Chapter 1 & 2 Quiz-MIRCO – Flashcards
Unlock all answers in this set
Unlock answers
question
Other things equal, an increase in a consumer's money income:
answer
shifts the individual's budget line rightward because she can now purchase more of both products.
question
If the output of product X is such that marginal benefit equals marginal cost:
answer
the correct amount of resources is being allocated to X's production.
question
The fallacy of composition is essentially the error of:
answer
generalizing from the particular to the general.
question
Suppose that an economy is producing on its production possibilities curve but is not producing quantities of each good where the marginal benefit equals the marginal cost for each good. This economy:
answer
can improve its allocation by producing more of one good and less of the other.******
question
The present choice of position on the production possibilities curve will not influence the future location of the curve
answer
false
question
Any point inside the production possibilities curve indicates
answer
that more output could be produced with the available resources.
question
The market system's answer to the fundamental question "How will the system promote progress?" is essentially
answer
"Through the profit potential that encourages development of new technology."
question
Martha's Milkshake Company buys earthquake insurance from the Stable Ground Insurance Company. Based on this purchase, economists would conclude that:
answer
Martha's has a lower tolerance for earthquake risk than Stable Ground.
question
Of the following countries, which one best exhibits the characteristics of a market economy?
answer
Canada
question
Which of the following statements is true about risk management in market systems versus command systems?
answer
Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, where in command systems government decision makers don't bear those costs.
question
The invisible hand refers to the many indirect controls that the federal government imposes in a market system.
answer
false
question
Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the:
answer
incentive problem under communist central planning.
question
Examples of command economies are:
answer
Cuba and North Korea
question
The guiding function of prices tends to keep resources flowing toward their most highly valued uses.
answer
True
