Quiz 1 Flashcards
Which of the following is (are) basic economic questions or coordination problems all societies face?
a. What to produce
b. How to produce
c. For whom to produce
d. all the above
d. all the above
Scarcity is a result of
a. a limit on resources
b. government corruption.
c. the prices of goods are too high.
d. Bill O’Reilly
a. a limit on resources
To engage in economic reasoning, one must compare:
a. total cost and total benefit.
b. marginal cost, sunk cost, and total benefit.
c. sunk cost and marginal cost.
d. marginal cost and marginal benefit.
d. marginal cost and marginal benefit
Herber recently purchased a rare handgun for $5k that he likely will never shoot. An economist would conclude that:
a. Heber must perceive a marginal benefit of the gun of no more than $5,000.
b. Heber is irrational.
c. Heber will need to shoot the gun to realize its full value.
d. Heber must perceive a marginal benefit of the gun of at least $5,000.
d. Herbert must perceive a marginal benefit of the gun of at least $5k
The marginal benefit of consuming one more donut
a. must equal the marginal cost or the donut will not be consumed.
b. must exceed the marginal cost or the donut will not be consumed.
c. equals the total benefit from consuming donuts.
d. equals the total cost of consuming all previous donuts.
b. must exceed the marginal cost or the donut will not be consumed
Herber is sitting in a bar drinking beers that cost $1 each. According to the economic decision rule, Herber will quit drinking when the marginal:
a. benefit to him of an additional beer is less than $1.
b. cost to him of an additional beer is less than the marginal benefit.
c. cost remains at $1.
d. benefit to him of an additional beer is greater than $1.
a. benefit to him of an additional beer is less than $1
Opportunity cost:
a. includes only monetary outlays.
b. is the net benefit given up by not undertaking the next best alternative.
c. is nonexistent for some choices.
d. is the same as sunk cost.
b. is the net benefit given up by not undertaking the next best alternative
Assume that prostitution was legal and profitable in Cache County, Utah, but a referendum closed the 2 brothels in that county. What idea from Chapter 1 of the text does this story best illustrate?
a. Sunk costs do not matter in making decisions.
b. Marginal revenue should equal marginal cost.
c. Social and political forces sometimes rein in market forces.
d. Microeconomics and macroeconomics are very much interrelated.
c. Social and political forces sometimes rein in market forces
An economic force given relatively free rein by society to work through the market is:
a. a market force.
b. a social force.
c. a price mechanism.
d. a political force.
a. a market force.
A cultural norm is:
a. an economic force.
b. a social force.
c. a political force.
d. a market force.
b. a social force.
An economic model:
a. applies economic theory to understand real-world events.
b. is so abstract that it cannot be applied to real-world events.
c. can be used only to understand free markets.
d. is an action taken to influence the course of economic events.
a. applies economic theory to understand real-world events.
Which statement best summarizes the invisible hand theorem?
a. Government policies direct people’s selfish desires (tempered by social and economic forces) to the common good.
b. Cultural norms direct people’s selfish desires (tempered by political and economic forces) to the common good.
c. Markets direct people’s selfish desires (tempered by political and social forces) to the common good.
d. Social, political, and economic forces act against people’s selfish desires to promote the common good.
c. Markets direct people’s selfish desires (tempered by political and social forces) to the common good.
A necessary assumption behind the invisible hand theorem is that:
a. market forces are determined by cultural norms.
b. market forces produce inefficient outcomes.
c. the price mechanism is not constrained by political or social forces.
d. people behave rationally.
d. people behave rationally.
According to the Invisible Hand Theory, markets, through the price mechanism, generally will result in:
a. the correct answer to the question of what to produce.
b. shortages.
c. surpluses.
d. high prices.
a. the correct answer to the question of what to produce.
Market forces (i.e., the free market):
a. will result in an equitable distribution of income.
b. always results in efficiency.
c. always results in the correct price of goods.
d. none of the above is true.
c. always results in the correct price of goods.
