222. In early 1996, the upper Midwest suffered record cold, with wind chills of fifty degrees below zero or worse. Yet,
grocery stores stocked fresh citrus fruit (obviously not grown locally). Why did grocers stock the fruit?
a.
the desire for profit
b.
concern for their neighbors
c.
the need to dispose of excess production
d.
government orders to distribute fruit
e.
All of the above are correct.
223. Adam Smith noted that people are adept at pursuing their own self-interests, and that ____ harnesses this self-interest
remarkably well.
a.
a totalitarian regime
b.
a market system
c.
a democratic government
d.
a closed system
224. In a market system, ____ distributes goods among consumers in accord with their tastes and preferences, using
voluntary exchange to determine who gets what.
a.
a price system
b.
a regulatory framework
c.
a democratic government
d.
a closed system
225. What mechanism assures that producers use inputs efficiently?
a.
governmental regulations on use of resources
b.
altruism
c.
the desire for profit
d.
an innate desire to be efficient
e.
All of the above are correct.
226. Which of the following observations is true?
a.
Free markets will achieve all of society’s goals.
b.
The ability to buy goods is divided equally among consumers.
c.
The market deals with efficiency in production through the profit motive.
d.
The market system encourages firms to use inputs wastefully.
227. What mechanism assures that firms produce outputs that consumers actually desire?
a.
b.
c.
d.
e.
228. Do markets solve all of society’s problems?
a.
Yes, markets are efficient and work well under nearly all circumstances.
b.
Yes, markets solve the problems of production and distribution.
c.
No, they do not solve problems such as unemployment and inflation.
d.
No, they hardly solve any problems at all.
e.
Uncertain, economic theory has no answer to this question.
229. According to Baumol and Blinder, recognition of the usefulness of markets
a.
labels a person as an apologist (defender) of capital.
b.
extends to some socialist countries, for example, China.
c.
should make totally free markets good for any society.
d.
makes one a radical.
230. Both conservatives and liberals tend to approve of markets because
a.
markets are effective in solving many of society’s problems.
b.
markets work well in all cases, and can be relied upon to solve problems.
c.
their goals are similar enough that they can rely on the same means.
d.
production is the most important goal, and market systems are very productive.
e.
of all of the above.
231. Goods are distributed among people by means of:
a.
a central authority
b.
prices
c.
markets
d.
all of these
232. Free markets can:
a.
prouduce goods and services with maximum efficiency
b.
solve unemployment
c.
protect the environment
d.
all of these
233. Carefully define the following terms and explain their importance to the study of economics.
a.
resources
b.
rational decision
c.
scarcity
d.
opportunity cost
materials, labor, and capital.
resources.
cost.
234. President Barack Obama pushed forward a national health care plan to increase the availability of medical care for all
Americans. How would one determine the opportunity cost of the proposal?
235. Economics is often described as a science of constrained choice. How do you justify this argument?
236. Suppose a presidential candidate campaigns on the need to improve U.S. infrastructure, a term for capital goods like
bridges, highways, and technology (much of it publicly owned). Which would lead to faster growth: government
expenditure on capital goods or expenditure on consumption goods such as sports stadiums? Illustrate your answer,
drawing appropriate production possibilities frontiers accompanied by an explanation.
237. See table below. Does production exhibit increasing costs? Which ring and machine combination will achieve the
highest growth in the production of mood rings?
Saturn Rings
Machines
30
0
20
5
10
8
0
10
238. At various times, the United States has undergone the painful process of reducing military spending. Military bases
from the Carolinas to California pleaded to be spared, citing huge job losses if they close. How can one rationally decide
which bases to shut down, given the necessity of jobs?
239. Explain the relationship between opportunity costs and money costs. Can they be treated as identical?
240. “OPEC is exploiting the United States by selling us oil at inflated prices.” Agree or disagree.
241. You have invested $1,000 in a stock whose price is increasing at 10 percent a year. Your stock broker, who is never
wrong, recommends a stock rising at 20 percent a year. Assuming the broker earns 4 percent of the stock’s value on any
purchase or sale of the stock, should you take her recommendation?
242. In the 1960s, the lyrics of a rock song asked, “Did you ever have to make up your mind to say yes to one and leave
the others behind?” What economic principle was demonstrated in the song? Explain.
243. Draw a production possibilities frontier for an economy, with the axes labeled “military goods” and “peace goods.”
Indicate the region that is attainable and the region that is not. Explain the shape of the curve-what assumptions did you
make in drawing it?
244. During World War II, Hitler would often order his army to hold a particular town or river “at all costs.” Was this
rational? If so, explain. If not, indicate which economic idea it violated.
245. Why is it inefficient for an economy to be inside the production possibilities frontier?
246. If an economy wants to experience economic growth, what decision must it make and carry out? Explain.
247. Some college students have claimed that because their incomes will be higher as a result of attending college, there is
no opportunity cost of attending college. Do you agree? Explain.
248. If Japan and the United States engage in trade, and Japan gains as a result of the trade, does that mean the United
States has lost in some manner?
249. What is division of labor? How does it raise efficiency and productivity?
250. What are the three coordination tasks which markets resolve?
251. A country can gain by importing a good from abroad even if that good can be produced more efficiently at home. Is
this statement true?
252. Why might the money price for something be higher than the opportunity cost? Why might it be lower? Give an
example of each to illustrate your answer.
253. Few bother to think about what makes Florida oranges show up daily in South Dakota supermarkets, but the people
of South Dakota are likely to think a great deal about this. Why does someone take the time and energy to assure that
oranges which are grown in Florida move more than 1,000 miles before they appear on grocery shelves?
254. A market system works very well in solving some basic problems of the economy but it fails in some cases. Provide
examples.
255. How do economists define efficiency? Elaborate.