Microeconomics HW Ch. 1&2 – Flashcards

question
The main incentive for business activity is:
answer
profit
question
Adam Smith coined the term "invisible hand" to mean:
answer
a metaphorical hand that leads individuals to promote social interest by pursuing self-interest.
question
Which of the following choices best illustrates the concept of Adam Smith's "invisible hand"?
answer
A Vietnamese farmer grows rice; an exporter ships it to the United States, and a grocer in New York sells it to a customer.
question
The opportunity cost of a choice is:
answer
the value of the next best opportunity foregone.
question
In the 2 hours between classes a student can do one of three things, ranking them from most to least desirable as: (1) chat with friends, (2) study economics, or (3) eat lunch. This student's opportunity cost of chatting with friends is:
answer
the value of studying economics.
question
Susan quits her administrative job, which pays $40,000 a year, to finish her four-year college degree. Her annual college expenses are $8,000 for tuition, $900 for books, and $2,500 for food. The opportunity cost of attending college for the year is:
answer
$48,900.
question
What is thinking on the margin?
answer
Making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity.
question
A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts. So the first dozen is $6 and the second would be $3. A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is:
answer
greater than $3
question
One benefit of trade is that it:
answer
allows for increased specialization and mass-production techniques that lower per unit costs of production.
question
The better Martha Stewart is at running her business:
answer
the higher her opportunity cost of ironing her own shirts.
question
The historical rise in living standards of American workers is primarily a result of:
answer
the rise in American productivity.
question
What are the institutions that help foster the appropriate incentives for economic growth?
answer
a dependable legal system, property rights, and competitive and open markets
question
Institutions that support economic growth are the ones that:
answer
provide incentives for entrepreneurs to take risks and innovate.
question
Booms and busts refer to the:
answer
fluctuations in economic activity over time.
question
Which of the following explains why economic booms and busts cannot be avoided?
answer
The economy is always being struck by unavoidable shocks.
question
The Zimbabwean government printed money as fast as it could for years. As a result:
answer
Zimbabwe experienced inflation at a rate of billions of percent per month.
question
A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker:
answer
needs to know the causes of inflation, for example, the government's printing of too much money.
question
The decisions made by the Federal Reserve Bank sometimes result in negative effects on the economy because:
answer
too much money or too little money might induce inflation or unemployment due to bad timing of decisions.
question
If the central bank creates too much money, _____ is the result. If the central bank doesn't create enough money, an economic _____ is the result.
answer
inflation; slowdown
question
The average starting salary of economics majors is just behind that of:
answer
chemical and nuclear engineering majors.
question
David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is true?
answer
David and Cameron must have different preferences for the car.
question
Division of knowledge refers to:
answer
people learning different tasks in which they specialize.
question
Specialization and trade can _____ the per-unit cost of production because _____ .
answer
decrease; it creates economies of scale associated with large-scale production
question
The ability of one producer to produce one good or service using fewer inputs than another producer is:
answer
absolute advantage.
question
Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?
answer
The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student.
question
Suppose France can produce four phones or three computers with one unit of labor, and Sweden can produce one phone or two computers with one unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that:
answer
France should specialize in producing phones and import computers from Sweden.
question
The production possibilities frontier shows:
answer
the combinations of outputs a country can produce given its resources and productivity.
question
Two countries that specialize where they have a comparative advantage and then trade with each other will experience increases in: I. wages in both countries. II. total output in both countries. III. living standards in both countries.
answer
I, II, and III
question
Which of the following statements is TRUE?
answer
Specialization and trade raise wages in both countries that are party to the trade.
question
According to the theory of comparative advantage, the reason wages are lower in China than in the United States is:
answer
lower productivity in China.
question
Globalization is:
answer
the advance of human cooperation across national boundaries.
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question
The main incentive for business activity is:
answer
profit
question
Adam Smith coined the term "invisible hand" to mean:
answer
a metaphorical hand that leads individuals to promote social interest by pursuing self-interest.
question
Which of the following choices best illustrates the concept of Adam Smith's "invisible hand"?
answer
A Vietnamese farmer grows rice; an exporter ships it to the United States, and a grocer in New York sells it to a customer.
question
The opportunity cost of a choice is:
answer
the value of the next best opportunity foregone.
question
In the 2 hours between classes a student can do one of three things, ranking them from most to least desirable as: (1) chat with friends, (2) study economics, or (3) eat lunch. This student's opportunity cost of chatting with friends is:
answer
the value of studying economics.
question
Susan quits her administrative job, which pays $40,000 a year, to finish her four-year college degree. Her annual college expenses are $8,000 for tuition, $900 for books, and $2,500 for food. The opportunity cost of attending college for the year is:
answer
$48,900.
question
What is thinking on the margin?
answer
Making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity.
question
A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen doughnuts. So the first dozen is $6 and the second would be $3. A person would buy the second dozen if their marginal benefit from the second dozen doughnuts is:
answer
greater than $3
question
One benefit of trade is that it:
answer
allows for increased specialization and mass-production techniques that lower per unit costs of production.
question
The better Martha Stewart is at running her business:
answer
the higher her opportunity cost of ironing her own shirts.
question
The historical rise in living standards of American workers is primarily a result of:
answer
the rise in American productivity.
question
What are the institutions that help foster the appropriate incentives for economic growth?
answer
a dependable legal system, property rights, and competitive and open markets
question
Institutions that support economic growth are the ones that:
answer
provide incentives for entrepreneurs to take risks and innovate.
question
Booms and busts refer to the:
answer
fluctuations in economic activity over time.
question
Which of the following explains why economic booms and busts cannot be avoided?
answer
The economy is always being struck by unavoidable shocks.
question
The Zimbabwean government printed money as fast as it could for years. As a result:
answer
Zimbabwe experienced inflation at a rate of billions of percent per month.
question
A policymaker wants to reduce inflation. In order to make an intelligent decision about how to do so, the policymaker:
answer
needs to know the causes of inflation, for example, the government's printing of too much money.
question
The decisions made by the Federal Reserve Bank sometimes result in negative effects on the economy because:
answer
too much money or too little money might induce inflation or unemployment due to bad timing of decisions.
question
If the central bank creates too much money, _____ is the result. If the central bank doesn't create enough money, an economic _____ is the result.
answer
inflation; slowdown
question
The average starting salary of economics majors is just behind that of:
answer
chemical and nuclear engineering majors.
question
David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is true?
answer
David and Cameron must have different preferences for the car.
question
Division of knowledge refers to:
answer
people learning different tasks in which they specialize.
question
Specialization and trade can _____ the per-unit cost of production because _____ .
answer
decrease; it creates economies of scale associated with large-scale production
question
The ability of one producer to produce one good or service using fewer inputs than another producer is:
answer
absolute advantage.
question
Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?
answer
The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student.
question
Suppose France can produce four phones or three computers with one unit of labor, and Sweden can produce one phone or two computers with one unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that:
answer
France should specialize in producing phones and import computers from Sweden.
question
The production possibilities frontier shows:
answer
the combinations of outputs a country can produce given its resources and productivity.
question
Two countries that specialize where they have a comparative advantage and then trade with each other will experience increases in: I. wages in both countries. II. total output in both countries. III. living standards in both countries.
answer
I, II, and III
question
Which of the following statements is TRUE?
answer
Specialization and trade raise wages in both countries that are party to the trade.
question
According to the theory of comparative advantage, the reason wages are lower in China than in the United States is:
answer
lower productivity in China.
question
Globalization is:
answer
the advance of human cooperation across national boundaries.
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