Economics Quiz

An increase in the overall level of prices in an economy is referred to as

• the income effect.

• inflation.

• deflation.

• the substitution effect.

Economics is the study of

• production methods

• how society manages its scarce resources.

• how households decide who performs which tasks.

• the interaction of business and government.

Which of the following is the most correct statement about the relationship between inflation and unemployment?

• In the short run, falling inflation is associated with falling unemployment.

• In the short run, falling inflation is associated with rising unemployment.

• In the long run, falling inflation is associated with falling unemployment.

• In the long run, falling inflation is associated with rising unemployment.

Which of the following statements about trade is false?

• Trade increases competition.

• 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.

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

• even people on welfare have to pay for food.

• the cost of living is always increasing.

• people face tradeoffs.

• all costs are included in the price of a product.

Productivity is defined as the

• amount of goods and services produced from each unit of labor input.

• number of workers required to produce a given amount of goods and services.

• amount of labor that can be saved by replacing workers with machines.

• actual amount of effort workers put into an hour of working time.

A rational decision maker takes an action only if the

• marginal benefit is less than the marginal cost.

• marginal benefit is greater than the marginal cost.

• average benefit is greater than the average cost.

• marginal benefit is greater than both the average cost and the marginal cost.

Economists are particularly adept at understanding that people respond to

• laws.

• incentives.

• punishments more than rewards.

• rewards more than punishments.

Causes of market failure include

• externalities and market power.

• market power and incorrect forecasts of consumer demand.

• externalities and foreign competition.

• incorrect forecasts of consumer demand and foreign competition.

The invisible hand refers to

• how central planners made economic decisions.

• how the decisions of households and firms lead to desirable market outcomes.

• the control that large firms have over the economy.

• government regulations without which the economy would be less efficient.