Practice Questions Chapter 1 Microeconomics – Flashcards
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scarcity
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Economics deals primarily with the concept of
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resources are scarce
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Both households and societies face many decisions because
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all members of society can have all they want of it
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For society, a good is not scarce if
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how society manages its scarce resources
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Economics is defined as the study of
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how societies change over time
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Economists study all of the following EXCEPT
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tradeoffs
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The adage, "There is no such thing as a free lunch," is used to illustrate the concept of
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national defense and consumer goods
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Guns and butter are used to represent the classic societal tradeoff between spending on
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a tradeoff because of reduced incomes to the firms' owners, workers, and customers
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When society requires that firms reduce pollution, there is
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minimum waste
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Which of the following best defines efficiency?
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society is getting the most it can from its scarce resources
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Efficiency means that
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equity is increased and efficiency is decreased
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When the government implements programs such as progressive income tax rates, which of the following is likely to occur?
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the value of the best opportunity a student gives up to attend college
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The opportunity cost of going to college is
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what you give up to get that item
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The opportunity cost of an item is
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are well aware that their opportunity cost of attending college is very high
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College-age athletes who drop out of college to play professional sports
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small incremental adjustment
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A marginal change is a
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The price of housing rose in Seattle by 5% in last year
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Which of the following is the best example of a marginal change?
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marginal benefit is greater than the marginal cost
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A rational decision maker takes an action only if the
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incentives
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Economists understand that people respond to
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an increase in the number of accidents
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One effect of a government-imposed seat belt law has been
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by allowing the family to buy a greater variety of goods and services at a lower cost; by allowing each person to specialize in the activities he or she does best
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Trade can benefit a family
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with any nation
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Canada can benefit from trade
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prices
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In a market economy, economic activity is guided by
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Adam Smith
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The term "invisible hand" was coined by
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1776
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Adam Smith's book The Wealth of Nations was published in
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economic information
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A primary function of prices in a market economy is to provide participants with
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businesses would have less incentive to provide goods and services
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Without government's protection of property rights
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externalities and market power
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Causes of market failure include
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one person's actions on the well-being of a bystander
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An externality is the impact of
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a young man from a small town attends medical school to become a doctor
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Which of the following is most likely to generate an externality?
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their ability to produce things that other people are willing to pay for
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A market economy rewards people according to
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the ability to produce goods and services
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The primary determinant of a country's standard of living is
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amount of goods and services produced each hour of a worker's time
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Productivity is defined as the
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an increase in the overall level of prices in the economy
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Inflation is defined as
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In the short run, reducing inflation is associated with rising unemployment
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Which of the following is the most correct statement about the relationship between inflation and unemployment?
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Phillips curve
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The curve that illustrates the tradeoff between inflation and unemployment is called the
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help others even more than when they seek to help others
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Adam Smith argued that in a market system, when people act in their own self-interest, they typically
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an increase in investment in new capital
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Which of the following is most likely to raise the average standard of living in the United States?
