econ chap 1

Which of the following involve a trade-off?

• a. Buying a new car

• b. Going to college

• c. Watching a football game on Saturday afternoon

• 
  d. Taking a nap

  
  

• e. All of the answer choices involve trade-offs.

Trade-offs are required because wants are unlimited and resources are _______.

• a. marginal

  
  

• b. efficient

• c. scarce

• d. unlimited

• e. economical

Economics is the study of how ________.

• a. society manages its scarce resources

  
  

• b. to reduce our wants until we are satisfied

• c. to avoid having to make trade-offs

  
  

• d. to fully satisfy our unlimited wants

• e. society manages its unlimited resources

A rational person does not act unless ________.

• a. the action makes money for the person

  
  

• b. the action is ethical

  
  

• c. the action produces marginal costs that exceed marginal benefits

• d. the action produces marginal benefits that exceed marginal costs

  
  

• e. none of the answer choices are correct

  
  

Raising taxes and increasing welfare payments ________.

• 
  a. reduces market power

• b. proves that there is such a thing as a free lunch

  
  

• 
  c. improves efficiency at the expense of equality

• d. improves equality at the expense of efficiency

  
  

• e. does none of the answer choices

Answer explanation

• ✅ Improves equality → smaller income gap, helps the poor.

• ❌ Reduces efficiency → weaker work incentives, lower productivity, less total income.

Suppose you find $20. If you choose to use the $20 to go to the baseball game, your opportunity cost of going to the game is ________.

• a. nothing, because you found the money

• b. $20 (because you could have used the $20 to buy other things)

• c. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game

  
  

• d. $20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchased at the game

• e. none of the answer choices

Foreign trade ________.

• a. is none of the answer choices

• b. makes the members of a country more equal

• c. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

• d. increases the scarcity of resources

• e. allows a country to avoid trade-offs

Because people respond to incentives, we would expect that if the average salary of engineers increases by 50 percent while the average salary of teachers increases by 20 percent, ________.

• a. students will shift majors from education to engineering

• 
  b. students will shift majors from engineering to education

• 
  c. fewer students will attend college

• d. none of the answer choices are correct

Which of the following activities is most likely to produce an externality?

• a. A student eats a sandwich in the student union.

• b. A student reads a novel for pleasure.

• 
  c. A student sits at home and watches television.

• d. A student has a party in their dorm room.

Answer explanation

Noise can disturb neighbors or others nearby (a negative externality).

Which of the following products would be least capable of producing an externality?

• a. Stereo equipment

• b. Inoculations against disease

• c. Food

• d. Education

• e. Cigarettes