Deck 1: 2: Sec 12 Mc How People Interac

Question 1

Trade

A)allows specialization,which increases costs.
B)allows specialization,which reduces costs.
C)reduces specialization,which increases costs.
D)reduces specialization,which reduces costs.

Answer 1

C

Question 2

England can benefit from trade

A)only with nations that can produce goods England cannot produce.
B)only with less developed nations.
C)only with nations outside of Europe.
D)with any nation.

Answer 2

C

Question 3

Dale is a guitar teacher and Terrence is a tile layer.If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

A)only Dale is made better off by trade.
B)only Terrence is made better off by trade.
C)both Dale and Terrence are made better off by trade.
D)neither Dale nor Terrence are made better off by trade.

Answer 3

D

Question 4

The principle that trade can make everyone better off applies to

A)individuals.
B)families.
C)countries.
D)All of the above

Question 5

Annie is an excellent baker and Sam has a plentiful farm.If Sam trades eggs and butter to Annie for some of Annie's bread and pastries,

A)only Sam is made better off by trade.
B)only Annie is made better off by trade.
C)both Sam and Annie are made better off by trade.
D)neither Sam nor Annie are made better off by trade.

Question 6

Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level.Which country can benefit?

A)only the one with a low level of output per person.
B)only the one with a high level of output per person.
C)both
D)neither

Question 7

Senator Bright,who understands economic principles,is trying to convince workers in her district that trade with other countries is beneficial.Senator Bright should argue that trade can be beneficial

A)only if it allows us to obtain things that we couldn't make for ourselves.
B)because it allows specialization,which increases total output.
C)to us if we can gain and the others involved in the trade lose.
D)in only a limited number of circumstances because others are typically self-interested.

Question 8

Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself.Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper.This scenario is an example of which principle of economics?

A)Trade can make everyone better off.
B)Markets are usually a good way to organize economic activity.
C)Governments can sometimes improve market outcomes.
D)Prices rise when the government prints too much money.

Question 9

Suppose Country A has a high average wage level and a high level of output per person,while Country B has a low average wage level and a low level of output per person.Which country can benefit from trade?

A)Only Country A can benefit.
B)Only Country B can benefit.
C)Both Country A and Country B can benefit.
D)Neither Country A nor Country B can benefit.

Question 10

Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person.Which country can benefit?

A)only the one with a low level of output per person.
B)only the one with a high level of output per person.
C)both
D)neither

Question 11

If Switzerland chooses to engage in trade,it

A)will only benefit if it trades with countries that produce goods Switzerland cannot produce.
B)cannot benefit if it trades with less developed countries.
C)should first attempt to produce the good itself.
D)can benefit by trading with any other country.

Question 12

Trade between countries tends to

A)reduce both competition and specialization.
B)reduce competition and increase specialization.
C)increase competition and reduce specialization.
D)increase both competition and specialization.

Question 13

Trade between the United States and Guatemala

A)benefits both the United States and Guatemala.
B)is a losing proposition for the United States because Guatemalan labor is less expensive than U.S.labor.
C)is a losing proposition for Guatemala because capital is much more abundant in the U.S.than in Guatemala.
D)is a losing proposition for Guatemala because U.S.workers are more productive than Guatemalan workers.

Question 14

The principle that "trade can make everyone better off" applies to interactions and trade between

A)families.
B)states within the United States.
C)nations.
D)All of the above are correct.

Question 15

Which of the following statements about trade is false?

A)Trade increases competition.
B)With trade,one country wins and one country loses.
C)Bulgaria can benefit,potentially,from trade with any other country.
D)Trade allows people to buy a greater variety of goods and services at lower cost.

Question 16

If the United States decides to trade with Yemen,we know that

A)Yemen will benefit,but trade with a less developed country could not benefit the United States.
B)it will not benefit Yemen because workers in the United States are more productive.
C)Yemen and the United States can both benefit.
D)it will not benefit either country because their cultural differences are too vast.

Question 17

When the United States trades with China,

A)both countries will likely benefit.
B)only United States will benefit.
C)only China will benefit.
D)neither country will benefit.

Question 18

Which is the most accurate statement about trade?

A)Trade can make every nation better off.
B)Trade makes some nations better off and others worse off.
C)Trading for a good can make a nation better off only if the nation cannot produce that good itself.
D)Trade helps rich nations and hurts poor nations.

Question 19

Which of the following is a principle concerning how people interact?

A)Markets are usually a good way to organize economic activity.
B)Rational people think at the margin.
C)People respond to incentives.
D)All of the above are correct.

