SOLUTIONS TO TEXT PROBLEMS:
Quick Quizzes
1. There are many possible answers.
2. A country is better o by trading because trade allows more goods and services to be
3. The three principles that describe how the economy, as a whole, works are: (1) a
Chapter Quick Quiz
1. a
Questions for Review
1. Examples of trade-os include time trade-os (such as studying one subject over
2. To 3gure out the opportunity cost of a vacation to Disney World, you would include the
3. The marginal bene3t of a glass of water depends on your circumstances. If you have just
1
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accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website or school-approved learning management system for
classroom use.
Chapter 1/Ten Principles of Economics ❖ 2
4. Policymakers need to think about incentives so they can understand how people will
5. Trade among countries is not a game with some losers and some winners because trade
6. The “invisible hand” of the marketplace represents the idea that even though individuals
7. The two main causes of market failure are externalities and market power. An externality
8. Productivity is important because a country’s standard of living depends on its ability to
9. In,ation is an increase in the overall level of prices in the economy. In,ation is caused by
10. In,ation and unemployment are negatively related in the short run. Thus, reducing
Problems and Applications
1. a. A family deciding whether to buy a new car faces a trade-o between the cost of
the car and other things they might want to buy. For example, buying the car
b. For a member of Congress deciding how much to spend on national parks, one
c. When a company president decides whether to open a new factory, the decision
© 2018 Cengage Learning®. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website or school-approved learning management system for
classroom use.
Chapter 1/Ten Principles of Economics ❖ 3
d. In deciding how much to prepare for class, a professor faces a trade-o between
e. In deciding whether to go to graduate school, the student faces a trade-o
between his possible earnings with a bachelor’s degree and the bene3ts of an
2. When the bene3ts of something are psychological, such as going on a vacation, it is not
easy to compare bene3ts to costs to determine if it is worth doing. But there are two
3. If you are thinking of going skiing instead of working at your part-time job, the cost of
4. If you spend $100 now instead of saving it for a year and earning 5 percent interest, you
5. The fact that you have already sunk $5 million is not relevant to your decision anymore,
because that money is gone. What matters now is the chance to earn pro3ts at the
6. a. When welfare recipients have their bene3ts cut o after two years, they have a
b. The loss of bene3ts means that someone who cannot 3nd a job will get no income at
7. a. EKciency: The market failure comes from the market power of the cable TV
3rm.
b. Equality
© 2018 Cengage Learning®. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website or school-approved learning management system for
classroom use.
Chapter 1/Ten Principles of Economics ❖ 4
8. a. If everyone were guaranteed the best healthcare possible, much more of our nation’s
output would be devoted to medical care than is now the case. Would that be
b. When workers are laid o, equality considerations argue for the unemployment
bene3ts system to provide them with some income until they can 3nd new jobs. After
9. Because average income in the United States has roughly doubled every 35 years, we
are likely to have a better standard of living than our parents, and a much better
10. If Americans save more and it leads to more spending on factories, there will be an
increase in production and productivity, because the same number of workers will have
11. When governments print money, they impose a “tax” on anyone who is holding money,
© 2018 Cengage Learning®. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or
service or otherwise on a password-protected website or school-approved learning management system for
classroom use.