Ch01 Micro6Ce TB

Chapter 1 — Ten Ten Principles of Economics MULTIPLE CHOICE

1. Which word comes from the Greek Gree k word for “one who manages a household”? a. market b. consumer c. producer d. economy ANS: D BLM: Remember

PTS: 1 DIF: NOT: Micro TB_1-1

Easy

REF: 3-4

2. From which which Greek word(s) is the word economy economy derived? a. environment b. one who manages a household c. one who participates in a market d. conservation ANS: B BLM: Remember


Easy

REF: 3-4

3. What do households and economies economies have have in common? a. They both must allocate scarce resources. b. They both face many decisions. decisions. c. They both both must allocate the goods goods and services they produce. produce. d. They both both must must have have a central decision maker. ANS: D BLM: Remember


Average

REF: 3-4

Easy

REF: 4

4. What concept does economics primarily deal with? a. scarcity b. poverty c. change d. power ANS: A BLM: Remember


5. Which of the following following is NOT included in the decisions decisions that every society must make? make? a. what goods will be produced b. who will produce the goods goods c. what determines consumer preferences d. who will consume the goods ANS: C BLM: Remember


Copyright © 2014 Nelson Education Limited.

Average

REF: 4

1-1

Titles you can't find anywhere else

Try Scribd FREE for 30 days to access over 125 million titles without ads or interruptions! Start Free Trial Cancel Anytime.













Test Bank

Chapter 1

Microeconomics Mankiw 6Ce

6. Why do both households households and and societies face many decisions? a. because resources are scarce b. because populations may increase or decrease over time c. because wages for households households and and therefore society fluctuate with with business business cycles d. because people, by nature, tend to disagree ANS: A BLM: Remember


Average

REF: 4

7. When is a good good considered considered scarce in a society? a. when more more output output of the the good good is possible b. when everyone in that society society cannot have all they want want of the good c. when the the government government restricts restricts production production of the the good good d. when only the richest people in the economy can buy all they want of the good good ANS: B BLM: Remember


Average

REF: 4

8. When does scarcity exist? a. when there is less than an infinite amount of of a resource resource or good b. when society can meet the wants of of every individual c. when there is less of a good or resource available available than people wish to have d. when the the government government fails fails to to produce produce goods goods ANS: C BLM: Remember


Average

REF: 4

9. How are goods and and services allocated in a market economy? a. by government decisions b. by giving each individual individual just enough for a decent decent standard of living c. by the actions of all firms and consumers d. by inherited rights and properties ANS: C PTS: 1 BLM: Higher Order

DIF: Average REF: 4 NOT: Micro TB_1-9

10. Approximately what percentage of the world’s economies experience scarcity? a. 25% b. 50% c. 75% d. 100% ANS: D BLM: Remember


Easy

REF: 4

11. What is the economy economy experiencing when a society cannot produce all all the goods and services people people wish to have? a. scarcity















Test Bank

Chapter 1


12. For society, society, when is a good NOT scarce? a. if at least one individual individual in society can obtain all all he or she wants of the good good b. if firms are producing at full capacity capacity c. if all members of society can can have all they want of the good good d. if those who who have enough enough income income can buy all they want of the good ANS: C PTS: 1 BLM: Higher Order


13. Which of the following following goods best meets the definition definition of scarcity? scarcity? a. air b. water in the ocean c. water in a city d. wood in a forest ANS: C BLM: Remember


Average

REF: 4

Easy

REF: 4

Easy

REF: 4

14. What does economics study? a. business b. how society manages its scarce scarce resources c. central planning d. government regulation ANS: B BLM: Remember


15. What does economics study? a. how society manages its scarce resources b. the government’s role in society c. how to increase production d. how firms make profits ANS: A BLM: Remember


16. In most societies, who allocates resources? a. a single central planner b. those who own the resources resources c. those firms firms that use resources resources to provide goods and services services d. the combined combined actions actions of millions of households households and firms firms ANS: D BLM: Remember


