Deck 1: Ten Lessons From Economics

Question 1

Public policies to reduce emissions from cars do not affect the private costs and benefits of driving cars.

Answer 1

False

Question 2

In economic policymaking, there is often a conflict between the goal of efficiency and the goal of equity.

Answer 2

True

Question 3

People are likely to make good decisions only if they understand the options that are available to them.

Answer 3

True

Question 4

When the government redistributes income from the rich to the poor, society benefits since there are more poor than rich.

Question 5

Scarcity means that society has less to offer than people wish to have.

Question 6

Economists study how individuals make decisions, how they interact with each other and the factors that affect the economy as a whole.

Question 7

The opportunity cost of something is not what you give up to get something else.

Question 8

Societies face trade-offs because of scientific improvements to technology.

Question 9

With careful planning, we can usually get something that we like without having to give up something else that we like.

Question 10

Economics is the study of the circulation of money between banks, taxpayers and the government.

Question 11

Economist Sam Peltzman found that seatbelt laws caused less accidents and more pedestrian deaths.

Question 12

A marginal change is a large and significant change to an existing plan of action.

Question 13

In international trade, if one party gains, the other party loses.

Question 14

Pollution regulations make society better off by raising incomes.

Question 15

Efficiency refers to the size of the economic pie and equity refers to how the pie is divided.

Question 16

The word 'economy' comes from the Latin word for 'production'.

Question 17

A rational decision maker takes an action only if the marginal cost exceeds the marginal benefit.

Question 18

Equity means that everyone in the economy should receive an equal share of the goods and services produced.

Question 19

The opportunity cost of consuming a unit of good X is the amount of resources that must be devoted to its production.

Question 20

Australian government policies announcing when changes to child benefits would occur had no effect on the timing decision of some Australian families to have babies.

Question 21

If each person pursues their own self-interest through a market-institution, the resulting chaos would cause the market to collapse.

Question 22

In his book The Wealth of Nations, Adam Smith observed that households and firms interacting in markets are led by an 'invisible hand' to make decisions that produce desirable outcomes for society.

Question 23

Trade makes rich nations richer and poor nations poorer.

Question 24

Monopoly power and income inequality are examples of market failure.

Question 25

Productivity is defined as the quantity of goods and services produced from each hour of a worker's time.

Question 26

Protecting domestic jobs from foreign competition is the best way to raise labour productivity.

Question 27

Inflation increases the value of money.

Question 28

A market economy rewards people according to their ability to produce things that other people are willing to pay for.

Question 29

Economists agree that monetary and fiscal policy, although not very powerful, are necessary instruments for controlling the economy.

Question 30

The countries with the lowest labour productivities tend to have the lowest wages.

Question 31

A monopolist has limited market power.

Question 32

Inflation in an economy is primarily caused by profiteering by greedy firms.

Question 33

A benefit of trade is that it permits two parties to specialise in those tasks in which they have the highest productivity.

Question 34

Governments can improve efficiency in an economy by intervening when the richest companies are not paying enough out to shareholders

Question 35

The two broad reasons for a government to intervene in the economy are to promote efficiency and to promote equity.

Question 36

While the 'invisible hand' cannot guarantee efficiency, it is better at guaranteeing equity.

Question 37

The Phillips curve shows that at least in the short term, reductions in the inflation rate must be accompanied by increases in unemployment.

Question 38

Better tools and technology can increase productivity and therefore living standards in countries.

Question 39

If the government prints too much money, it will cause inflation.

Question 40

When markets allocate resources efficiently, the natural outcome of this is market failure.

Question 41

An 'increase in efficiency' suggests that an economy:

A) is using more costly production techniques
B) has decided to produce more luxury goods
C) is able to get less goods and services from a given amount of resources
D) is able to get more goods and services from a given amount of resources

Question 42

In economics, the cost of something is:

A) the out-of-pocket expense of obtaining it
B) what you give up to get it
C) always measured in units of time
D) always higher than people think

Question 43

Which of the following is a major area of study for economists?

