Efficiency refers to the size of the economic pie; equality refers to how the pie is divided. Government policies usually improve upon both equality and efficiency. As long as the economic pie continually gets larger, no one will have to go hungry. Efficiency and equality can both be achieved if the economic pie is cut into equal pieces.
2. Pete receives $50 as a birthday gift. In deciding how to spend the money, he narrows his options down to four choices: Option A, Option B, Option C, and Option D. Each option costs $50. Finally he decides on Option B. The opportunity cost of this decision is (Points : 1) the value to Pete of the option he would have chosen had Option B not been available. the value to Pete of Options A, C and D combined.
3. Making rational decisions "at the margin" means that people (Points : 1) make those decisions that do not impose a marginal cost. evaluate how easily a decision can be reversed if problems arise. compare the marginal costs and marginal benefits of each decision. always calculate the marginal dollar costs for each decision.
4. Suppose the state of Iowa passes a law that increases the price of cigarettes by $1 per pack. As a result, residents in Iowa start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate? (Points : 1) People respond to incentives
Rational people think at the margin
Trade can make everyone better off
Markets are usually a good way to organize economic activity
5. A furniture maker currently produces 100 tables per week and sells them for a profit. She is considering expanding her operation in order to make more tables. Should she expand? (Points : 1) Yes, because making tables is profitable.
No, because she may not be able to sell the additional tables. It depends on the marginal cost of producing more tables and the marginal revenue she will earn from selling more tables. It depends on the average cost of producing more tables and the average revenue she will earn from selling more tables.
6. Communist countries worked under the premise that (Points : 1) markets were the best way to organize economic activity. central planners were in the best position to determine the allocation of scarce resources in the economy. households and firms, guided by an “invisible hand,” could achieve the most efficient allocation of scarce resources. allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources.
7. Which of the following could reduce economic efficiency? (Points : 1) laws that encourage lawsuits.
policies that redistribute income
policies that impose significant restrictions on international trade All of the above are correct
8. In a particular country in 1998, the average worker needed to work 25 hours to produce 40 units of output. In that same country in 2008, the average worker needed to work 40 hours to produce 68 units of output. In that country, the productivity of the average worker (Points : 1) decreased by 1.7 percent between 1998 and 2008.
remained unchanged between 1998 and 2008.
increased by 4.75 percent between 1998 and 2008.
increased by 6.25 percent between 1998 and 2008.
9. In a particular country in 2000, the average worker needed to work 40 hours to produce 55 units of output. In that same country in 2008, the average worker needed to work 30 hours to produce 45 units of output. In that country, the productivity of the average worker (Points : 1) decreased by about 6 percent between 2000 and 2008.
remained unchanged between 2000 and 2008....