Question 1

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that
A)trade can make everyone better off.
B)rational people think at the margin.
C)people face tradeoffs.
D)people respond to incentives.

Accepted Answer

The statement directly addresses the concept of tradeoffs, where a decision to regulate pollution results in a cleaner environment but also decreases income for those affected by the regulations. The other principles do not apply as directly to the scenario presented in the statement.

Question 2

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that
A)trade can make everyone better off.
B)people face trade-offs.
C)rational people think at the margin.
D)decisions made at the margin are not particularly important.

Accepted Answer

The scenario illustrates the concept of trade-offs, where Billie Jean must choose between purchasing either an amplifier or an mp3 player due to limited resources. This highlights the economic principle of scarcity, where individuals must make choices with finite resources.

Question 3

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that
A)people respond to incentives.
B)rational people think at the margin.
C)people face tradeoffs.
D)improvements in efficiency sometimes come at the expense of equality.

Accepted Answer

Candice is facing a tradeoff between going to the pool or seeing the movie because she cannot do both simultaneously. She must choose one option over the other. This scenario exemplifies the idea of opportunity cost - the cost of forgoing the next best alternative. Candice's opportunity cost of going to the movie is the enjoyment she could have had at the pool, and vice versa.

Question 4

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

Accepted Answer

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Question 5

Guns and butter are used to represent the classic societal tradeoff between spending on
A)durable and nondurable goods.
B)imports and exports.
C)national defense and consumer goods.
D)law enforcement and agriculture.

Accepted Answer

Guns represent national defense, while butter represents consumer goods. The tradeoff between these two represents the choice a society has to make between spending on military/security needs versus spending on goods and services for its citizens.

Question 6

A tradeoff exists between a clean environment and a higher level of income in that
A)studies show that individuals with higher levels of income pollute less than low-income individuals.
B)efforts to reduce pollution typically are not completely successful.
C)laws that reduce pollution raise costs of production and reduce incomes.
D)employing individuals to clean up pollution causes increases in employment and income.

Accepted Answer

Laws that require reductions in pollution often require firms to invest in expensive technologies or to take costly measures to reduce emissions, leading to higher production costs and reduced profits. This can ultimately lead to lower incomes for both firms and individuals. Therefore, there is a tradeoff between a clean environment and a higher level of income.

Question 7

Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?
A)Michelle can attend the concert only if she takes her sister with her.
B)Michael is hungry and homeless.
C)Andrea must repair the tire on her bike before she can ride it to class.
D)Dani must decide between going to Florida or Brazil for spring break.

Accepted Answer

The answer of Which of the following statements best represents...

Question 8

With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year.

Accepted Answer

The answer of With the understanding that people respond to...

Question 9

How does the study of economics depend upon the phenomenon of scarcity?

Accepted Answer

The answer of How does the study of economics depend...

Question 10

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that
A)goods are scarce.
B)people face tradeoffs.
C)income must be earned.
D)households face many decisions.

Accepted Answer

The adage "There is no such thing as a free lunch" emphasizes the idea that people always face tradeoffs in their choices. Even if something appears to be free, such as a lunch provided by someone else, it still involves a tradeoff (such as the time spent at the lunch or future obligations owed to the provider). This principle of tradeoffs is a fundamental concept in economics.

Question 11

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?
A)Melissa needs to pay her rent and her electric bill.
B)Kevin must choose between buying a new flat screen television and buying his textbooks for this semester.
C)Robert must decide between studying for his psychology exam and working at his part-time job.
D)Lisa can spend her money on a new smart phone or on a weekend trip.

Accepted Answer

The principle "There is no such thing as a free lunch" means that everything has a cost and nothing is truly free. Option A does not relate to this principle as it is about someone needing to pay for necessary expenses, rather than receiving something for "free".

Question 12

The phrase "no such thing as a free lunch" means
A)people must face tradeoffs.
B)rational people think at the margin.
C)people respond to incentives.
D)trade can make everyone better off.

Accepted Answer

The phrase "no such thing as a free lunch" implies that everything in life comes at a cost and people must make tradeoffs in order to get what they want. It is a reminder that there is no such thing as a completely free or unlimited resource, and that everything has a cost or consequence associated with it.

Question 13

What are the two short-run effects of increasing the quantity of nation's money?

Accepted Answer

The answer of What are the two short-run effects of...

Question 14

One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

Accepted Answer

The answer of One tradeoff society faces is between efficiency...

Question 15

Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the principle that
A)trade can make everyone better off.
B)people face trade-offs.
C)rational people think at the margin.
D)people respond to incentives.

Accepted Answer

Lawrence has to make a trade-off between buying the flash or the tripod because he only has enough money for one. This illustrates the principle that people face trade-offs.

Question 16

The principle that "people face tradeoffs" applies to
A)individuals.
B)families.
C)societies.
D)All of the above are correct.

Accepted Answer

The principle of "people face tradeoffs" applies to individuals, families, and societies as all these entities have limited resources and need to make choices among competing alternatives, which involves tradeoffs between different options. Individuals have to make tradeoffs between their time, money, and energy, whereas families have to make tradeoffs between different expenses, saving priorities, and healthcare choices. Societies face tradeoffs among different policies, such as economic growth versus environmental sustainability or national defense versus social welfare. Therefore, all the given options are correct.

Question 17

John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that
A)trade can make everyone better off.
B)people face trade-offs.
C)rational people think at the margin.
D)people respond to incentives.

Accepted Answer

The scenario describes a trade-off between buying a heart rate monitor or running shoes, as John only has $120 to spend and cannot afford both. This illustrates the principle of people facing trade-offs, which is the idea that when people make choices, they must give up something else in return. In this case, John must give up the opportunity to purchase one item in order to buy the other. While trade can make everyone better off and rational people think at the margin, these principles are not directly applicable to this scenario. People responding to incentives may be relevant if John's decision is influenced by external factors, such as a sale or discount, but this is not mentioned in the scenario.

Question 18

Under what conditions might government intervention in a market economy improve the economy's performance?

Accepted Answer

The answer of Under what conditions might government intervention in...

Question 19

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

Accepted Answer

The answer of Define opportunity cost. What is the opportunity...

Question 20

The adage, "There is no such thing as a free lunch," means
A)even people on welfare have to pay for food.
B)the cost of living is always increasing.
C)people face tradeoffs.
D)all costs are included in the price of a product.

Accepted Answer

The phrase "there is no such thing as a free lunch" means that everything has a cost or tradeoff. Even if something appears to be free, someone, somewhere, is paying for it. This idea is a key concept in economics, where it is known as opportunity cost. Therefore, choice C is the best answer.

Quiz 1: Ten Principles of Economics

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $120, so she can only buy one. This illustrates the basic concept that

Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.

Guns and butter are used to represent the classic societal tradeoff between spending on

A tradeoff exists between a clean environment and a higher level of income in that

Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?

With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year.

How does the study of economics depend upon the phenomenon of scarcity?

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

Which of the following examples does not illustrate the principle represented by the adage, "There is no such thing as a free lunch"?

The phrase "no such thing as a free lunch" means

What are the two short-run effects of increasing the quantity of nation's money?

One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the principle that

The principle that "people face tradeoffs" applies to

John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that

Under what conditions might government intervention in a market economy improve the economy's performance?

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

The adage, "There is no such thing as a free lunch," means