Micro- Chapter 1

Economics is the study of the choices people make in attempting to manage their scarce resources.

Adam has $200 to spend and wants to buy either a new amplifier for his guitar or a new cell phone. Both the amplifier and the cell phone cost $200, so he can only buy one. This illustrates the basic concept that:

Every time we choose to do one thing, we give up doing something else. This best describes the economic principle of:

In economics, we measure the cost of something as

Which of the following is true about market economies?

Which of the following best summarizes a basic difference between market economies and centrally- planned economies?

A record company went out of business because too many of its customers downloaded its music illegally from the internet rather than purchasing the digital copy from the record company. This instance serves as an example of:

In the United States, real incomes have increased about 2 percent per year. At this growth rate, average income doubles every

Productivity is not important in economics.

It once took 90 percent of our population to grow our food but now it takes around 3 percent of the population. Which of the following statements is true?

A fundamental concept in economics is the idea of

The main reason households and societies must make many decisions is because

Which of the following is something an economist might study? a. Roger reads a newspaper article about the decline of the unemployment rate in the United States over the past few years. b. Claire sells her physics textbook from last semester to her roommate for half the price she paid for it. c. Phil decides to work overtime to earn extra income for his upcoming family vacation. d. All of these answers are correct.

in economics, the phrase "no such thing as a free lunch" means

Monica has $500 to spend and wants to buy either a new snowboard or a new laptop. Both the snowboard and the laptop cost around $500, so she can only buy one. This illustrates the basic concept that:

The concept of guns vs. butter represents the classic societal trade-off between spending on

Which of the following is true? a. Efficiency and equality occur only when our economic pie is cut into equal pieces. b. Efficiency refers to the size of the economic pie; equality refers to how the pie is divided. c. As long as our economic pie continues to grow, everyone will automatically get a bigger piece. d. Government policies always improve upon both equality and efficiency.

Efficiency means our economic pie is divided into equal slices

Kurt decides to spend 2 hours working rather than hanging out with his friends. He earns $10 per hour for work. His opportunity cost of working is

Normal cost of living expenses, such as room and board, are included in the opportunity cost of attending college.

One of the reasons that people tend to eat more in an "all you can eat" buffet is because the

Marginal thinking involves:

A marginal change is best described as:

Suppose a publishing company is deciding whether or not to print 50,000 additional copies of an economic textbook. The company should print the textbooks if:

Given an objective to minimize time spent shopping, deciding which "check-out" line to get into is an everyday example of marginal thinking.

If a tax on unhealthy food items like soda and candy bars causes people to purchase less of these items and eat more healthful alternatives. Which principle of economics does this illustrate?

Suppose the state of Ohio increases the tax on a pack of cigarettes and, in response to the policy change, Ohio smokers decide to buy cigarettes in neighboring states. Which principle of economics does this illustrate?

Public policy such as changes in the amount of taxes and subsidies can alter people's behavior by: a. offering an incentive or a disincentive to engage in an activity b. All of these answers are correct. cc. hanging the opportunity cost of an activity. d. changing the benefits and the costs of an activity.

An incentive is anything that is designed to change behavior.

Incentives are not important in economics.

Which of the following statements about trade is the most accurate? a. International trade has the potential to make all countries better off. b. International trade helps rich nations while hurting poor nations. c. International trade can only make a country better off if the country cannot produce the good itself. d. Trade makes some better off and others worse off.

The idea that trade can make everyone better off applies to which of the following: A. Families. B. All of these answers are correct. C. Different countries. D. States within the United States.

Nick is a guitar teacher and Raul is an accountant. If Nick teaches Raul to play the guitar in exchange for Raul helping with Nick's bookkeeping:

When countries trade, one country wins and the other country loses.

When countries trade, it is possible for both countries to benefit.

A key feature of market economies is that market economies:

The economy of the North Korea is best described as a

According to the FYI insert in your textbook, in The Wealth of Nations, Adam Smith made which of the following observations?

Adam Smith's 'invisible hand' refers to:

China is an example of a centrally-planned economy.

Most countries on the planet use a market-based approach to organizing economic activity.

Reasons why we need government, even in a market economy, include

Which of the following is a way in which the government helps enforce property rights?

When the government intervenes in the economy to promote efficiency, it means that the government is trying to:

A reason for government involvement in a market economy is: a. markets sometimes fail to produce a fair distribution of economic resources. b. All of these answers are correct. c. property rights have to be enforced to promote innovation in an economy. d. markets sometimes fail to produce an efficient allocation of resources.

Thousands of people develop asthma and breathing problems from exposure to air pollution. This is an example a:

There is no need for a government in a market economy.

The government plays an important role in a market economy.

The term "productivity"

Productivity is defined as the

The standard of living in a country is most closely tied to its

A direct or positive relationship exists between a country's

US citizens have better nutrition, better healthcare, and a longer life expectancy than citizens of Nigeria. Which of the following conclusions can be drawn from this statement? a. Average income in the US is higher than the average income Nigeria. b. All of these conclusions are correct. c. Productivity in the US is higher than productivity in Nigeria. d. US citizens have a higher standard of living than Nigerians.

Historically, real income in the United States has risen about 2 percent per year.

There is no relationship between a country's productivity and its standard of living.

The increase in living standards of Americans over the past century is mainly due to

A main cause of large or persistent inflation is

The last time the United States experienced prolonged high inflation was during

The last time the United States experienced high inflation was during the 1970s.

In the United States, inflation was much higher during the 1990s than it was during the 1970s.

In the 1990s, inflation in the United States was

In the short run, an increase in the money supply will likely cause

If the Federal Reserve announces it will be decreasing the money supply through its monetary policy tools, it tells us the Federal Reserve is

If the Federal Reserve announces that it will be increasing the money supply through its monetary policy tools, it tells us the Federal Reserve is

Which of the following is an important cause of inflation?

Germany's hyperinflation after World War I was primarily due to the rapid increase in the supply of money.

In response to the Great Recession of 2007-2009, the US Congress and the Federal Reserve attempted to stimulate the economy by

In the short run, if the money supply increases, which of the following is NOT likely to happen?

Which of the following will happen in the short run if the money supply decreases?

Fluctuations in economic activity are known as

To measure a business cycle we look at what is happening to

Both the production of goods and services and the unemployment rate are used to measure the business cycle.

When a government program is justified based only on the number of jobs it will create,

The fact that there are far fewer farmers now than at the turn of the century has caused massive food shortages in the United States.

According to the concept of the 'broken window fallacy' protests and riots that result in the destruction of property are good for the economy.