A) how people make decisions
B) the design of nuclear power plants
C) the best way to design a nature reserve
D) how countries choose national leaders

Question 44

The scarcity problem:

A) has been eliminated in the richest countries
B) persists only because countries have failed to eliminate unemployment
C) has been solved in all industrialised nations
D) persists because society cannot give every individual the highest standard of living to which he or she might aspire

Question 45

Daniel decides to spend an hour playing cricket rather than working at $16 per hour. His trade-off is:

A) nothing, because he enjoys playing cricket more than working
B) the increase in skill he obtains from playing cricket for that hour
C) the $16 he could have earned
D) nothing, because he spent $16 for admission into the sports complex to play cricket

Question 46

Which of the following is NOT included in the decisions that every society must make?

A) what goods will be produced
B) what determines consumer preferences
C) who will produce goods
D) who will consume the goods

Question 47

The word 'economy' comes from the Greek word for:

A) 'one who manages a household'
B) 'one who participates in a market'
C) 'environment'
D) 'conservation'

Question 48

In order for scarcity to exist, it must be that:

A) there is a finite amount of a resource
B) more people want the resource than there is available of it
C) the resource is non-renewable
D) nobody wants to purchase the resource

Question 49

When government policies are being designed:

A) equity and efficiency goals are usually independent of each other
B) there is usually a trade-off between equity and efficiency
C) equity can usually be achieved without an efficiency loss
D) increasing efficiency usually results in more equity

Question 50

If stricter regulations are used to reduce pollution then:

A) everyone will benefit so there is no trade-off
B) only firms that polluted will be affected
C) there will be no trade-off as the firms can afford to reduce pollution
D) incomes of these firm's owners, workers and customers will be affected, and this means a trade-off must result

Question 51

The central concept of economics is:

A) finance
B) scarcity
C) energy
D) employment

Question 52

Efficiency means that:

A) society is getting the most it can from its scarce resources
B) society is conserving resources in order to save them for the future
C) society's goods and services are distributed fairly among society's members
D) society has lessened its dependence on foreign energy sources

Question 53

If the government redistributes income from the rich to the poor:

A) there is no change to efficiency because rich people can afford it
B) everyone gains when the poor have more money
C) people respond by working harder
D) people tend to work less and this causes losses in output

Question 54

The study of economics is concerned with:

A) keeping private businesses from losing money
B) demonstrating that capitalistic economies are superior to socialistic economies
C) how society manages its scarce resources
D) determining the most equitable distribution of society's output

Question 55

Which of the following resources is least likely to meet the definition of scarcity?

A) whales
B) air
C) ice-cream
D) computers

Question 56

Equity means that:

A) all members of society have the same income
B) the benefits of society's resources are distributed fairly among society's members
C) society's goods and services are distributed according to need
D) society is getting the most it can from its scarce resources

Question 57

Economics is defined as the study of:

A) politics and business
B) central planning
C) government regulation
D) how society manages its scarce resources

Question 58

An equitable outcome is one where:

A) rich people give more to charities
B) it can be described as fair
C) it can be described as efficient
D) everyone has the same income

Question 59

For society, a good is not scarce if:

A) all members of society can have all they want of it
B) at least one individual in society can obtain all he or she wants of the good
C) firms are producing at full capacity
D) those who have enough income can buy all they want of the good

Question 60

What does the adage 'There is no such thing as a free lunch' mean?

A) the government taxes firms that sell lunches
B) food prices have risen as a consequence of increased taxes
C) lunches are not free
D) we usually have to give up something, in order to get something else we like

Question 61

Which is the most accurate statement about trade?

A) trade makes some nations better off and others worse off
B) trade can make every nation better off
C) trading for a good can make a nation better off only if the nation cannot produce that good
D) trade helps rich nations and hurts poor nations

Question 62

From an accounting point of view, the largest single cost of a university education for most students is:

A) transportation, parking and entertainment
B) tuition fees and books
C) the wages given up to attend university
D) room and board

Question 63

A rational decision maker takes an action only if the:

A) marginal benefit is greater than the marginal cost
B) marginal benefit is less than the marginal cost
C) average benefit is greater than the average cost
D) marginal benefit is greater than both the average cost and the marginal cost

Question 64

Lee accepts a contract to photograph a wedding on Saturday for $1000. She cancels plans to go to the zoo with her friends instead. Her opportunity cost of photographing the wedding is:

