econ exam 1

Question 1

Scarcity exists when
there is less than an infinite amount
of a resource or good.

Answer 1

False

Question 2

Approximately 75
percentage of the world’s economies
experience scarcity.

Answer 2

false

Question 3

Economics is the study
of how society manages its scarce
resources.

Answer 3

True

Question 4

In most societies,
resources are allocated by a single
central planner.

Answer 4

False

Question 5

Economists use the
phrase “There is no such thing as a
free lunch,” to illustrate how inflation
increases prices.

Answer 5

False

Question 6

Henry decides to
spend two hours playing golf rather
than working at his job which pays
$8 per hour. Henry’s tradeoff is
nothing, because he enjoys playing
golf more than working.

Answer 6

False

Question 7

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

Answer 7

True

Question 8

After much
consideration, you have chosen
Cancun over Ft. Lauderdale for your
Spring Break trip this year. For this
decision to change, the marginal
benefit of Cancun must increase.

Answer 8

False

Question 9

A rational decision
maker takes an action only if the
marginal benefit is less than the
marginal cost.

Answer 9

False

Question 10

Suppose your
management professor has been
offered a corporate job with a 30%
pay increase. He has decided to take
the job. For him, the marginal cost of
leaving was greater than the
marginal benefit.

Answer 10

False

Question 11

Prices direct economic
activity in a market economy by
reducing scarcity of the goods and
services produced.

Answer 11

False

Question 12

An example of market
power is a fast food restaurant in a
college town.

Answer 12

False

Question 13

An example of a firm
with market power is a cable TV
provider in St. Louis.

Answer 13

True

Question 14

The “invisible hand”
directs economic activity through
advertising.

Answer 14

False

Question 15

When the government
redistributes income from the rich to
the poor, people work less and
produce fewer goods and services.

Answer 15

True

Question 16

n economics, the cost
of something is the dollar amount of
obtaining it.

Answer 16

False

Question 17

The opportunity cost of
going to college is the value of the
best opportunity a student gives up
to attend college.

Answer 17

True

Question 18

For most students, the
largest single cost of a college
education is the wages given up to
attend school.

Answer 18

true

Question 19

Mallory decides to
spend 3 hours working overtime
rather than watching a video with her
friends. She earns $8 an hour. Her
opportunity cost of working is the
$24 she earns working.

Answer 19

False

Question 20

Russell spends an hour
studying instead of playing tennis.
The opportunity cost to him of
studying is the enjoyment and
exercise he would have received had
he played tennis.

Answer 20

True

Question 21

People make decisions

at the margin by following tradition.

Answer 21

False

Question 22

Both The Wealth of
Nations and the Declaration of
Independence share the point of
view that individuals are best left to
their own devices without the
government guiding their actions.

Answer 22

True

Question 23

A primary function of
prices in a market economy is to
provide participants with spending
limits.

Answer 23

False

Question 24

Causes of market
failure include externalities and
market power.

Answer 24

True

Question 25

An externality is the
impact of a person’s actions on that
person’s well-being.

Answer 25

False

Question 26

An example of an
externality is the impact of pollution
from a factory on the health of
people in the vicinity of the factory.

Answer 26

True

Question 27

The income of a
typical worker in a country is most
closely linked to productivity.

Answer 27

True

Question 28

If the government
wanted to enact a policy to increase
living standards in the country, it
might allow corporate tax write-offs
for money spent on worker safety.

Answer 28

False