Question 20

Trade makes costs

A)higher and reduces the variety of goods and services available.
B)higher but raises the variety of goods and services available.
C)lower but reduces the variety of goods and services available.
D)lower and raises the variety of goods and services available.

Question 21

Adam Smith's book The Wealth of Nations was published in

A)1692.
B)1776.
C)1816.
D)1936.

Question 22

Which of the following statements best characterizes a basic difference between market economies and centrally planned economies?

A)Society relies more upon prices to allocate resources when the economy is centrally-planned than when it is market-based.
B)The self-interest of households is reflected more fully in the outcome of a centrally-planned economy than in the outcome of a market economy.
C)Government plays a larger role in the economic affairs of a market economy than in the economic affairs of a centrally planned economy.
D)None of the above are correct.

Question 23

Prior to the collapse of communism,communist countries worked on the premise that economic well-being could be best attained by

A)a market economy.
B)a strong reliance on prices and individuals' self-interests.
C)a system of large privately-owned firms.
D)the actions of government central planners.

Question 24

Which of the following statements about markets is most accurate?

A)Markets are usually a good way to organize economic activity.
B)Markets are usually inferior to central planning as a way to organize economic activity.
C)Markets fail and are therefore not an acceptable way to organize economic activity.
D)Markets are a good way to organize economic activity in developed nations,but not in less developed nations.

Question 25

The failure of communism in a large number of countries is at least partly explained by

A)the fact that those countries relied absolutely on the invisible hand.
B)the fact that those countries did little or nothing to restrict trade with other countries.
C)the lack of information,on the part of central planners in those countries,about tastes and preferences in their economies.
D)the lack of information,on the part of central planners in those countries,about how much authority the government had in affecting economic outcomes.

Question 26

Market economies are distinguished from other types of economies largely on the basis of

A)the political affiliations of government officials.
B)the process by which government officials are elected or appointed.
C)the ways in which scarce resources are allocated.
D)the number of retail outlets available to consumers.

Question 27

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

A)David Ricardo
B)Thorstein Veblen
C)John Maynard Keynes
D)Adam Smith

Question 28

In communism,central planners decide which of the following?

A)what goods and services will be produced
B)how much will be produced
C)who will produce and consume the goods and services
D)All of the above are correct.

Question 29

The idea that only the government can organize economic activity in a way that promotes economic well-being for a country as a whole

A)is a basic principle regarding individual decisionmaking.
B)amounts to a denial of one of the basic principles regarding interactions among people.
C)supports the idea that the "invisible hand" should guide economic activity.
D)was promoted by the economist Adam Smith in a well-known 1776 book.

Question 30

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

A)There is no such thing as a free lunch.
B)People buy more when prices are low than when prices are high.
C)No matter how much people earn,they tend to spend more than they earn.
D)Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

Question 31

Benefits from trade would not include

A)the ability of people and nations to specialize.
B)a greater variety of goods and services becoming available.
C)less competition.
D)lower prices.

Question 32

The term "invisible hand" was coined by

A)Adam Smith.
B)David Ricardo.
C)Karl Marx.
D)Benjamin Franklin.

Question 33

When Ukraine trades with Italy,

A)both countries are likely made better off.
B)only Italy benefits since Ukraine can produce all goods at a higher level of quality than Italy.
C)only Ukraine benefits since Italy's low wages guarantee that Italian firms will be profitable regardless of trade.
D)neither country will benefit since Ukraine is more efficient than Italy in the production of all goods.

Question 34

Communist countries worked under the premise that

A)people,when left on their own without government intervention,will find the best use of available resources
B)central planners were in the best position to determine the allocation of scarce resources in the economy.
C)households and firms,guided by an "invisible hand," could achieve the most efficient allocation of scarce resources.
D)allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources.

Question 35

The economy of the former Soviet Union is best described as a

A)primitive economy.
B)market economy.
C)hybrid economy.
D)centrally-planned economy.

Question 36

One advantage market economies have over centrally-planned economies is that market economies

A)provide an equal distribution of goods and services to households.
B)establish a significant role for government in the allocation of resources.
C)solve the problem of scarcity.
D)are more efficient.

Question 37

The "invisible hand" refers to

A)the government.
B)the free market.
C)central planners.
D)large businesses.

Question 38

The basic principles of economics suggest that

A)markets are seldom,if ever,a good way to organize economic activity.
B)government should become involved in markets when trade between countries is involved.
C)government should become involved in markets when those markets fail to produce efficient or fair outcomes.
D)All of the above are correct.

Question 39

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

A)1960s.
B)1970s.
C)1980s.
D)1990s.

