Page 21
106.
The phrase gains from trade refers to the:
A)
profits obtained from sales of a good or service.
B)
increase in total output that is realized when individuals specialize in particular
tasks and trade with each other.
C)
gains that one obtains by taking advantage of an uninformed buyer and selling at a
higher than average price.
D)
gains that one obtains by taking advantage of a temporary discount, or sale price.
107.
Individuals gain from trade because:
A)
of specialization in production.
B)
they can sell at a lower price than they can buy at.
C)
self-sufficiency is efficient.
D)
of the principle of absolute advantage.
108.
Specialization in production was the starting point for:
A)
The Wealth of Nations, by Adam Smith.
B)
The General Theory, by John Maynard Keynes.
C)
Das Kapital, by Karl Marx.
D)
Free to Choose, by Milton Friedman.
109.
Two neighbors, Molly and Sandy, are separated by a white picket fence. Each neighbor
has a garden that grows tomatoes and peppers. To gain from trade, _____ can trade
_____ to _____ for _____ if _____ is the more efficient grower of peppers.
A)
Molly; peppers; Sandy; peppers; Molly
B)
Sandy; tomatoes; Molly; peppers; Sandy
C)
Sandy; peppers; Molly; tomatoes; Molly
D)
Molly; peppers; Sandy; tomatoes; Molly
110.
If equilibrium exists:
A)
all individuals must have an equal amount of income.
B)
the price in that market will not fluctuate by more than 5%.
C)
there will be no remaining opportunities for individuals to make themselves better
off.
D)
the number of buyers will equal the number of sellers.
Page 22
111.
If a market is in disequilibrium:
A)
it will continue unless there is government intervention.
B)
no individual will be better off doing something different.
C)
there are opportunities for some people to make themselves better off.
D)
it must be because the government has intervened in the market, resulting in the
market’s failure to reach equilibrium.
112.
Equilibrium exists when:
A)
output is distributed equitably.
B)
scarcity is eliminated.
C)
an individual would be better off taking a different action.
D)
no individual has an incentive to change his or her behavior.
113.
Which statement is TRUE?
A)
The concept of equilibrium requires that all individuals have an equal amount of
income.
B)
If a market is in equilibrium, the price in that market will not fluctuate by more
than 5%.
C)
If a market is in equilibrium, there will be no remaining opportunities for
individuals to make themselves better off.
D)
A market is in equilibrium when the number of buyers is equal to the number of
sellers.
114.
Which statement is CORRECT?
A)
Resource scarcity is not a major concern in the rich countries of the world.
B)
Most opportunity costs are zero.
C)
An economic situation is in equilibrium when no individual would be better off
taking a different action.
D)
Some very talented, skilled individuals who can do everything better than most
people should not specialize in doing any one thing.
115.
In baseball, when one manager decides to send in a pinch hitter, the other manager often
changes pitchers. This sometimes causes the first manager to send in a new pinch hitter.
Once both managers decide that no more player substitutions will benefit their team, the
situation has reached:
A)
efficiency.
B)
equilibrium.
C)
equity.
D)
the market.
Page 23
116.
Economists use the term equilibrium to describe situation when:
A)
individuals are equal.
B)
goods are distributed equitably .
C)
there are equal number of buyers and sellers..
D)
no individual would be better off taking a different action or no individual has an
incentive to change his or her behavior.
117.
A dozen friends got together to celebrate a birthday. If the birthday cake is cut into 12
pieces of the same size and each of the 12 partygoers gets a slice, this cake distribution
is:
A)
efficient but not equitable.
B)
equitable but not efficient.
C)
efficient and equitable.
D)
equitable.
118.
An economy is efficient if it is:
A)
possible to produce more of all goods and services.
B)
possible to produce more of one good without producing less of another.
C)
not possible to produce more of one good without producing less of another good.
D)
producing a combination of goods.
119.
If all of the opportunities to make someone better off (without making someone else
worse off) have been exploited, an economy is:
A)
equitable.
B)
inefficient.
C)
marginally optimal.
D)
efficient.
120.
A trade-off between equity and efficiency may NOT exist because of the fact that:
A)
allocating resources fairly may increase efficiency.
B)
the efficient allocation of resources may lead to an outcome that most people
consider unfair.
C)
policies that promote equity often come at a cost of decreased efficiency.