17. What do economists study? a. how people make decisions

Average

REF: 4















Test Bank

Chapter 1


18. Which of the following following is NOT NOT a major area of study for economists? a. how people make decisions b. how countries choose national national leaders c. how people interact with each other d. how forces and and trends trends affect affect the the overall overall economy ANS: B BLM: Remember


Average

REF: 4

19. What concept is illustrated by the adage, “There is no such thing as a free lunch”? a. tradeoffs b. scarcity c. productivity d. efficiency ANS: A BLM: Remember


Average

REF: 4

20. What does the adage “There is no such thing as a free lunch” mean? a. Even people on welfare welfare have have to pay pay for food. b. The cost of living is always always increasing. c. To get something something we like, we usually usually have to give up another thing we like. d. All costs costs are included in the the price of a product. ANS: C BLM: Remember


Average

REF: 4

21. What do economists illustrate when they use the phrase “There is no such thing as a free lunch”? a. how inflation increases prices b. that to get one thing, thing, we must give up something else c. that nothing is free in a market economy d. that if something looks too good to be true, it probably probably is ANS: B BLM: Remember


Average

REF: 4

22. Which best represents the concept represented by the adage “There is no such thing as a free lunch”? a. Melissa can only attend attend the concert if she takes her sister sister with her. b. Greg is hungry and homeless. homeless. c. Brian must repair the tire on his bike before he can ride it to class. d. Kendra must decide between between going to Miami or Cancun for spring break. ANS: D BLM: Remember


Challenging

REF: 4

23. Guns and butter butter represent the classic classic societal tradeoff between spending spending on which two two items? a. durable and nondurable goods















Test Bank

Chapter 1


24. Henry decides to spend two hours playing golf rather than than working at his his job, which which pays $8 per hour. hour. What is Henry’s tradeoff? a. the $16 he could could have earned working for two hours b. nothing, because he enjoys enjoys playing golf more than working working c. the increase in skill skill he obtains from playing golf for those two hours d. nothing, because because he spent $16 $16 for green fees to play golf ANS: A PTS: 1 BLM: Higher Order

DIF: Average REF: 4-5 NOT: Micro TB_1-24

25. When society requires that that firms reduce pollution, pollution, what what happens? happens? a. There is a tradeoff because of reduced incomes incomes to the firms' owners, workers, and customers. b. There is no tradeoff, since everyone everyone benefits from reduced pollution. pollution. c. There is no tradeoff for society as a whole, since since the cost cost of reducing reducing pollution pollution falls only on the firms affected by the requirements. d. There is a tradeoff only if some firms are forced forced to close. ANS: A PTS: 1 BLM: Higher Order

DIF: Challenging REF: 4-5 NOT: Micro TB_1-25

26. Daniel decides to to spend the last two hours of the night before his economics exam studying instead of sleeping. For Daniel, what would his tradeoff be? a. nothing, since no dollar value can be put on sleep sleep b. nothing, since studying studying would be more beneficial beneficial than sleep c. the six hours hours of sleep sleep he could could have had if he had gone to bed before midnight d. the two hours of of rest he would would have gotten ANS: D PTS: 1 BLM: Higher Order


27. How does a tradeoff exist between a clean environment environment and a higher level level of income? income? a. Studies show that individuals individuals with higher levels levels of income income actually pollute less than low-income individuals. b. To pay for pollution cleanup, cleanup, the government must increase increase taxes, which lowers income. income. c. Laws that reduce pollution pollution raise raise costs of production production and reduce incomes. incomes. d. By employing individuals to to clean up pollution, employment and income both rise. ANS: C PTS: 1 BLM: Higher Order


28. Which of the following following would would NOT be a result result of laws that require firms firms to reduce pollution? pollution? a. lower spending by government b. higher prices to consumers c. lower wages to workers d. smaller profit to firms















