Ecomonic

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ch1 class student ID name
Multiple Choice
Identify the choice that best completes the statement or answers the question.

____1.Which of the following is correct?
a.|The word economy comes from the Greek word for “rational thinker.”| b.|Economists study the management of scarce resources.|
c.|Because economists believe that people pursue their best interests, they are not interested in how people interact.| d.|All of the above are correct.|

____2.Which of the following is correct concerning Trade-offs? a.|Recognizing that trade-offs exist is the only thing people need to know to determine what decisions to make.| b.|Government policies generally do not involve a trade-off between equity and efficiency.| c.|Laws that require firms to reduce pollution involve trade-offs.| d.|None of the above are correct.|

____3.When computing the opportunity cost of attending a football game you should include a.|the price you pay for the ticket and the value of your time.| b.|the price you pay for the ticket, but not the value of your time.| c.|the value of your time, but not the price you pay for the ticket.| d.|neither the price of the ticket nor the value of your time.|

____4.You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should a.|compare the total cost of your education to the total benefits of your education.| b.|compare the total cost of your education to the benefits of staying one more semester.| c.|compare the cost of staying one more semester to the benefits of staying one more semester.| d.|compare the total benefits of your education to the cost of staying one more semester.|

____5.Senator Smith argues that replacing the income tax with a national sales tax would increase the level of output. Senator Wells objects that this policy would benefit the rich at the expense of the poor. a.|Both Senators’ arguments are primarily about equity.|

b.|Both Senators’ arguments are primarily about efficiency.| c.|Senator Smith’s argument is primarily about equity, while Senator Well’s argument is primarily about efficiency.| d.|Senator Smith’s argument is primarily about efficiency, while Senator Well’s argument is primarily about equity.|

____6.Which of the following could reduce economic efficiency? a.|laws that encourage lawsuits.|
b.|policies that redistribute income|
c.|policies that impose significant restrictions on international trade| d.|All of the above are correct|

____7.Suppose that a country that has a high level of output per person agrees to trade with a country that has a low level of output per person. Which country can benefit? a.|only the one with a low level of output per person.|

b.|only the one with a high level of output per person.|
c.|both|
d.|neither|

____8.Prices usually reflect
a.|only the value of a good to society.|
b.|only the cost to society of making a good.|
c.|both the value of a good to society and the cost to society of making the good.| d.|neither the value of a good to society nor the cost to society of making the good.|

____9.The invisible hand refers to
a.|how central planners made economic decisions.|
b.|how the decisions of households and firms lead to desirable market outcomes.| c.|the control that large firms have over the economy.|
d.|government regulations without which the economy would be less efficient.|

____10.For which of the following problems can well-designed public policy enhance economic efficiency? a.|both externalities and market power|
b.|externalities, but not market power|
c.|market power, but not externalities|
d.|neither externalities nor market power|

____11.Public policies
a.|may be able to improve either economic efficiency or equity.| b.|may be able to improve economic efficiency but cannot improve equity.| c.|may be able to improve equity but cannot...
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