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

decisions made at the margin are not particularly important.

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

national defense and consumer goods.

law enforcement and agriculture.

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

laws that reduce pollution raise costs of production and reduce incomes.

studies show that individuals with higher levels of income pollute less than low-income individuals.

efforts to reduce pollution typically are not completely successful.

employing individuals to clean up pollution causes increases in employment and income.

When society requires that firms reduce pollution, there is

a tradeoff because of reduced incomes to the firms' owners and workers.

a tradeoff only if some firms are forced to close.

no tradeoff, since the cost of reducing pollution falls only on the firms affected by the requirements.

no tradeoff, since everyone benefits from reduced pollution.

Economists use the word equality to describe a situation in which

each member of society has the same income.

each member of society has access to abundant quantities of goods and services, regardless of his or her income.

society is getting the maximum benefits from its scarce resources.

society's resources are used efficiently.

Efficiency means that

society is getting the maximum benefits from its scarce resources.

society is conserving resources in order to save them for the future.

society's goods and services are distributed equally among society's members.

society's goods and services are distributed fairly, though not necessarily equally, among society's members.

refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society.

and equality both refer to how much a society can produce with its resources.

and equality both refer to how fairly the benefits from using resources are distributed between members of a society.

refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources.

The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.

equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits.

equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits.

equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.

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

equality is improved, but efficiency is not.

efficiency is improved, but equality is not.

both efficiency and equality are improved.

neither efficiency nor equality are improved.

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.

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

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

the pie gets larger, and there will be more 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.

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

people work less and produce fewer goods and services.

efficiency is improved, but equality is not.

both wealthy people and poor people benefit directly.

the government collects more revenue in total.

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

reduce the reward for working hard.

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.

When government policies are enacted,

d. None of the above are correct.

a. equality can usually be enhanced without an efficiency loss, but efficiency can never be enhanced without a reduction in equality.

b. efficiency can usually be enhanced without a reduction in equality, but equality can never be enhanced without an efficiency loss.

c. it is always the case that either efficiency and equality are both enhanced, or efficiency and equality are both diminished.

Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

a good decision requires that we recognize both viewpoints.

we should agree with Senator Brown.

we should agree with Senator Johnson.

there are no tradeoffs between equity and efficiency.

A certain state legislature is considering an increase in the state gasoline tax. Representative Campbell argues that an increase in the gasoline tax would harm low-income drivers disproportionately. Representative Richards responds by saying that low-income drivers own smaller cars that use less gasoline, and that low-income drivers therefore would not be harmed disproportionately.

Both representatives’ arguments are based primarily on equality.

Representative Campbell’s argument is based primarily on efficiency, while Representative Richards’ argument is based primarily on equality.

Representative Campbell’s argument is based primarily on equality, while Representative Richards’ argument is based primarily on efficiency.

Both representatives’ arguments are based primarily on efficiency.

Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor.

Senator Jackson’s argument is primarily about efficiency, while Senator Feldman’s argument is primarily about equality.

Both senators’ arguments are primarily about equality.

Both senators’ arguments are primarily about efficiency.

Senator Jackson’s argument is primarily about equality, while Senator Feldman’s argument is primarily about efficiency.

Suppose the government taxes the wealthy at a higher rate than it taxes the poor and then develops programs to redistribute the tax revenue from the wealthy to the poor. This redistribution of wealth

is more equal but less efficient for society.

is more efficient and more equal for society.

is more efficient but less equal for society.

is less equal and less efficient for society.

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort. This law is likely to

decrease efficiency but increase equality.

increase efficiency and increase equality.

increase efficiency but decrease equality.

decrease efficiency and decrease equality.

The opportunity cost of an item is

what you give up to get that item.

the number of hours needed to earn money to buy the item.

usually less than the dollar value of the item.

In economics, the cost of something is

the dollar amount of obtaining it.

always measured in units of time given up to get it.

often impossible to quantify, even in principle.

Which of the following is correct concerning opportunity cost?

Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway.

To compute opportunity costs, you should subtract benefits from costs.

Opportunity costs and the idea of trade-offs are not closely related.

Rational people should compare various options without considering opportunity costs.

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.

Hamid spends an hour studying instead of watching TV with his friends. The opportunity cost to him of studying is

the enjoyment he would have received if he had watched TV with his friends.

the improvement in his grades from studying for the hour.

the improvement in his grades from studying minus the enjoyment of watching TV.

zero. Since Hamid chose to study rather than to watch TV, the value of studying must have been greater to him than the value of watching TV.

For most students, the largest single cost of a college education is

the wages given up to attend school.

transportation, parking, and entertainment.

For most students, the earnings they give up to attend college are

the single largest cost of their education.

a minor cost when compared to the costs of tuition, room and board, and the like.

about equal to the costs of room and board at college.

not considered true costs by an economist.

1.1 MICROECONOMICS

Authored by Nhân Thiện

Social Studies

University

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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

goods are scarce.

people face tradeoffs.

income must be earned.

households face many decisions.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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

people must face tradeoffs.

rational people think at the margin.

people respond to incentives.

trade can make everyone better off.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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

Michelle can attend the concert only if she takes her sister with her.

Michael is hungry and homeless.

Andrea must repair the tire on her bike before she can ride it to class.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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

Melissa needs to pay her rent and her electric bill.

Kevin must choose between buying a new flat screen television and buying his textbooks for this semester.

Robert must decide between studying for his psychology exam and working at his part-time job.

Lisa can spend her money on a new smart phone or on a weekend trip.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The principle that "people face tradeoffs" applies to

individuals.

families.

societies.

All of the above are correct.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

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

people respond to incentives.

rational people think at the margin.

people face tradeoffs.

improvements in efficiency sometimes come at the expense of equality.

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