ECON 1113
The Economics of Social Issues (S)
Oklahoma State University Main Campus
to all human beings regardless of environment
which of the following is often referred to as the basic postulate of economics?
incentives matter-- individuals respond in predictable ways to change in personal costs and benefits
the expression, "there's no such thing as a free lunch," implies that...
opportunity costs are incurred when resources are used to produce good and services
Maria wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $2.50 per gallon, the car wash costs $2, but if she buys 10 gallons of gasoline, the car wash is free. For Maria, the marginal cost of the tenth gallon of gasoline is
if the market price of a good is more than the opportunity cost of producing it,
producers will increase supply in the long run
who gains in a voluntary trade?
both the buyer and the seller
reflects that people are achieving higher income levels and living standards
voluntary trade promotes economic progress because it...
makes larger outputs possible as a result of specialization
high transaction costs will tend to
reduce the number of mutually beneficial exchanges
reduce transactions costs
if the internet helps buyers learn about the availability of products and find potential sellers more quickly,
the gains from trade will increase
the curve that shows the relationship between the price of a good and the quantity that consumers are willing to purchase at each price
if equilibrium is present in a market,
quantity demanded equals quantity supplied
when individuals increase their personal wealth through production and exchange, they...
increase the wealth of others
the pursuit of profit will
- encourage firms to produce efficiently and keep their costs low - " goods and services that consumers value highly relative to costs - discover and develop better products and lower-cost production methods
economic progress comes primarily through
entrepreneurial action directed by competitive markets
if you want to earn a high income you should figure out what others value because...
others will be willing to pay you for what they value
losses and business failures
will help redirect resources away from unproductive projects
the law of comparative advantage
specialization in goods and services one can produce at a low cost makes it possible for trading partners to produce a larger joint output
the income and living standards of a nation will increase when
the availability of goods and services that people value increases
when the government funds a project that will create jobs, the funds for the project...
will have to be either taxed or borrowed from the private sector
adam smith's invisible hand principle stresses the tendency of...
the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society
which of the following is a predictable, secondary effect of a sharp increase in gasoline prices?
producers will increase the production of fuel-efficient cars
in a free market economy, consumption and investment decisions
shape the future course of the national economy
why is private ownership an important source of economic prosperity
it provides owners with a strong incentive to develop and use assets in ways that others value highly
yes, the farmer will benefit from increased valuation of the land as the trees grow and the harvest moves closer
under a system of private property, could a 60-year-old owner of a tree farm benefit by planting and caring for a crop of douglas firs, most of which will not be ready to harvest for fifty years?
which of the following is most important if a country is going to achieve and sustain rapid economic growth?
an open and competitive capital market
even-handed enforcement of contracts fuels economic prosperity because it...
promotes gains from trade by minimizing the costs of entry and enforcement of contracts
competition is present when
freedom of entry and rival firms are present in a market
what role do losses play in a competitive market?
they send a message that more value would be created if the resources were used to produce other goods
which of the following best summarizes the importance of business failure and the central idea of "creative destruction in a market economy?"
business failure allows the assets and resources from that business to move into other areas where they will be more productive
if a nation is going to achieve and sustain a high rate of economic growth, it must
have a mechanism capable of attracting savings and channeling them into wealth-creating projects
"walmart is a low wage firm and this indicates that it exploits its workers" which of the following should cause one to question the validity of this
no one is required to work for walmart and, therefore, it must attract workers by paying them more attractive wages then they could earn elsewhere
in recent decades labor markets in european countries like italy and spain have been
more highly regulated and the unemployment rates of the european countries have been higher than the United States
if the government levies $20 billion in taxes to finance additional spending on military weapons, the net impact on total employment will be
small because the higher taxes will reduce spending in the private sector, which will tend to offset any jobs created by the government spending
private entrepreneurs are likely to make better investment decisions than central planners because
investors who make mistakes must bear the costs of these mistakes personally
which of the following contributed to the soaring housing prices of 2002-2005?
regulations designed to make housing more affordable increased the demand for housing and drove housing prices upward.
which of the following is true of regulation?
regulatory agencies often ignore the secondary effects of their actions and fail to foresee future problems
a persistent increase in the general level of prices
whatever is generally used to pay for goods, services and resources
monetary and price instability will
generate uncertainty, and encourage investors and businesses to move their activities to countries with a more stable monetary environment
which of the following will discourage investment
high and variable rates of inflation
the fed's low short-term interest rate policy of 2002 to 2004 encouraged decision makers to
borrow more and increase their purchases of housing
which of the following is true of taxes?