Test Bank

Chapter 1


29. What will pollution regulations do? a. increase profit to firms b. impose a tradeoff on society c. allow firms to raise workers’ wages d. lower prices for consumers ANS: B BLM: Remember


Average

REF: 4-5

Easy

REF: 5

30. Which of the following following best defines defines efficiency? a. absolute fairness b. equal distribution c. minimum waste d. consumer sovereignty ANS: C BLM: Remember


31. What does efficiency mean? a. Society is conserving resources in order to save them for the future. b. Society’s goods and services are distributed fairly among society’s members. c. Society has lessened its dependence dependence on foreign foreign energy energy sources. d. Society is getting the most most it can from its scarce resources. ANS: D BLM: Remember


Average

REF: 5

32. In which of the following following situations situations would would economists use the word word equity? a. Each member of society society has the same income. b. Society is getting the most most it can from its scarce resources. c. Those in society who have have the least will will receive receive the most. d. The benefits of society’s resources are distributed fairly among society’s members. ANS: D BLM: Remember


Average

REF: 5

Easy

REF: 5

33. What is one definition of equity? a. equality b. efficiency c. fairness d. similarity ANS: C BLM: Remember


34. What happens happens when government policies are being designed? a. There is usually a tradeoff tradeoff between equity and efficiency. b. Equity and efficiency goals goals are usually independent of each other.

















Test Bank

Chapter 1


35. When government policies such as the welfare system system try to help the neediest members members of society, what happens? a. It increases equity and reduces efficiency. b. It reduces charitable contributions contributions in an economy. economy. c. It increases the productivity productivity of the the needy in society. society. d. It causes market failure to occur. ANS: A PTS: 1 BLM: Higher Order


36. When the government government implements programs programs such as progressive progressive income tax rates, which of of the following is likely to occur? a. Equity and efficiency is increased. b. Equity and efficiency is decreased. decreased. c. Equity is decreased, and efficiency is increased. d. Equity is decreased, and efficiency is decreased. ANS: B PTS: 1 BLM: Higher Order


37. When the government government attempts to cut the economic economic pie into more more equal slices, what what happens? a. It is easier to cut the pie, and therefore the economy can produce a larger pie. b. The government can more easily allocate allocate the pie to those most most in need. c. The pie gets smaller, and there will be less pie for everyone. everyone. d. The economy will spend too much much time cutting the pie and lose lose the ability to produce enough pie for everyone. ANS: C BLM: Remember


Challenging

REF: 5

38. When the government government attempts to improve equity in an economy, economy, what is often the the result? a. an increase increase in overall output in the economy economy b. additional government government revenue since overall income income will increase c. an actual reduction in equity d. reduced efficiency in the economy ANS: D BLM: Remember


Average

REF: 5

















Test Bank

Chapter 1


40. In economics, what what is the cost cost of something? a. the dollar amount of obtaining it b. what it takes to produce it c. what you give up to obtain it d. the amount amount of labour to produce it ANS: C BLM: Remember


Easy

REF: 5

41. What is the term for what you give up to obtain an item? a. opportunity cost b. explicit cost c. true cost d. direct cost ANS: A BLM: Remember


Easy

REF: 6

42. Paul receives $300 as a birthday gift. In deciding deciding how to spend spend the money, money, he narrows his options options down to four: A, B, C, and D. The price of each option is $200, but Paul prefers B to A, A to C, and C to D. What is the opportunity cost of option B? a. It is Paul’s valuation of A. b. It is Paul’s valuation of A, C, and D together. c. It is $300. d. It is $200. ANS: A PTS: 1 BLM: Higher Order


43. What is the opportunity opportunity cost of going to university? university? a. the total spent on food, clothing, clothing, books, transportation, tuition, lodging, lodging, and other other expenses b. the value of the best opportunity opportunity a student gives gives up to attend university c. zero for students students who are fortunate enough to have all of their college college expenses paid paid by someone else d. zero, since a college education education will allow a student student to earn a larger larger income after graduation

















