When the government attempts to improve equality in an economy the result is often

an increase in overall output in the economy

additional government revenue since overall income will increase.

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

equality is increased and efficiency is decreased.

equality is increased and efficiency is increased.

equality is decreased and efficiency is increased.

equality is decreased and efficiency is decreased.

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

increase the reward for working hard

High-school athletes who skip college to become professional athletes

understand that the opportunity cost of attending college is very high.

obviously do not understand the value of a college education.

usually do so because they cannot get into college.

are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes.

When computing the opportunity cost of attending a basketball game you should include

the price you pay for the ticket and the value of your time.

the price you pay for the ticket, but not the value of your time.

the value of your time, but not the price you pay for the ticket.

neither the price of the ticket nor the value of your time.

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone to the park.

the $60 minus the enjoyment she would have received from going to the park.

nothing, since she would have received less than $60 worth of enjoyment from going to the park.

Ramona decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

the value of the knowledge she would have received had she attended class.

the $24 she could have earned if she had worked at her job for those two hours.

the value of her nap minus the value of attending class.

nothing, since she valued sleep more than attendance at class.

Central planning refers to

government guiding economic activity. Today many countries that had this system have abandoned it.

markets guiding economic activity. Today many countries that had this system have abandoned it.

markets guiding economic activity. Today many countries that did not have this system have implemented it.

government guiding economic activity. Today many countries that did not have this system have implemented it.

U.S. laws requiring that drivers wear seat belts have resulted in

little change in the number of driver deaths, but more accidents and more pedestrian deaths.

a reduction in both driver deaths and pedestrian deaths.

fewer accidents and fewer deaths per accident.

fewer driver deaths, fewer accidents and fewer pedestrian deaths.

Evidence indicates that seat belt laws have led to

fewer deaths per automobile accident

One effect of the government-imposed seat belt law in the U.S. has been

an increase in the number of accidents.

a dramatic decrease in the number of pedestrian deaths.

a dramatic decrease in the number of driver deaths.

Based on the available evidence, which of the following groups benefits most from mandatory seat belt laws?

owners of collision-repair shops

Suppose the state of Illinois passes a law that bans smoking in restaurants. As a result, residents of Wisconsin who do not like breathing second-hand smoke begin driving across the border to Illinois to eat at restaurants there. Which of the following principles does this best illustrate?

Rational people think at the margin

Trade can make everyone better off

Markets are usually a good way to organize economic activity

Which of the following principles is not one of the four principles of individual decisionmaking?

Trade can make everyone better off.

Rational people think at the margin.

Which of the following statements exemplifies a principle of individual decisionmaking?

The cost of something is what you give up to get it.

Trade can make everyone better off.

Governments can sometimes improve market outcomes.

Which of the following is not an example of a group responding to an incentive?

Universities offer fewer online classes when they generate more revenue than traditional classes.

Students attend class because of an attendance policy that reduces their grade for absences.

Consumers buy more of a product when it is on sale at a reduced price.

Employees work harder to earn higher commissions.

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

Markets are usually a good way to organize economic activity.

Rational people think at the margin.

Which is the most accurate statement about trade?

Trade can make every nation better off.

Trade makes some nations better off and others worse off.

Trading for a good can make a nation better off only if the nation cannot produce that good itself

Trade helps rich nations and hurts poor nations.

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

states within the United States.

Which of the following statements about trade is false?

With trade, one country wins and one country loses.

Bulgaria can benefit, potentially, from trade with any other country.

Trade allows people to buy a greater variety of goods and services at lower cost.

Trade between the United States and Guatemala

benefits both the United States and Guatemala.

is a losing proposition for the United States because Guatemalan labor is less expensive than U.S. labor.

is a losing proposition for Guatemala because capital is much more abundant in the U.S. than in Guatemala.

is a losing proposition for Guatemala because U.S. workers are more productive than Guatemalan workers.

Communist countries worked under the premise that

central planners were in the best position to determine the allocation of scarce resources in the economy

markets were the best way to organize economic activity.

households and firms, guided by an “invisible hand,” could achieve the most efficient allocation of scarce resources

allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources

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

the actions of government central planners

a strong reliance on prices and individuals’ self-interests

a system of large privately-owned firms

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

the lack of information, on the part of central planners in those countries, about tastes and preferences in their economies.

the fact that those countries relied absolutely on the invisible hand.

the fact that those countries did little or nothing to restrict trade with other countries.

the lack of information, on the part of central planners in those countries, about how much authority the government had in affecting economic outcomes.

