Chapter 01 - Micro 11e
Indicate whether the statement is true or false.
1. Inflation is the primary determinant of a country's living standards.
a. True
b. False
ANSWER: False
2. A rational decision maker takes an action if and only if the marginal cost exceeds the marginal benefit.
a. True
b. False
ANSWER: False
3. A tax on gasoline is an incentive that encourages people to drive smaller and more fuel-efficient cars.
a. True
b. False
ANSWER: True
4. The opportunity cost of working one hour is the sum of the values you would have received from all other
activities you could have done in that hour.
a. True
b. False
ANSWER: False
5. The invisible hand ensures that economic prosperity is distributed equally.
a. True
b. False
ANSWER: False
6. Inflation measures the increase in the quantity of goods and services produced from each hour of a worker’s
time.
a. True
b. False
ANSWER: False
7. Inflation and unemployment both increase as the money supply increases.
a. True
b. False
ANSWER: False
Page 1
,Name: Class: Date:
Chapter 01 - Micro 11e
8. In the long run the primary effect of increasing the quantity of money is higher prices.
a. True
b. False
ANSWER: True
9. Economics is the study of how evenly goods and services are distributed within society.
a. True
b. False
ANSWER: False
10. The cost of an action is measured in terms of foregone opportunities.
a. True
b. False
ANSWER: True
11. 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
ANSWER: True
12. Economics is exclusively the study of how evenly goods and services are distributed within society.
a. True
b. False
ANSWER: False
13. In the long run the primary effect of increasing the quantity of money is higher prices.
a. True
b. False
ANSWER: True
14. 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
ANSWER: False
Page 2
,Name: Class: Date:
Chapter 01 - Micro 11e
15. Economics is the study of how society allocates its unlimited resources.
a. True
b. False
ANSWER: False
16. Trade allows each person to specialize in the activities they do best, thus increasing each individual's
productivity.
a. True
b. False
ANSWER: True
17. Trade can make everyone better off except in the case where one person is better at doing everything.
a. True
b. False
ANSWER: False
18. Variations in the standard of living across countries is due almost entirely to differences in each nation’s total
output of goods and services.
a. True
b. False
ANSWER: False
19. A rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost.
a. True
b. False
ANSWER: True
20. Equality means distributing society’s resources in the most efficient manner.
a. True
b. False
ANSWER: False
21. Communist countries worked on the premise that government officials were in the best position to allocate the
economy’s scarce resources.
a. True
b. False
ANSWER: True
Page 3
, Name: Class: Date:
Chapter 01 - Micro 11e
22. 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
ANSWER: True
23. Market failure refers to a situation in which the market does not allocate resources efficiently.
a. True
b. False
ANSWER: True
24. In the short-run, society faces a tradeoff between inflation and unemployment.
a. True
b. False
ANSWER: True
25. The goal of President Obama’s stimulus package and increased government spending following the deep
economic downturn in 2008 and 2009 was to reduce inflation.
a. True
b. False
ANSWER: False
26. Trade with any nation can be mutually beneficial.
a. True
b. False
ANSWER: True
27. 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
ANSWER: False
28. The opportunity cost of working one hour is the sum of the values you would have received from all other
activities you could have done in that hour.
a. True
b. False
ANSWER: False
Page 4
Indicate whether the statement is true or false.
1. Inflation is the primary determinant of a country's living standards.
a. True
b. False
ANSWER: False
2. A rational decision maker takes an action if and only if the marginal cost exceeds the marginal benefit.
a. True
b. False
ANSWER: False
3. A tax on gasoline is an incentive that encourages people to drive smaller and more fuel-efficient cars.
a. True
b. False
ANSWER: True
4. The opportunity cost of working one hour is the sum of the values you would have received from all other
activities you could have done in that hour.
a. True
b. False
ANSWER: False
5. The invisible hand ensures that economic prosperity is distributed equally.
a. True
b. False
ANSWER: False
6. Inflation measures the increase in the quantity of goods and services produced from each hour of a worker’s
time.
a. True
b. False
ANSWER: False
7. Inflation and unemployment both increase as the money supply increases.
a. True
b. False
ANSWER: False
Page 1
,Name: Class: Date:
Chapter 01 - Micro 11e
8. In the long run the primary effect of increasing the quantity of money is higher prices.
a. True
b. False
ANSWER: True
9. Economics is the study of how evenly goods and services are distributed within society.
a. True
b. False
ANSWER: False
10. The cost of an action is measured in terms of foregone opportunities.
a. True
b. False
ANSWER: True
11. 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
ANSWER: True
12. Economics is exclusively the study of how evenly goods and services are distributed within society.
a. True
b. False
ANSWER: False
13. In the long run the primary effect of increasing the quantity of money is higher prices.
a. True
b. False
ANSWER: True
14. 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
ANSWER: False
Page 2
,Name: Class: Date:
Chapter 01 - Micro 11e
15. Economics is the study of how society allocates its unlimited resources.
a. True
b. False
ANSWER: False
16. Trade allows each person to specialize in the activities they do best, thus increasing each individual's
productivity.
a. True
b. False
ANSWER: True
17. Trade can make everyone better off except in the case where one person is better at doing everything.
a. True
b. False
ANSWER: False
18. Variations in the standard of living across countries is due almost entirely to differences in each nation’s total
output of goods and services.
a. True
b. False
ANSWER: False
19. A rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost.
a. True
b. False
ANSWER: True
20. Equality means distributing society’s resources in the most efficient manner.
a. True
b. False
ANSWER: False
21. Communist countries worked on the premise that government officials were in the best position to allocate the
economy’s scarce resources.
a. True
b. False
ANSWER: True
Page 3
, Name: Class: Date:
Chapter 01 - Micro 11e
22. 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
ANSWER: True
23. Market failure refers to a situation in which the market does not allocate resources efficiently.
a. True
b. False
ANSWER: True
24. In the short-run, society faces a tradeoff between inflation and unemployment.
a. True
b. False
ANSWER: True
25. The goal of President Obama’s stimulus package and increased government spending following the deep
economic downturn in 2008 and 2009 was to reduce inflation.
a. True
b. False
ANSWER: False
26. Trade with any nation can be mutually beneficial.
a. True
b. False
ANSWER: True
27. 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
ANSWER: False
28. The opportunity cost of working one hour is the sum of the values you would have received from all other
activities you could have done in that hour.
a. True
b. False
ANSWER: False
Page 4
