - 10 PART I INTRODUCTION as the firm is...

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Unformatted text preview: 10 PART I INTRODUCTION as the firm is profitable, even if the cost of the additional units exceeds the “ e fies“ 3“ Wig; ; X 12. An auto manufacturer should continue to produce additional autos as long @ price received. 13. An individual farmer is likely to have market power in the market for wheat. 14. To a student. the opportunity cost of going to a basketball game would include the price of the ticket and the value ofthe time that could have been 9 . spent studying. 15. Workers in the United States have a relatively high standard ofliving because the United States has a relatively high minimum wage. Multiple—Choice Questions 1. Which of the following involve a trade—OH? a. buying a new car b. going to college , watching a football game on Saturday afternoon taking a nap I (Dr-Lo All of the above involve trade—offs. 2. Trade~oifs are required because wants are unlimited and resources are efficient. Fr?” economical. scarce. unlimited marginal. ® 3. Economics is the study of how time to fully satisfy our unlimited wants. F75” society manages its scarce resources. to reduce our wants until we are satisfied. to avoid having to make trade~ofis rue-r» society manages its unlimited resources. 4. 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 benefitsithat exceed marginal costs. e. None of the above is true. 5. Raising taxes and increasing welfare payments a. proves that there is such a thing as a iee iunch. b. reduces market power. improves efficiency at the expense of equality. improves equality at the expense ofetiiciency. one does none of the above. CHAPTER ‘I TEN PRINCIPLES OF ECONOMICS 6. Suppose you find 320. 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 $320 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. 5320 (because you cguld 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. 7. 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~ofis c. makes the members ofa country more equal. d. increases the scarcity of resources. e. is none of the above. \ 8. 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. 9. Which. of the following activities is most likely to produce an externality? a. A student sits at home and watches television. b. A student has a party in her dorm room. c. A student reads a novel for pleasure. d. A student eats a hamburger in the student union. 10. Which of the following products would be least capable of producing an externality? a. cigarettes b. stereo equipment c. inoculations against disease d. education e. food ll. Which of the following situations describes the greatest market power? a. a farmer’s impact on the price of corn b. ‘Volyo’s impact on the price of autos c. Microsoft’s impact on the price ofde‘slitop operating systems d. a student’s impact on college tuition 12. Which of the {ollowing statements is true about a market economy? a. Market participants act as if guided by an “invisible hand” to produce outcomes that promote general economic well-being. ' b. Taxes help prices communicate costs and fine‘fits to producers and consumers. c. With a large enough computer, central planners could guide production more efficiently than markets. . d. The strength of a market system is dust it tends to distribute resources evenly across consumers. 12 PART I INTRODUCTION 13. 14. 16. 17. 1‘8. 19. 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. None of the above is true. (D . . 0 . . . High and persistent inflation is caused by P unions increasing wages too much. OPEC raising the price ofoil too much. governments increasing the quantity of money too much. new regulations raising the cost of production too much. 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. An increase in the price of beef provides a. . information that tells consumers to buy more beef. b. information that tells consumers to buy less pork. c information that tells producers to produce more beef. d. no information because prices in a market system are managed by planning boards. You have spent $1,000 building a hotndog stand based on estimates of sales ofi$2,000. The hot‘dog stand is nearly completed, but now you estimate total sales to be only $800You can complete the hotndog stand for another $300. Should you complete the hotndog stand? (Assume that the hot dogs cost you nothing.) a. Yes. b. No. c. There is not enough information to answer this question. Referring to question 17, your decision rule should be to complete the hot‘dog stand as long as the cost to complete the stand is less than a. $100. \ ’ b. $300. c. $500. d. 313800. e. none of the above. Which of the foliowing is not part of the opportunity cost of going on vacation? 3. the money you could have made if you had stayed home and worked b. the money you spent on fwd c. the money you spent on airline tickets d. the money you spent on a Broadway show Productivity can be increased by a. raising minimum wages. b. raising union wages. c. improving the education of workers. d. restricting trade with foreign countries. 10‘ ll. T F; a reduction in inflation tends to raise unemployment V F; a manufacturer Should produce as long as the marginal benefit exceeds the marginal cost. F; a single farmer is too small to influence the market. a T F; workers in the United States have a high standard of living because they are productive. Multiple—Choice Questions l8. 19. 20. 6 c b d d C I’) mcrgm Advanced Critical Thinking More students would want to park on campus. It would take much longer to find a parking place _ No because we would lime to factor 111 the value i of our time spent looking for a parking place No Students who could be earning money working are giving up more while looking for a parking place. Theretore, the1r opportunity cost 15 higher. CHAPTER 1 TEN PRINCIPLES OF ECONOMICS IS ...
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