Deck 1: True False

Question 1

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.

Answer 1

True

Question 2

Tuition is the single-largest cost of attending college for most students.

Answer 2

False

Question 3

Economics is the study of how society allocates its unlimited resources.

Answer 3

False

Question 4

Economists study how people make decisions.

Question 5

An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of that activity.

Question 6

Because resources are scarce,a society cannot give all individuals the standard of living to which each aspires.

Question 7

A marginal change is a small incremental adjustment to an existing plan of action.

Question 8

If wages for accountants rose,then accountants' leisure time would have a lower opportunity cost.

Question 9

Choosing not to attend a concert so that you can study for your exam is an example of a tradeoff.

Question 10

Efficiency means everyone in the economy should receive an equal share of the goods and services produced.

Question 11

Economics is the study of how evenly goods and services are distributed within society.

Question 12

With careful planning,we can usually get something that we like without having to give up something else that we like.

Question 13

An individual deciding how to allocate her limited time is dealing with both scarcity and trade-offs.

Question 14

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Question 15

Scarcity means that there is less of a good or resource available than people wish to have.

Question 16

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.

Question 17

The cost of an action is measured in terms of foregone opportunities.

Question 18

Equality refers to how the pie is divided,and efficiency refers to the size of the economic pie.

Question 19

Equality means distributing society's resources in the most efficient manner.

Question 20

Government policies that improve equality usually increase efficiency at the same time.

Question 21

The invisible hand ensures that economic prosperity is distributed equally.

Question 22

The government can potentially improve market outcomes if market inequalities or market failure exists.

Question 23

Trade can make everyone better off except in the case where one person is better at doing everything.

Question 24

Market failure refers to a situation in which the market does not allocate resources efficiently.

Question 25

Market power and externalities are two possible causes of market failure.

Question 26

Productivity is defined as the quantity of goods and services produced from each unit of labor input.

Question 27

The fact that people are willing to pay much more for a diamond,which is not needed for survival,than they are willing to pay for a cup of water,which is needed for survival,is an example of irrational behavior.

Question 28

To say people respond to incentives means that people may alter their decisions when the costs and benefits of an action change.

Question 29

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

Question 30

Trade allows each person to specialize in the activities he or she does best,thus increasing each individual's productivity.

Question 31

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Question 32

Trade with any nation can be mutually beneficial.

Question 33

Suppose one county in Missouri decides it wants to reduce alcohol consumption,so the county passes a law that raises the price of a bottle of beer by $1.As a result,people drive to other counties to drink alcohol,which results in an increase in drunk driving.This illustrates the principle that people respond to incentives.

Question 34

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Question 35

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

Question 36

A rational decisionmaker takes an action if and only if the marginal cost exceeds the marginal benefit.

Question 37

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new,fuel-efficient aircraft.

Question 38

Inflation increases the value of money.

Question 39

Inflation is the primary determinant of a country's living standards.

Question 40

Market failure occurs when no individual has the ability to substantially influence market prices.

Question 41

Inflation and unemployment both increase as the money supply increases.

Question 42

The opportunity cost of working one hour is the sum of the values you would have received from all other activities you could have done in that hour.

Question 43

The business cycle refers to fluctuations in economic activity such as employment and production.

Question 44

Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time.

Question 45

The goal of President Obama's stimulus package and increased government spending following the deep economic downturn in 2008 and 2009 was to reduce inflation.

Question 46

In the short-run,society faces a tradeoff between inflation and unemployment.

Question 47

The opportunity cost of working out for one hour is the value of the next-best activity that you could have done in that hour.

Question 48

In the long run the primary effect of increasing the quantity of money is higher prices.

Question 49

A rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost.

Question 50

The "invisible hand" influences market behavior through trade.

Question 51

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.