Question 40

Central planning refers to

A)markets guiding economic activity.Today many countries that had this system have abandoned it.
B)markets guiding economic activity.Today many countries that did not have this system have implemented it.
C)government guiding economic activity.Today many countries that had this system have abandoned it.
D)government guiding economic activity.Today many countries that did not have this system have implemented it.

Question 41

In an economy in which decisions are guided by prices and individual self-interest,there is

A)the potential to achieve efficiency in production.
B)a strong need for government intervention in the market.
C)less efficiency than would be observed in a centrally-planned economy.
D)more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.

Question 42

For markets to work well,there must be

A)market power.
B)a central planner.
C)property rights.
D)abundant,not scarce,resources.

Question 43

Prices direct economic activity in a market economy by

A)influencing the actions of buyers and sellers.
B)reducing scarcity of the goods and services produced.
C)reducing opportunity cost of goods and services produced.
D)allocating goods and services in the most equitable way.

Question 44

The self-interest of the participants in an economy is guided into promoting general economic self-interest by

A)the invisible hand.
B)market power.
C)government intervention.
D)oikonomos.

Question 45

The "invisible hand" works to promote general well-being in the economy primarily through

A)government intervention.
B)the political process.
C)people's pursuit of self-interest.
D)altruism.

Question 46

Which of the following statements about market economies is correct?

A)In a market economy,no one is looking out for the economic well-being of society as a whole.
B)Market economies are characterized by decentralized decision making and self-interested decision makers.
C)Market economies have proven remarkably successful in promoting overall economic well-being.
D)All of the above are correct.

Question 47

In a market economy,economic activity is guided by

A)the government.
B)central planners.
C)large businesses.
D)prices and self-interest.

Question 48

Both The Wealth of Nations and the Declaration of Independence share the point of view that

A)every person is entitled to life,liberty,and the pursuit of happiness.
B)individuals are best left to their own devices without the government guiding their actions.
C)the government plays a central role in organizing a market economy.
D)because of human nature a strong legal system is necessary for a market system to survive.

Question 49

The "invisible hand" refers to

A)how central planners made economic decisions.
B)how the decisions of households and firms lead to desirable market outcomes.
C)the control that large firms have over the economy.
D)government regulations without which the economy would be less efficient.

Question 50

Which of the following statements does not apply to a market economy?

A)Firms decide whom to hire and what to produce.
B)The "invisible hand" usually maximizes the income of society as a whole.
C)Households decide which firms to work for and what to buy with their incomes.
D)Government policies are the primary forces that guide the decisions of firms and households.

Question 51

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

A)government actions that distort prices.
B)increased competition in markets.
C)enforcement of property rights.
D)too much attention paid to efficiency.

Question 52

The decisions of firms and households are guided by prices and self-interest in a

A)command economy.
B)centrally-planned economy.
C)market economy.
D)All of the above are correct.

Question 53

In a market economy,economic activity is guided by

A)the government.
B)public-interest groups.
C)central planners.
D)self-interest and prices.

Question 54

When the "invisible hand" guides economic activity,prices of products reflect

A)only the values that society places on those products.
B)only the costs to society of producing those products.
C)both the values that society places on those products and the costs to society of producing those products.
D)none of the above;when the "invisible hand" guides economic activity,prices of products are set by the government in a manner that is thought to be "fair."

Question 55

According to Adam Smith,the success of decentralized market economies is primarily due to

A)the basic benevolence of society.
B)society's legal system.
C)individuals' pursuit of self-interest.
D)partnerships that are forged between business and government.

Question 56

A friend of yours asks you why market prices are better than government-determined prices.Because you understand economic principles,you say that market-determined prices are better because they generally reflect

A)the value of a good to society,but not the cost of making it.
B)the cost of making a good to society,but not its value.
C)both the value of a good to society and the cost of making it.
D)neither the value of a good to society nor the cost of making it.

Question 57

Prices usually reflect

A)only the value of a good to society.
B)only the cost to society of making a good.
C)both the value of a good to society and the cost to society of making the good.
D)neither the value of a good to society nor the cost to society of making the good.

Question 58

The "invisible hand" directs economic activity through

A)advertising.
B)prices.
C)central planning.
D)government regulations.

Question 59

In a market economy,who makes the decisions that guide most economic activity?

A)firms only
B)households only
C)firms and households
D)government

Question 60

In a market economy,

A)households decide which firms to work for and what to buy with their incomes.
B)firms decide whom to hire and what to make.
C)a central planner makes decisions about production and consumption.
D)Both a and b are correct.

Question 61

The government enforces property rights by

A)requiring property owners to pay property taxes.
B)providing police and courts.
C)forcing people to own property.
D)providing public parks and recreation facilities.

Question 62

Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market?

