Ch 1 Quiz – Flashcards
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Resources are
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scarce for households and scarce for economies.
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Economics deals primarily with the concept of
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scarcity
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A society allocates its scarce resources to various jobs. These scarce resources include
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all of the above are correct
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The adage, "There is no such thing as a free lunch," is used to illustrate the principle that
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people face tradeoffs
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A tradeoff exists between a clean environment and a higher level of income in that
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laws that reduce pollution raise costs of production and reduce incomes.
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The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that
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equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
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What you give up to obtain an item is called your
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opportunity cost
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College-age athletes who drop out of college to play professional sports
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are well aware that their opportunity cost of attending college is very high
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A rational decisionmaker
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takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.
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A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?
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People respond to incentives
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Evidence indicates that seat belt laws have led to
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Fewer deaths per automobile accident
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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?
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People respond to incentives
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England can benefit from trade
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with any nation
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Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper. This scenario is an example of which principle of economics?
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Trade can make everyone better off
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The basic principles of economics suggest that
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government should become involved in markets when those markets fail to produce efficient or fair outcomes.
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Communist countries worked under the premise that
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central planners were in the best position to determine the allocation of scarce resources in the economy.
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For markets to work well, there must be
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property rights
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A rationale for government involvement in a market economy is
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all of the above are correct
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A direct or positive relationship exists between a country's
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productivity and its standard of living.
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An increase in the overall level of prices in an economy is referred to as
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inflation
