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ECON2302 - KC - Ch01

Ecomomics Chapter 1 review

QuestionAnswer
It once took 90% of our population to grow food. It now takes only 3% of the population to grow our food. This is progress because freed-up labor is used to produce other goods. True or false? TRUE
It once took 90% of our population to grow food. It now takes only 3% of the population to grow our food. This loss of jobs has been detrimental to our economy. True or false? FALSE
It once took 90% of our population to grow food. It now takes only 3% of the population to grow our food. The government should provide subsidies to encourage more people to become farmers. True or false? FALSE
It once took 90% of our population to grow food. It now takes only 3% of the population to grow our food. This reduction in the number of farmers explains the increase in the price of food. True or false? FALSE
Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time. True or false? FALSE
While pollution regulations yield the benefit of a cleaner environment and improved health, the regulations come at the cost of reducing incomes of the regulated firm's owners, workers, and customers. This illustrates that people face tradeoffs.
In the early 1920's, Germany experienced a very high rate of inflation.
Productivity is defined as the quantity of goods and services produced from each unit of labor input. True or false? TRUE
You have chosen Cancun over Ft. Lauderdale as vacation spot. You can still change your mind. What might cause you to change your decision? The marginal cost of Ft. Lauderdale decreases.
The English word that comes from the Greek word for "one who manages a household" is economy.
Which is most likely to have market power? The only hotel in a rural area as opposed to a grocery store in a metropolitan area.
A direct or positive relationship exists between a country's productivity and its standard of living.
When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing scarcity.
Trade makes costs lower and raises the variety of goods and services available.
Which of the following phrases best captures the notion of efficiency? minimum waste
In the short-run, which of the following rates of growth in the money supply is likely to lead to the highest level of unemployment in the economy? 1% per year
If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost. True or false? FALSE
Trade with any nation can be mutually beneficial. True or false? TRUE
If Germany chooses to engage in trade, it can benefit by trading with any other country.
Economists study how people make decisions. True or false? TRUE
Evidence indicates that seat belt laws have led to fewer deaths per automobile accident.
Approximately what percentage of the world's economies experience scarcity? 100%
To increase living standards, public policy should ensure that workers are well educated and have the necessary tools and technology.
The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 & 2009 was to reduce inflation. True or false? FALSE
When government policies are enacted, it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished. True or false? FALSE
When government policies are enacted, efficiency can usually be enhanced without a reaction in equality, but equality can never be enhanced without an efficiency loss. True or false? FALSE
When government policies are enacted, equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality. True or false? FALSE
Efficiency means that society is getting the maximum benefits from its scarce resources.
Prices usually reflect both the value of a good to society and the cost to society of making the good.
The "invisible hand' directs economic activity through prices
Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie. True or false? TRUE
Market power refers to the power of a single person or small group to influence market prices.
The self-interest of the participants in an economy is guided into promoting general economic self-interest by the invisible hand.
People are willing to pay more for a diamond than for a bottle of water because the marginal benefit of an extra diamond far exceed the marginal benefit of an extra bottle of water.
People are likely to respond to a policy change if the policy changes either the costs or benefits of their behavior.
The principal that "people face tradeoffs" applies to individuals, families, societies.
Oil is considered to be a non-renewable energy resource. Oil is a scarce resource.
Tuition is the single-largest cost of attending college for most student. True or false? FALSE
For a very long time Treeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate could be due to slower money supply growth. We would expect unemployment to be higher.
When you calculate your true costs of going to college, what portion of your room-and-board expenses should be included? you should include only the amount by which your room-and-board expenses exceed the expenses for rent and food if you were not in college.
The willingness of citizens to pay for vaccinations does not include the benefit society receives from having vaccinated citizens who cannot transmit an illness to others. This extra benefit society gets from vaccinating its citizens is knows as an externality.
Incomes of U.S. households in the 1970's and 1980's grew slowly, due to slow growth of the output of goods and services per hour of US workers time during those decades.
The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living. True or false? TRUE
Opportunity cost: Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway. True or false? TRUE
if the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be irrational for the railroad to allow any passenger to ride for less than $75. True or false? FALSE
The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
In the short run, an increase in the money supply is likely to lead to lower unemployment and higher inflation.
Economists are particularly adept at understanding that people respond to incentives.
Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality. True or false? TRUE
Public policies may be able to improve either economic efficiency or equality.
The invisible hand ensures that economic prosperity is distributed equally. True or false? FALSE
A rationale for government involvement in a market economy is markets sometimes fail to produce a fair distribution of economic well-being, markets sometimes fail to produce an efficient allocation of resources, property rights have to be enforced.
Germany could have avoided the high inflation that it experienced in the 1920's by not allowing the quantity of money to increase so rapidly.
Market failure is the ability of a single person to have a substantial influence on market prices. True or false? FALSE
A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests. True or false? FALSE
Created by: debra473
 

 



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