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

amounts to a denial of one of the basic principles regarding interactions among people.

is a basic principle regarding individual decisionmaking.

supports the idea that the "invisible hand" should guide economic activity.

was promoted by the economist Adam Smith in a well-known 1776 book.

Which of the following statements about markets is most accurate?

Markets are usually a good way to organize economic activity

Markets are usually inferior to central planning as a way to organize economic activity

Markets fail and are therefore not an acceptable way to organize economic activity

Markets are a good way to organize economic activity in developed nations, but not in less developed nations.

College-age athletes who drop out of college to play professional sports

are well aware that their opportunity cost of attending college is very high.

are not rational decision makers.

are concerned more about present circumstances than their future.

underestimate the value of a college education

A direct or positive relationship exists between a country's

productivity and its standard of living

amount of government spending and its productivity.

total population and its average citizen’s income.

rate of population growth and the extent of its trade with other countries.

The primary determinant of a country's standard of living is

the country’s ability to produce goods and services.

the country’s ability to prevail over foreign competition.

the total supply of money in the economy.

the average age of the country's labor force.

The fact that different countries experience different standards of living is largely explained by differences in those countries'

None of the above is correct. Economists are puzzled by differences in standards of living around the world.

Suppose the average income of a citizen of Poland is higher than the average income of a citizen of Romania. You might conclude that

productivity in Poland is higher than in Romania.

Polish firms are faced with stricter government regulations than Romanian firms.

total income is divided among fewer workers in Poland since it has a smaller labor force than Romania.

Romania's climate allows for longer growing seasons and therefore Romania can produce large quantities of grain and other crops.

A marginal change is a

change that involves little, if anything, that is important.

change for the worse, and so it is usually a short-term change.

People are willing to pay more for a diamond than for a bottle of water because

the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.

the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water.

producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices.

water prices are held artificially low by governments, since water is necessary for life.

It costs a meat-processing company $50,000 to produce 5,000 pounds of steak. The company’s cost will be $50,009 if it produces an additional pound of steak. If the company produces 5,001 pounds of steak then

its average cost is greater than its marginal cost.

its average cost and its marginal cost are equal.

its average cost is less than its marginal cost.

there is insufficient information to compute average and marginal costs.

The marginal benefit Kyra gets from eating a second sandwich is

the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich.

the same as the total benefit she gets from eating two sandwiches.

less than the marginal cost of eating the second sandwich since she chose to eat the second sandwich.

the total benefit Kyra gets from eating three sandwiches minus the total benefit she gets from eating two sandwiches.

The marginal benefit Susie gets from purchasing a third pair of gloves is

the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two pairs of gloves.

the same as the total benefit she gets from purchasing three pairs of gloves.

more than the marginal cost of purchasing the third pair of gloves.

the total benefit she gets from purchasing four pairs of gloves minus the total benefit she gets from purchasing three pairs of gloves.

TESTBANk (B)

Authored by Hien Huy

Other

University

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following words and phrases best captures the notion of equality?

minimum waste

maximum benefit

sameness

efficiency

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

When society gets the most it can from its scarce resources, then the outcome is called

equitable.

efficient

normal.

efficacious.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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

guns and butter.

efficiency and equality.

inflation and unemployment.

work and leisure.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

When the government redistributes income from the wealthy to the poor,

efficiency is improved, but equality is not.

equality is improved, but efficiency is not.

both efficiency and equality are improved.

neither efficiency nor equality are improved.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following is true?

Efficiency refers to the size of the economic pie; equality refers to how the pie is divided

Government policies usually improve upon both equality and efficiency

As long as the economic pie continually gets larger, no one will have to go hungry

Efficiency and equality can both be achieved if the economic pie is cut into equal pieces

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

As a result of a successful attempt by government to cut the economic pie into more equal slices,

the pie gets larger, and there will be more pie overall

the pie gets smaller, and there will be less pie overall.

it increases the reward for working hard, resulting in people producing more goods and services

those who earn more income pay less in taxes.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

When the government redistributes income from the wealthy to the poor,

efficiency is improved, but equality is not.

both wealthy people and poor people benefit directly.

people work less and produce fewer goods and services.

the government collects more revenue in total.

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