A) the $1000 she earns
B) the enjoyment of spending the day with her friends at the zoo
C) the $1000 less the enjoyment she would have received from being at the zoo with her friends
D) nothing, as she wasn't going to earn any money at the zoo

Question 65

If Australia is better than the US at producing wheat, but the US is better than Australia at producing cars, the US should:

A) impose a tariff on Australian wheat in order to protect jobs in the US car industry
B) sell cars to Australia, and should buy Australian wheat
C) subsidise its wheat industry so that it can compete with Australian wheat
D) put a quota on the amount of Australian wheat imported

Question 66

Australia can benefit from trade if it

A) trades with all other countries
B) does not trade with countries that make the same goods as Australia
C) does not trade with any country with lower wages than Australia
D) trades only with countries that have higher wages than Australia

Question 67

Compulsory seatbelt laws in Australia have resulted in:

A) a decrease in both driver and pedestrian deaths
B) little change in driver deaths and an increase in pedestrian deaths
C) little change in either driver deaths or pedestrian deaths
D) an increase in both driver and pedestrian deaths

Question 68

People make decisions at the margin by:

A) following tradition
B) comparing costs and benefits
C) experience
D) calculating dollar costs

Question 69

Which of the following is important for policymakers to consider when designing public policy?

A) the possibility that policies might change behaviour
B) the direct effect of policies
C) the indirect effect of policies
D) all of the above

Question 70

You have spent $500 purchasing and repairing an old car which you expect to sell for $800 once the repairs are complete. You discover that you need an additional part, which will cost $400, including labour, in order to complete the repairs. You can sell the car as it is now for $300. What should you do?

A) you should never sell something for less than it costs
B) you should cut your losses and take the $300
C) you should complete the repairs and sell the car
D) it doesn't matter which action you take; the outcome is the same either way

Question 71

The opportunity cost of an item is:

A) the number of hours needed to earn money to buy it
B) what you give up to get that item
C) always less than the dollar value of the item
D) always equal to the dollar value of the item

Question 72

Economists have recognised that people respond to:

A) the aspirations of policymakers
B) incentives
C) regulations rather than prices
D) poverty rather than pollution

Question 73

The opportunity cost of going to university is:

A) the total spent on food, clothing, books, transportation, tuition, lodging and other expenses
B) zero for students who are fortunate enough to have all of their university expenses paid by someone else
C) the value of the best opportunity a student gives up to attend university
D) zero, since a university education will allow a student to earn a larger income after graduation

Question 74

Whenever a person gives up one resource to obtain an item is called:

A) cost-benefit analysis
B) opportunity decision
C) opportunity price
D) opportunity cost

Question 75

Ryan spends an hour studying instead of going for a bike ride. The opportunity cost to him of studying is:

A) the improvement in his grades from studying for the hour
B) the difference between the improvement in his grades from studying minus the enjoyment of a bike ride
C) the enjoyment and exercise he would have received had he gone for a bike ride
D) zero, since Ryan chose to study rather than to ride his bike, the value of studying must have been greater than the value of the bike ride

Question 76

From an economic point of view for most students, the largest single cost of a university education is:

A) transportation, parking and entertainment
B) tuition fees and books
C) the wages given up to attend university
D) room and board

Question 77

Trade between Australia and New Zealand:

A) is a losing proposition for New Zealand because Australian workers are more productive
B) is a losing proposition for Australia because New Zealand has cheaper labour
C) is like a sports contest - one side wins and the other side loses
D) benefits both Australia and New Zealand

Question 78

Trade can benefit a family:

A) by increasing the variety of goods and services they can buy at a lower cost
B) by requiring each person to perform a wide range of tasks, including those they are not very productive in
C) only if the government provides them with a subsidy
D) both A and B

Question 79

According to Peltzman, one effect of a government-imposed seatbelt law has been:

A) fewer pedestrian deaths
B) safer driving
C) an increase in the number of accidents
D) that everyone now wears seatbelts

Question 80

Which of the following is most likely to be a marginal change?

A) doubling the number of fishing boats in a fishery
B) increasing the length of all fishing boats by 50 per cent
C) comparing fishing technology now, to that used 50 years ago
D) increasing a six-month fishing season by one week