Test Bank

Chapter 1


45. What is the largest single cost cost of going to university? university? a. books b. room and board c. tuition d. lost wages ANS: D PTS: 1 BLM: Higher Order

DIF: Easy REF: 6 NOT: Micro TB_1-45

46. What is the opportunity opportunity cost of an item? item? a. the number of hours hours needed needed to earn money money to buy it b. what you give up to get that that item c. usually more than the the dollar dollar value of the the item item d. usually less than than the dollar value of the item item ANS: B BLM: Remember


Easy

REF: 6

47. Maurice receives $100 as a birthday gift. gift. In deciding how to spend the money, he narrows narrows his options options down to four choices: A, B, C, and D. Each option costs $100, but Maurice values each option differently. Finally, he decides on B. What is the opportunity cost of B? a. the value to him of the the option he would have chosen if B was not available available b. the value to him of options options A, C, and D combined c. $300 d. $100 ANS: A PTS: 1 BLM: Higher Order


48. Mallory decides to to spend three hours hours working overtime rather than watching a video video with her friends. friends. She earns $8 an hour. What is her opportunity cost of working? a. the $24 she earns working b. the $24 minus the enjoyment enjoyment she would have received from watching watching the video c. the enjoyment enjoyment she she would have received had she watched watched the video d. nothing, since since she would have received less than $24 of enjoyment from the video ANS: C PTS: 1 BLM: Higher Order

DIF: Challenging REF: 6 NOT: Micro TB_1-48

















Test Bank

Chapter 1


50. What do we know know about college-age college-age athletes who drop out of college college to play professional sports? sports? a. They are not rational decision makers. b. They are well aware that their opportunity opportunity cost of attending attending college is very high. high. c. They are concerned more more about present circumstances than their their future. future. d. They underestimate underestimate the value value of a college education. ANS: B BLM: Remember


Average

REF: 6

Easy

REF: 6

Easy

REF: 6

51. How do people make decisions decisions at the margin? a. by following tradition b. by experience c. by calculating dollar costs d. by comparing costs and benefits ANS: D BLM: Remember


52. What does the word “margin” mean? a. edge b. distance c. space d. measure ANS: A BLM: Remember


53. What does making decisions “at the margin” mean? a. that people make those those decisions decisions that do not impose a marginal cost cost b. that people evaluate how easily easily a decision can be reversed if if problems arise c. that people compare the marginal costs costs and marginal benefits benefits of each decision d. that people always calculate calculate the marginal dollar dollar costs costs for each decision ANS: C BLM: Remember


54. What is a marginal change? a. a long-term trend

Average

REF: 6

















Test Bank

Chapter 1


55. Which of the following following is the the best example example of a marginal change? change? a. After graduating from university, Audrey’s income increases from $500 per month to $3000 per month. b. Morgan gets a raise at her part-time job and and is now paid $10.25 per hour hour instead of $10.00. c. Housing prices in an area area increase by 40% when a new highway highway is built built in a small town. d. A hard freeze wipes out half of the tobacco crop in Ontario and the price of cigarettes cigarettes doubles. ANS: B PTS: 1 BLM: Higher Order


56. Which of the following following is the the best example example of a marginal change? change? a. After graduating from university, Neville’s income increases from $1000 per month to $1,100 per month. b. Marliss is granted a raise at her part-time part-time job and is now paid $11.25 per per hour instead of $11.00. c. Housing prices in an area area increase by 50% when a new freeway is built in a small small town. d. A hard freeze wipes out half of the potato crop in Prince Edward Island and the price price of potatoes doubles. ANS: B PTS: 1 BLM: Higher Order


57. Which of the following following is the the best example example of a marginal change? change? a. The price of water rose in Calgary by by 2% last year. b. Kim gets a big promotion at work. work. She also gets a raise from $25 000 per per year to $40 000 per year. c. Mark graduates from university university and takes takes a job. His income income increases from $10 000 per year to $50 000 per year. d. A drought hits Saskatchewan Saskatchewan and the price of of wheat increases increases from $4.00 per bushel bushel to $8.00 per bushel. ANS: A PTS: 1 BLM: Higher Order

DIF: Challenging REF: 6 NOT: Micro TB_1-57

58. Which of of the following illustrates a marginal change? a. Nancy retires and takes a part-time job. job. She was working 40 hours per per week, but now works 10 hours per week.



















Test Bank

Chapter 1


59. After much consideration, consideration, you have have chosen Cancun over over Fort Lauderdale for your your spring break break trip this year. For this decision to change, which of the following must occur? a. The marginal benefit of Cancun must increase. b. The marginal cost of Cancun must must decrease. c. The marginal marginal benefit benefit of Fort Fort Lauderdale Lauderdale must increase. d. The marginal marginal cost cost of of Fort Fort Lauderdale Lauderdale must increase. ANS: C PTS: 1 BLM: Higher Order


60. The average cost per per seat on a bus bus trip from Montreal Montreal to Toronto Toronto is $140. Suppose Suppose no refreshments refreshments are served and three seats are empty. How could the bus company increase its profit? a. if it charged no less than $140 for the three remaining seats seats b. if it charged more than $140 for the the three remaining seats c. if it charged any ticket price price above $0 for the remaining seats d. if it left the seats empty ANS: C PTS: 1 BLM: Higher Order


61. The average cost per per seat on an airplane trip from Calgary to Edmonton Edmonton is $105. Suppose Suppose no refreshments are served and seven seats are a re empty. How could the airline company increase its profit? a. if it charged no less than $105 for the seven remaining seats b. if it charged more than $105 for the the seven remaining seats c. if it charged any ticket price price above $0 for the remaining seats d. if it left the seats empty



















Test Bank

Chapter 1


64. Mike has spent $800 purchasing and repairing an old motorcycle, which which he expects to sell for $1,200. $1,200. He discovers that he needs an additional repair, which will cost $200. He can sell the motorcycle as it is now for $400. What should he do? a. He should take the $400. b. He should never sell something something for less than it cost. cost. c. He should should complete complete the the repairs repairs and sell the motorcycle. motorcycle. d. It doesn’t matter which action he takes; the outcome is the same either way. ANS: C PTS: 1 BLM: Higher Order


65. Carol has spent $2000 purchasing and repairing an old car, which she expects to sell for $2400. $2400. She discovers that she needs an additional repair, which will cost $400. She can sell the car as it is now for f or $2000. What should she do? a. She should should sell the car now for $2000. $2000. b. She should never sell something something for less than it cost. cost. c. She should should complete complete the repairs repairs and and sell sell the car. car. d. It doesn’t matter which action she takes; the outcome is the same either way. ANS: D PTS: 1 BLM: Higher Order


66. Tim has spent $2500 purchasing and repairing a Hummer, which he expects to sell for $3500. He discovers that he needs an additional repair, which will cost $1100. He can sell the Hummer as it is now for $900. What should he do? a. He should take the $900. b. He should never sell something something for less than it cost. cost.



















Test Bank

Chapter 1


68. Stan buys a 1966 1966 Mustang, which he plans to restore and sell. He He anticipates that the cost of the car and the repairs will be $10 000 and that he can sell it for $13 000. When he has spent $10 000, he discovers he needs to replace the engine, which will cost $4000. He can sell the car without the new engine for $9000. What should Stan do? a. He should complete the the repairs and sell the car for $13 000. b. He should sell the car now for $9000. $9000. c. He should should never never try such an expensive expensive project again. d. He should be totally indifferent between between finishing finishing the project project and selling selling the car now. ANS: D PTS: 1 BLM: Higher Order