taxes drive a wedge between what buyers pay and what sellers receive
why do foreigners export goods and services to buyers in the united states?
they want to acquire dollars so they can purchase things from americans
trade restrictions like tariffs and quotas will
reduce the value of goods and services that we will be able to produce and consume
which of the following resulted from the smoot-hawley trade bill of 1930?
many countries responded by imposing higher tariffs on American products, and the volume of international trade fell sharply
in order to achieve a high economic freedom rating, a country must
protect property rights, enforce contracts even-handedly, and rely extensively on markets to allocate goods and services
which of the following would be included in US GDP?
the value of the spark plugs tim buys in order to do a tune-up on his car in new york
the value of all final goods and services produced in an economy during a year
which of the following is included in US GDP?
the production of tires by goodyear in Ohio that are purchased by you
one reason why GDP may not be an accurate measure of the quality of life is because...
if people decide to consume more leisure, GDP will decline
which of the following would be considered an intermediate good
the buttons used of a pair of levi button-down blue jeans
which of the following would NOT be considered a part of government purchases?
government payments to elderly individuals through the medicare program
personal consumption expenditures would include all of the following except:
a household's purchase of a new home
which of the following would be included as gross private domestic investment
a new factory built by a firm
suppose that during 2006 a nation's net private domestic investment was $3.5 billion. This would imply that:
after accounting for depreciation, the nation's capital stock grew by $3.5 billion during the year
the consumption of fixed capital refers to:
the allowance made for depreciation of an accidental damage to the nation's capital stock
suppose gross domestic investment is $625 billion. The consumption of fixed capital is $600 billion. Net Investment is:
suppose federal government purchases of goods and services is $350 billion, state government purchases of goods and services is $375 billion, and local government purchases of goods and services is $200 billion. What figure would GDP use for government purchases?
suppose the U.S. exports $800 billion of goods and services and imports $820 billion of goods and services. For the purposes of GDP, net exports are:
the least stable component of GDP is
gross private domestic investment
suppose that during 2000, real GDP increased by $25 billion. Which of the following is necessarily correct?
price increased and quantity was constant
suppose that nominal GDP increased from $11,700 billion in 2004 to $12,500 billion in 2006. Suppose that over this same period real GDP did not change. In this instance:
Suppose nominal GDP in 2004 is $8,000 billion. If the GDP deflator is 125, real GDP is
real GDP may not accurately reflect economic activity because it does not include:
the value of illegal activities
which of the following would not be included in GDP?
the money paid for the illegal sale of marijuana
the effect of excluding non-market activity would probably cause the relatively largest underestimate of GDP in:
recurring fluctuations in the level of economic activity
which of the following best exemplifies absolute advantage?
a unit of labor in the United States can produce more wheat than a unit of labor in Canada
trade based on comparative advantage will
increase the well-being of bother trading partners
who has an absolute advantage?
Anthony can make 12 pizzas or 6 calzones in an hour
who has a comparative advantage in making pizza
emil can make 3 pizzas or 1 calzone in an hour
a tax levied on a good when it crosses a nation's border
a tariff on cattle imported from Brazil is eliminated. The most likely effect of the elimination of the tariff will be to:
- decrease the price domestic producers receive for the cattle - increase the quantity of cattle bought by domestic buyers - increase the quantity of cattle imported into the country
suppose a tariff is imposed on textiles imported into the United States. This will result in:
an increase in the amount of textiles sold by domestic producers
trade restrictions cause:
resources to remain in industries that have a comparative disadvantage
which of the following best exemplifies the decreasing cost argument for free trade?
as a result of free trade, the New and Improved Automobile Company is able to increase its production, thereby lowering its production costs
the national defense argument
"Trade restrictions must be imposed on Taiwan, It has begun exporting a large number of computer chips to the United States. We must have a reliable domestic supply of these chips available if war breaks out." This is an example of:
suppose strict trade restrictions are imposed in the automobile industry. The most likely result of this action will be to:
increase employment in the automobile industry, but decrease employment in other industries
which of the following might be used as an argument in support of free trade?
free trade can increase the diversity of products available to consumers
the difference between what consumers would pay and the price they must pay refers to:
the difference between the price that producers receive and what is required to cover costs refers to: