chapter 1

Question 1

“When the government redistributes income by raising income taxes and increasing welfare payments, the economy becomes less equitable.”

Answer 1

False

the economy becomes less equitable

Question 2

“When economists say, “There is no such thing as a free lunch,” they mean that all economic decisions involve tradeoffs.”

Answer 2

True

Question 3

“Adam Smith’s “invisible hand” concept describes how corporate business reaches into the pockets of consumers like an “invisible hand.”

Answer 3

False; the invisible hand refers to how markets guide self-interested people to create desirable social outcomes

Question 4

“Rational people systematically and purposefully do the best they can to achieve their objectives.”

Answer 4

True

Question 5

“Canada will benefit if we eliminate trade with Bangladesh, because we will be forced to produce more of our own clothes.”

.

Answer 5

False;Canada gains from trade

Question 6

“When a jet flies overhead, the noise it generates is an externality.”

Answer 6

True

Question 7

“A tax on beer raises the price of beer and provides an incentive for consumers to drink more”

Answer 7

False; higher prices reduce the quantity of demand

Question 8

“An incentive is something that induces a person to act.”

Answer 8

True

Question 9

“Sue is better at cleaning and Bob is better at cooking. It will take fewer hours to eat and clean if Bob specializes in cooking and Sue specializes in cleaning than if they share the household duties evenly.”

Answer 9

True

Question 10

“High and persistent inflation is caused by moderate growth in the quantity of money in the economy”

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Answer 10

False; high inflation is caused by excessive monetary growth

Question 11

“In the short run, a reduction in inflation tends to cause a reduction in unemployment.

Answer 11

FALSE; a reduction in inflation tends to raise unemployment

Question 12

an auto manufacturer should continue to produce additional automobiles as long as the firm is profitable, even if the cost of the additional units exceeds the price received

Answer 12

False; a manufacturer should produce as long as the marginal benefit exceeds the marginal cost

Question 13

an individual wheat farmer is likely to have market power

Answer 13

FALSE; a single farmer has no impact on wheat prices

Question 14

to a student, the opportunity cost of going to a basketball game would include the price of the ticket and the value of the time that could have been spent studying

Answer 14

True

Question 15

workers in canada have a relatively high standard of living because canada as a relatively high minimum wage

Answer 15

False; workers in Canada have a high standard of living because they are productive.

Question 16

room and board are opportunity costs of going to university

Answer 16

False; only to the extent that they are more expensive than elsewhere