D)
allocating resources fairly may cause inefficiency.
Page 24
121.
An economy is efficient when:
A)
the problem of scarcity is eliminated.
B)
output is distributed equitably.
C)
all opportunities to make some people better off without making other people
worse off have been taken.
D)
all opportunities to make some people worse off without making other people
better off have been taken.
122.
Economists believe that resources should be used as efficiently as possible to:
A)
achieve society’s goals.
B)
eliminate scarcity.
C)
reduce inequity.
D)
maximize profits.
123.
If an economy has NOT achieved efficiency, there must be ways to:
A)
increase opportunity costs.
B)
eliminate inequity.
C)
make some people better off without making others worse off.
D)
increase the incentives for its citizens to follow their own self-interest.
124.
Resources are being used efficiently when:
A)
scarcity is no longer an issue.
B)
they are also used equitably.
C)
every opportunity to make people better off without making others worse off has
been seized.
D)
gains from trade are still available.
125.
Equity means that:
A)
everyone gets an efficient share of the goods and services produced.
B)
everyone gets his or her fair share of the goods and services produced.
C)
more of some goods and services can be produced only if the production of others
is reduced.
D)
more of all goods and services may be produced.
126.
Which statement is NOT a reason that markets usually lead to efficiency?
A)
People are naturally efficient.
B)
Individuals have incentives to offer what people want.
C)
Trade encourages efficiency.
D)
Inefficient firms will lose business.
Page 25
127.
An increase in efficiency means that an economy has:
A)
reduced its opportunity costs.
B)
increased the equity of its distribution of goods and services.
C)
made more people better off without making others worse off.
D)
increased the incentives for its citizens to follow their own self-interest.
128.
The trade-off between equity and efficiency occurs because:
A)
the efficient allocation of resources is bad for business and industry.
B)
allocating resources fairly may cause inefficiency.
C)
everyone must pay more tax to ensure equity.
D)
efficiency is politically unpopular.
129.
Economists define an efficient use of resources as a situation in which:
A)
one person can be made better off but only by making another person worse off.
B)
all persons can be made better off without making anyone worse off.
C)
all persons receive an equal share of the resources.
D)
all persons are made worse off when one person is made better off.
130.
In most cases, economic efficiency is achieved through:
A)
incentives built into a market economy.
B)
reducing regulation.
C)
individuals seeking out opportunities that involve no risk.
D)
maximizing equity.
131.
An economy has achieved _____ if it _____ pass up any opportunities to make some
people better off without making others worse off.
A)
efficiency; does not
B)
equity; does
C)
efficiency; does
D)
equity; does not
132.
Which statement is FALSE?
A)
Efficiency exists when an economy realizes the maximum possible gains from
trade given the available resources.
B)
If an economy is efficient, it is possible to make only a few people better off
without reducing other individuals’ economic welfare.
C)
Economic efficiency exists when all opportunities to make people better off have
been fully exploited.
D)
Free markets usually lead to efficiency, but not necessarily equity.
Page 26
133.
If in Equitania, 20% of the population receive 80% of the income and the remaining
80% of the population receive 20% of the income, Equitania’s economy:
A)
is efficient.
B)
cannot be efficient since efficiency requires a more nearly equal distribution of
income.
C)
may be efficient.
D)
is neither efficient nor equitable.
134.
The incentives built into the market economy ensure that resources are put to good use
and that opportunities to make people better off are not wasted. This means that:
A)
people usually are not selfish enough to exploit opportunities to make themselves
better off.
B)
markets move toward equilibrium.
C)
resources should be used as efficiently as possible to achieve society’s goals.
D)
markets usually lead to efficiency.
135.
When markets fail:
A)
government intervention may help.
B)
the market realizes the maximum possible gains from trade given the available
resources.
C)
there may still be an efficient allocation of resources.
D)
no goods and services are produced.
136.
When the nations that constitute the Organization of Petroleum Exporting Countries
(OPEC) restrict the supply of oil to increase their profits, the oil market:
A)
achieves an efficient outcome because profits increase.
B)
achieves an equitable outcome because the nations with oil resources receive the
profits commensurate with that resource.
C)
fails because there is no longer an efficient allocation of resources.
D)
fails because there is no longer an equitable allocation of resources.
