Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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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. | | |
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2.
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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. | | |
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3.
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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. | | |
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4.
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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. | | |
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5.
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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. | | |
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6.
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Making rational decisions "at the margin" means that people 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. | | |
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7.
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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. | | |
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8.
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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. | | |
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9.
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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. | | |
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10.
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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. | | |
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11.
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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. | | |
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12.
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The
term "productivity" a. | means the same thing as
"efficiency." | 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. | | |
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13.
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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. | | |
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14.
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President Gerald Ford referred to inflation as a. | a blight on our
nation's economy. | b. | a necessary evil to combat high
unemployment. | c. | public enemy number one. | d. | a fly in the
ointment. | | |
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15.
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During the 1990s, the United Kingdom experienced low levels of inflation while Turkey
experienced high levels of inflation. A likely explanation of these facts is that a. | the United
Kingdom is more industrialized than Turkey. | b. | the rate of
growth of the quantity of money was slower in the United Kingdom than in
Turkey. | c. | workers in the United Kingdom are less productive than workers
in Turkey. | d. | there were more cases of market failure in Turkey than in the
United Kingdom. | | |
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