69. Stan buys a 1966 1966 Mustang, which he plans to restore and sell. He He anticipates that the cost of the car and the repairs will be $8000 and that he can sell it for $10 000. When he has spent $7000, he discovers he needs to replace the engine, which will cost $4000. He can ca n sell the car without the new engine for $9000. What should Stan do? a. He should complete the the repairs and sell the car for $10 000. b. He should sell the car now for $9000. $9000. c. He should keep the car car for his own use because selling selling it would would be a loss. d. He should be totally indifferent between between finishing finishing the project project and selling selling the car now. ANS: B PTS: 1 BLM: Higher Order


70. Lisa buys a 1982 1982 BMW, which she plans to restore and sell. She She anticipates that that the cost of of the car and the repairs will be $11 000 and that she can sell it for $20 000. After she has spent $11 000, she discovers she needs to replace the engine, which will cost $5000. She can sell the car without the new



















Test Bank

Chapter 1


72. A donut shop sells fresh baked baked donuts from 5 a.m. until 3 p.m. p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $1.00. Since this shop does not sell day-old donuts the next day, what should the manager do if he still has ten dozen left at 2:30 p.m.? a. lower the price of the remaining donuts even even if the price falls below $1.00 b. lower the price of the remaining donuts as long as it’s more than $1.00 c. lower the price price on all donuts so they will all be sold sold earlier in the day d. throw them them away and produce produce ten fewer dozen dozen tomorrow tomorrow ANS: A PTS: 1 BLM: Higher Order


73. A donut shop sells fresh baked baked donuts from 5 a.m. until 3 p.m. p.m. every day but Sunday. The cost cost of making and selling a dozen glazed donuts is $2.00. Since this shop does not sell day-old day -old donuts the next day, what should the manager do if she still has ten dozen left at 2:30 p.m.? a. lower the price of the remaining donuts even even if the price falls below $2.00 b. lower the price of the remaining donuts donuts as long as it's it's more than $2.00 c. lower the price price on all donuts so they will all be sold sold earlier in the day d. throw them them away and produce produce ten fewer dozen dozen tomorrow tomorrow ANS: A PTS: 1 BLM: Higher Order


74. A furniture maker maker currently produces 100 100 tables per week week and sells them for a profit. She is considering expanding her operation in order to make more tables. Should she expand? a. Yes, because making tables is profitable. b. No, because she may not be able to sell sell the additional tables. tables. c. It depends on the marginal marginal cost of producing more tables and the marginal revenue she



















Test Bank

Chapter 1


76. Your professor loves loves her work, teaching economics. She She has been offered offered other positions in the corporate world making 25 percent more, but has decided to stay in teaching. What might change her decision? a. if the marginal cost of teaching increased b. if the marginal benefit of teaching teaching increased c. if the marginal cost of teaching decreased d. if the marginal cost of a corporate corporate job increased ANS: A PTS: 1 BLM: Higher Order


77. Suppose your management management professor has been offered a corporate corporate job with a 30 percent pay increase. Why has he decided to take the job? a. The marginal marginal cost of leaving leaving was greater than the the marginal benefit. b. The marginal benefit of leaving leaving was greater than the marginal cost. cost. c. The marginal marginal benefit of teaching teaching was was greater than the the marginal marginal cost. cost. d. The marginal cost of teaching was greater than the marginal benefit. benefit. ANS: B PTS: 1 BLM: Higher Order


78. Suppose your management management professor has been offered a corporate corporate job with a 30 percent pay increase. Why has he decided NOT to take the job? a. The marginal marginal cost of leaving leaving was greater than the the marginal benefit. b. The marginal benefit of leaving leaving was greater than the marginal cost. cost. c. The marginal marginal benefit of leaving leaving was was less than the marginal cost. cost. d. The marginal benefit of of teaching was greater than the the marginal cost.





