137.
Everyone benefits from street lighting, yet the marginal benefit to any one individual
usually falls short of the marginal cost. This is an example of:
A)
individual actions whose side effects are not properly taken into account by the
market.
B)
one party preventing mutually beneficial trades in an attempt to capture a greater
share of resources for itself.
C)
the unsuitability of some goods for efficient management by markets.
D)
regulating self-interest.
Page 27
138.
When markets don’t achieve efficiency:
A)
they must achieve equity.
B)
the government must be participating in the market.
C)
the government may intervene to improve society’s welfare.
D)
they should be closed.
139.
One parent picks up the child from day care while the other parent goes to the grocery
store and begins to make dinner. This is an example of the principle that:
A)
markets move toward equilibrium.
B)
government policies can change spending.
C)
there are gains from trade.
D)
markets usually lead to efficiency.
140.
Which principle underlies the interaction of individual choices?
A)
Choices are necessary because resources are scarce.
B)
There are gains from trade.
C)
“How Much” is a decision at the margin
D)
People usually respond to incentives, exploiting opportunities to make themselves
better off.
141.
It is cheaper to produce corn in Kansas than in Death Valley, California, because corn
needs a lot of water and moderate temperatures. Which economic concept does this
statement BEST represent?
A)
Government policies can change spending.
B)
Markets move toward equilibrium.
C)
Resources should be used as efficiently as possible to achieve society’s goals.
D)
One person’s spending is another person’s income.
142.
Which statement is NOT one of the five principles for understanding how individual
choices interact?
A)
There are gains from trade.
B)
Markets move toward equilibrium.
C)
Resources should be used as efficiently as possible to achieve society’s goals.
D)
Overall spending sometimes gets out of line with the economy’s productive
capability.
Page 28
143.
When a factory closes, why is it bad news for the local restaurants?
A)
Sales taxes are likely to increase.
B)
Unemployed factory workers have lower incomes and are less likely to dine out.
C)
Unemployed factory workers are eligible for government unemployment benefits.
D)
The opportunity cost of dining out has fallen.
144.
Because one person’s spending is another person’s income:
A)
if one group in the economy spends more, the incomes of other groups will
decrease.
B)
if one group in the economy spends less, the incomes of other groups will increase.
C)
if one group in the economy spends more, the incomes of other groups will
increase.
D)
spending by one group does not influence the income of any other group.
145.
One person’s spending is another person’s:
A)
loss.
B)
income.
C)
physical capital.
D)
opportunity cost.
146.
Buying vegetables at a farmers’ market benefits the community because:
A)
it is not possible to be self-sufficient when it comes to growing food.
B)
this will eliminate the opportunity cost of buying food.
C)
buying locally will decrease human capital in the community.
D)
one person’s local spending will increase another local person’s income.
147.
If Allison drives to a large city 100 miles from her small community to do her
back-to-school shopping, this will:
A)
hurt Allison’s community because Allison’s spending will be income for people in
the large city.
B)
hurt the city because Allison will take the goods that she purchases back home to
her small town.
C)
help Allison’s community because Allison’s shopping in the big city leaves more
goods for the other small-town residents to buy.
D)
help the city because people from small towns usually buy things that people in big
cities don’t want.
Page 29
148.
A grocery store benefits when a new furniture factory moves to town and hires workers
because the:
A)
new jobs at the factory will increase local incomes, some of which will be spent at
the grocery store.
B)
new factory will eliminate scarcity in the area.
C)
presence of a new factory will guarantee that resources are used efficiently.
D)
local circular flow will be smaller with a new factory in town.
149.
If the value of homes in University City increases and, as a result, the people of
University City spend more, incomes in University City will:
A)
decrease.
B)
increase.
C)
remain the same.
D)
be unaffected.
150.
If the value of beach-front property in Beach City decreases, the people of Beach City
will likely spend _____, causing incomes in Beach City to _____.
A)
more; increase
B)
more; decrease
C)
less; increase
D)
less; decrease
151.
Which statement demonstrates one of the three principles of economy-wide
interactions?
A)
A student chooses to rent a movie with friends, rather than study for an economics
quiz.
B)
Your roommate offers to pay for the movie tickets if you drive to the theater.
C)
A city builds a new public park on the grounds of an abandoned warehouse.