A)to promote efficiency
B)to promote equality
C)to enforce property rights
D)to protect an industry from foreign competition

Question 63

Which of the following could reduce economic efficiency?

A)laws that encourage lawsuits
B)policies that redistribute income
C)policies that impose significant restrictions on international trade
D)All of the above are correct

Question 64

The term market failure refers to

A)a situation in which the market on its own fails to allocate resources efficiently.
B)an unsuccessful advertising campaign which reduces demand for a product.
C)a situation in which competition among firms becomes ruthless.
D)a firm that is forced out of business because of losses.

Question 65

To say that government intervenes in the economy to promote efficiency is to say that government is attempting to

A)create a more fair distribution of income.
B)change the way in which the economic pie is divided.
C)enlarge the economic pie.
D)All of the above are correct.

Question 66

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price,then we would expect,relative to the market outcome,

A)an increase in the number of visits people want to make and an increase in the number of visits health care providers want to provide.
B)an increase in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.
C)a decrease in the number of visits people want to make and an increase in the number of visits health care providers want to provide.
D)a decrease in the number of visits people want to make and a decrease in the number of visits health care providers want to provide.

Question 67

A company that formerly produced music CDs went out of business because too many potential customers bought illegally-produced copies of the CDs instead of buying the product directly from the company.This instance serves as an example of

A)market power.
B)inefficient trade.
C)inadequate enforcement of property rights.
D)the invisible hand at work.

Question 68

For which of the following problems can well-designed public policy enhance economic efficiency?

A)both externalities and market power
B)externalities,but not market power
C)market power,but not externalities
D)neither externalities nor market power

Question 69

If the government were to intervene and set the price of a dozen eggs above the market price,then we would expect,relative to the market outcome,

A)an increase in the number of eggs people want to buy and an increase in the number of eggs farmers want to sell.
B)an increase in the number of eggs people want to buy and a decrease in the number of eggs farmers want to sell.
C)a decrease in the number of eggs people want to buy and an increase in the number of eggs farmers want to sell.
D)a decrease in the number of eggs people want to buy and a decrease in the number of eggs farmers want to sell.

Question 70

Public policies

A)may be able to improve either economic efficiency or equality.
B)may be able to improve economic efficiency but cannot improve equality.
C)may be able to improve equality but cannot improve economic efficiency.
D)cannot improve either equality or economic efficiency.

Question 71

To say that government intervenes in the economy to promote equality is to say that government is aiming to

A)create a more fair distribution of income.
B)change the ingredients that are used to "bake" the economic pie.
C)enlarge the economic pie.
D)All of the above are correct.

Question 72

The term used to describe a situation in which markets do not allocate resources efficiently is

A)economic meltdown.
B)market failure.
C)equilibrium.
D)the effect of the invisible hand.

Question 73

If the government were to intervene and set a wage for unskilled labor above the market wage,then we would expect,relative to the market outcome,

A)an increase in the number of unskilled jobs available.
B)a decrease in the number of unskilled jobs available.
C)a decrease in the number of workers wanting unskilled jobs.
D)None of the above is correct.

Question 74

Causes of market failure include

A)externalities and market power.
B)market power and incorrect forecasts of consumer demand.
C)externalities and foreign competition.
D)incorrect forecasts of consumer demand and foreign competition.

Question 75

When the government prevents prices from adjusting naturally to supply and demand,

A)it equates the amount buyers want to buy with the amount sellers want to sell.
B)it adversely affects the allocation of resources.
C)it improves equality and efficiency.
D)it improves efficiency but reduces equality.

Question 76

One reason we need government,even in a market economy,is that

A)there is insufficient market power in the absence of government.
B)property rights are too strong in the absence of government.
C)the invisible hand is not perfect.
D)Both a and b are correct.

Question 77

Which of the following can lead to market failure?

A)externalities and market power
B)externalities but not market power
C)market power but not externalities
D)neither externalities nor market power

Question 78

A rationale for government involvement in a market economy is

A)markets sometimes fail to produce a fair distribution of economic well-being.
B)markets sometimes fail to produce an efficient allocation of resources.
C)property rights have to be enforced.
D)All of the above are correct.

Question 79

If the government were to intervene and set the rent for apartments in New York City below the market rent,then we would expect,relative to the market outcome,

A)an increase in the number of people wanting to live in apartments in New York City.
B)a decrease in the number of people wanting to live in apartments in New York City.
C)an increase in the number of apartments available for rent in New York City.
D)None of the above is correct.

Question 80

The ability of an individual to own and exercise control over scarce resources is called

A)market failure.
B)property rights.
C)externality.
D)market power.