Test Bank

Chapter 1


81. What did Ralph Nader’s book Unsafe at Any Speed cause cause the U.S. government to require? a. safety glass in all new cars b. seat belts in all new cars c. air bags in all new cars d. stricter drunk driving laws ANS: B BLM: Remember


Easy

REF: 8-9

82. What has been the result result of laws requiring that drivers wear seat belts? belts? a. a reduction in both driver deaths and pedestrian pedestrian deaths deaths b. fewer accidents and fewer deaths per per accident c. fewer driver driver deaths, deaths, fewer accidents, and fewer pedestrian pedestrian deaths d. little change in the number number of driver driver deaths, but but more accidents accidents and more more pedestrian deaths ANS: D

PTS: 1

DIF:

Average

REF: 8-9



















Test Bank

Chapter 1


86. How can trade benefit a family? a. A family benefits benefits by allowing the family to buy a greater greater variety of goods and services at a lower cost. b. A family benefits by allowing allowing each person to buy only the goods and services they they want most. c. A family can benefit only if the family is not in in economic competition with with other families. d. Trade can only benefit entire entire nations, nations, not individuals. individuals. ANS: A BLM: Remember


Average

REF: 8-9

87. How does trade affect the well-being of the nations involved? a. Trade makes every nation better off. b. Trade makes exporting nations nations better off and importing nations worse off. c. Trade makes a nation better better off only if the nation nation cannot cannot produce that that good itself. d. Trade makes rich nations nations better off and poor nations nations worse off.



















Test Bank

Chapter 1


91. With which which nations nations does does Canada Canada benefit from trade? trade? a. only nations nations that can produce goods goods Canada Canada cannot produce b. with any nation c. with any nation not not in economic competition with Canada d. only with less developed nations ANS: B BLM: Remember


Average

REF: 8-9

92. What happens happens if Japan chooses chooses to engage in trade? a. It will only only benefit if it trades trades with countries countries that produce goods goods it cannot cannot produce. b. It cannot benefit if it trades with less developed countries. countries. c. It should first attempt to produce produce the good good itself. d. It can benefit by trading trading with with any other country. country. ANS: D BLM: Remember


Average

REF: 8-9



















Test Bank

Chapter 1


96. Which of the following following is NOT a characteristic of markets? a. Firms decide decide whom whom to hire hire and what to produce. b. Government policies do not not affect the decisions of firms firms and households. c. Households decide decide which firms to work work for and what to buy with their incomes. d. Firms and households guide the decisions based on profit and and self-interest. ANS: B BLM: Remember


Average

REF: 9

97. In what economy economy are the decisions of firms and households households guided guided by profit and self-interest? a. a command economy b. a traditional economy c. a market economy d. in every economy ANS: C BLM: Remember


Easy

REF: 9



















Test Bank

Chapter 1


101. How do prices direct economic activity in a market market economy? economy? a. by influencing the actions actions of buyers buyers and sellers sellers b. by reducing scarcity of the goods and services produced produced c. by eliminating the need for government intervention d. by allocating allocating goods goods and services produced produced in the most equitable way ANS: A BLM: Remember


Average

REF: 10

102. In a market economy, what do prices reflect? a. the popularity popularity of a good in society b. the cost to society of making making the good c. the quantity quantity society will ultimately choose to produce d. the level of wealth in society ANS: B BLM: Remember


Average

REF: 10





















Test Bank

Chapter 1


107. Which of the following following observations observations was made made famous by Adam Adam Smith in his book The Wealth of Nations? a. There is no such thing as a free lunch. lunch. b. People buy more when prices are low than than when prices are high. c. People tend to spend more than they earn.



















Test Bank

Chapter 1

112. When was Adam Smith’s book The Wealth of Nations published? a. 1692 b. 1776 c. 1816 d. 1936




















Test Bank

Chapter 1

118. What is one component component necessary for markets to work? a. government intervention b. a benevolent society c. property rights d. abundant resources




















Test Bank

Chapter 1


123. Which of the following following is NOT a reason for for the government to intervene in the market? a. to promote efficiency b. to enforce property rights c. to promote equity d. to protect an industry



















Test Bank

Chapter 1

129. What can cause market failure? a. low consumer demand b. government intervention and price controls c. externalities and market power d. high prices and foreign competition










































































































































































































Ch01 Micro6Ce TB

Recommend Documents