D)
In 2008, fearing a recession, Congress approved a White House proposal to rebate
some taxes for 2007.
152.
Sometimes the government varies its spending, depending on the needs of the country.
Which economic principle does this statement BEST represent?
A)
Resources should be used efficiently to achieve society’s goals.
B)
When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
C)
The true cost of something is its opportunity cost.
D)
Government policies can change spending.
Page 30
153.
Lena and Jess are roommates. Lena hates to clean the bathroom. Jess will agree to clean
the bathroom only if Lena vacuums the living room. Which economic concept does this
statement BEST represent?
A)
When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
B)
“How much” is a decision at the margin.
C)
One person’s spending is another person’s income.
D)
There are gains from trade.
154.
Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before
they can go to the high school football game. Nate mows the lawn and Dylan cleans up
the rooms, and they make it to the football game on time. Which economic concept does
this statement BEST represent?
A)
“How Much” is a decision at the margin.
B)
There are gains from trade.
C)
Markets usually lead to efficiency.
D)
One person’s spending is another person’s income.
155.
You notice that when a new yoga class is offered at the student recreation center at a
highly desirable time, some students from the other yoga classes go to the new class
instead. Which economic principle does this statement BEST represent?
A)
Choices are necessary because resources are scarce.
B)
The true cost of something is its opportunity cost.
C)
People usually respond to incentives, exploiting opportunities to make themselves
better off.
D)
“How Much” is a decision a the margin.
156.
The federal government regulates how much carbon dioxide a factory can emit. Which
economic principle does this statement BEST represent?
A)
There are gains from trade.
B)
“How much” is a decision at the margin.
C)
Markets usually lead to efficiency.
D)
When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
Page 31
157.
All children have to be immunized against polio, measles, mumps, and other diseases. If
you don’t have enough money to pay for the immunizations, they will be provided free
at the county health clinic. Which economic principle does this statement BEST
represent?
A)
People usually respond to incentives, exploiting opportunities to make themselves
better off.
B)
Resources should be used efficiently to achieve society’s goals.
C)
When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
D)
Government policies can change spending.
158.
The government of a small town has decided to ban smoking in all restaurants, stores,
and government offices. This is an example of the principle that:
A)
one person’s spending is another person’s income.
B)
when markets fail to achieve efficiency, government intervention can improve
society’s welfare.
C)
there are gains from trade.
D)
“How Much” is a decision at the margin.
159.
I know when I shop at the local grocery store, I am helping my community. Which
economic principle does this statement BEST represent?
A)
People usually respond to incentives, exploiting opportunities to make themselves
better off.
B)
There are gains from trade.
C)
One person’s spending is another person’s income.
D)
Overall spending sometimes gets out of line with the economy’s productive
capacity.
160.
Owen had a typewriter shop, but he went out of business because no one buys
typewriters anymore. Which economic principle does this statement BEST represent?
A)
Choices are necessary because resources are scarce.
B)
People usually respond to incentives, exploiting opportunities to make themselves
better off.
C)
Markets move toward equilibrium.
D)
One person’s spending is another person’s income.
Page 32
161.
During the Great Depression, consumers and producers in the United States
dramatically reduced their spending relative to the quantity of goods and services
available at the time. Which economic principle does this statement BEST represent?
A)
Choices are necessary because resources are scarce.
B)
When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
C)
Overall spending sometimes gets out of line with the economy’s productive
capacity.
D)
Government policies can change spending.
162.
When people want more goods and services than are available, the economy undergoes
inflation. Which economic principle does this statement BEST represent?
A)
There are gains from trade.
B)
When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
C)
Overall spending sometimes gets out of line with the economy’s productive
capacity.
D)
Government policies can change spending.
163.
Because the United States is a rich nation, free health care can be provided for all
citizens without considering the issue of scarcity.
A)
True
B)
False
164.
The study of economics arises because of the necessity of choice, and the necessity of
choice arises because of the fundamental problem of scarcity of resources.
A)
True
B)
False
165.
Because of the opportunity cost, if the United States spends $87 billion in the rebuilding
of Iraq, it has to forgo the opportunity to spend $87 billion on some other program.
A)
True
B)
False
166.
In 2003, Congress passed a tax cut. The country did NOT incur any opportunity cost
from this decision.
A)
True
B)
False