Ch 01: True False Short Answer and Essay
001. Scarcity means that there is less of a good or resource available than people wish to have.
a. True
b. False
ANS: True
002. Economics is exclusively the study of how evenly goods and services are distributed within society.
a. True
b. False
ANS: False
003. Economics is the study of how society allocates its unlimited resources.
a. True
b. False
ANS: False
004. Because resources are scarce, a society cannot give all individuals the standard of living to which each
aspires.
a. True
b. False
ANS: True
005. Equality means distributing society’s resources in the most efficient manner.
a. True
b. False
ANS: False
006. Economists study how people make decisions.
a. True
b. False
ANS: True
007. With careful planning, we can usually get something that we like without having to give up something else
that we like.
, a. True
b. False
ANS: False
008. Choosing not to attend a music festival so that you can study for your economics exam is an example of a
tradeoff.
a. True
b. False
ANS: True
009. The classic tradeoff between “guns and butter” states that when a society spends more on national defense,
it has less to spend on consumer goods to raise the standard of living.
a. True
b. False
ANS: True
010. Efficiency means everyone in the economy should receive an equal share of the goods and services
produced.
a. True
b. False
ANS: False
011. Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.
a. True
b. False
ANS: True
012. Government policies that improve equality usually increase efficiency at the same time.
a. True
b. False
ANS: False
013. Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.
a. True
b. False
,ANS: True
014. An individual deciding how to allocate one's limited time is dealing with both scarcity and trade-offs.
a. True
b. False
ANS: True
015. The cost of an action is measured in terms of foregone opportunities.
a. True
b. False
ANS: True
016. Tuition is the single-largest cost of attending college for most students.
a. True
b. False
ANS: False
017. If wages for accountants rose, then accountants’ leisure time would have a lower opportunity cost.
a. True
b. False
ANS: False
018. A marginal change is a small incremental adjustment to an existing plan of action.
a. True
b. False
ANS: True
019. An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of
that activity.
a. True
b. False
ANS: False
020. If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be
irrational for the railroad to allow any passenger to ride for less than $75.
a. True
, b. False
ANS: False
021. The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they
are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior.
a. True
b. False
ANS: False
022. A rational decision maker takes an action if and only if the marginal cost exceeds the marginal benefit.
a. True
b. False
ANS: False
023. Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law
that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which
results in an increase in drunk driving. This illustrates the principle that people respond to incentives.
a. True
b. False
ANS: True
024. A tax on gasoline is an incentive that encourages people to drive smaller and more fuel-efficient cars.
a. True
b. False
ANS: True
025. To say people respond to incentives means that people may alter their decisions when the costs and benefits
of an action change.
a. True
b. False
ANS: True
026. Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's
productivity.
a. True
b. False
001. Scarcity means that there is less of a good or resource available than people wish to have.
a. True
b. False
ANS: True
002. Economics is exclusively the study of how evenly goods and services are distributed within society.
a. True
b. False
ANS: False
003. Economics is the study of how society allocates its unlimited resources.
a. True
b. False
ANS: False
004. Because resources are scarce, a society cannot give all individuals the standard of living to which each
aspires.
a. True
b. False
ANS: True
005. Equality means distributing society’s resources in the most efficient manner.
a. True
b. False
ANS: False
006. Economists study how people make decisions.
a. True
b. False
ANS: True
007. With careful planning, we can usually get something that we like without having to give up something else
that we like.
, a. True
b. False
ANS: False
008. Choosing not to attend a music festival so that you can study for your economics exam is an example of a
tradeoff.
a. True
b. False
ANS: True
009. The classic tradeoff between “guns and butter” states that when a society spends more on national defense,
it has less to spend on consumer goods to raise the standard of living.
a. True
b. False
ANS: True
010. Efficiency means everyone in the economy should receive an equal share of the goods and services
produced.
a. True
b. False
ANS: False
011. Equality refers to how the pie is divided, and efficiency refers to the size of the economic pie.
a. True
b. False
ANS: True
012. Government policies that improve equality usually increase efficiency at the same time.
a. True
b. False
ANS: False
013. Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.
a. True
b. False
,ANS: True
014. An individual deciding how to allocate one's limited time is dealing with both scarcity and trade-offs.
a. True
b. False
ANS: True
015. The cost of an action is measured in terms of foregone opportunities.
a. True
b. False
ANS: True
016. Tuition is the single-largest cost of attending college for most students.
a. True
b. False
ANS: False
017. If wages for accountants rose, then accountants’ leisure time would have a lower opportunity cost.
a. True
b. False
ANS: False
018. A marginal change is a small incremental adjustment to an existing plan of action.
a. True
b. False
ANS: True
019. An increase in the marginal cost of an activity necessarily means that people will no longer engage in any of
that activity.
a. True
b. False
ANS: False
020. If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be
irrational for the railroad to allow any passenger to ride for less than $75.
a. True
, b. False
ANS: False
021. The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they
are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior.
a. True
b. False
ANS: False
022. A rational decision maker takes an action if and only if the marginal cost exceeds the marginal benefit.
a. True
b. False
ANS: False
023. Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law
that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which
results in an increase in drunk driving. This illustrates the principle that people respond to incentives.
a. True
b. False
ANS: True
024. A tax on gasoline is an incentive that encourages people to drive smaller and more fuel-efficient cars.
a. True
b. False
ANS: True
025. To say people respond to incentives means that people may alter their decisions when the costs and benefits
of an action change.
a. True
b. False
ANS: True
026. Trade allows each person to specialize in the activities he or she does best, thus increasing each individual's
productivity.
a. True
b. False
