ANS: T DIF: Easy TOP: Ideas for Beyond the Final Exam
2. Even though international trade in undertaken voluntarily, a country that engages in trade may not
benefit from it.
ANS: F DIF: Easy TOP: Ideas for Beyond the Final Exam
3. In international trade, one country's gain is another country's loss.
ANS: F DIF: Easy TOP: Ideas for Beyond the Final Exam
4. It is impossible for both nations to gain when trading with one other.
ANS: F DIF: Easy TOP: Ideas for Beyond the Final Exam
5. In economics the true cost of making a choice is the value of what must be given up.
ANS: T DIF: Easy TOP: Ideas for Beyond the Final Exam
6. Opportunity cost is the value of the next best alternative to a given choice.
ANS: T DIF: Easy TOP: Ideas for Beyond the Final Exam
7. Opportunity cost is the highest possible price you can receive when you sell an object.
ANS: F DIF: Moderate TOP: Ideas for Beyond the Final Exam
8. As a student, one of the costs of sleeping in rather than going to class is likely to be a lower grade in
the class.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
9. In her calculation of the cost of going to college, an economist would include the amount of forgone
earnings over the years spent at college.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
10. Government controls over market prices frequently "backfire."
ANS: T DIF: Easy TOP: Ideas for Beyond the Final Exam
11. There are never any adverse consequences of government attempts to modify the laws of supply and
demand.
ANS: F DIF: Easy TOP: Ideas for Beyond the Final Exam
,12. Comparative advantage explains how two nations can benefit from trade.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
13. If Japan is twice as good at producing cameras and three times as good at producing TV sets as the
United States, Japan is said to have a comparative advantage in TV sets and the United States has a
comparative advantage in cameras.
ANS: T DIF: Difficult TOP: Ideas for Beyond the Final Exam
14. The marginal cost of an airline ticket is the total cost of flying the plane divided by the number of
passengers.
ANS: F DIF: Difficult TOP: Ideas for Beyond the Final Exam
15. Marginal analysis involves looking at the extra costs involved in a decision.
ANS: T DIF: Easy TOP: Ideas for Beyond the Final Exam
16. There are frequently market solutions that the government can use to deal with externalities.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
17. Externalities are social costs that affect parties external to a particular economic transaction.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
18. Externalities affect only the buyer and seller involved in an exchange.
ANS: F DIF: Moderate TOP: Ideas for Beyond the Final Exam
19. Externalities are created when parties not involved in an economic transaction are affected by it.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
20. All economic transactions involve only buyers and sellers; no third parties are involved.
ANS: F DIF: Moderate TOP: Ideas for Beyond the Final Exam
21. The market mechanism provides a financial incentive for firms to minimize the pollution they create.
ANS: F DIF: Moderate TOP: Ideas for Beyond the Final Exam
22. Education and medical care costs have risen dramatically because they are not very labor intensive.
ANS: F DIF: Moderate TOP: Ideas for Beyond the Final Exam
23. The growth in efficiency in manufacturing in the United States has been a major factor in the rising
cost of health and education.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
, 24. Higher productivity and higher wages in manufacturing have caused wages in personal services to rise
also.
ANS: T DIF: Easy TOP: Ideas for Beyond the Final Exam
25. Higher wages in personal services have not been accompanied by higher productivity, leading to what
has become known as the "cost disease" in personal services.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
26. Greater economic efficiency often leads to greater economic inequality.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
27. The concept of economic efficiency refers to the size of the "economic pie" whereas the concept of
equality refers to how the "pie" is distributed.
ANS: T DIF: Easy TOP: Ideas for Beyond the Final Exam
28. There is no trade-off between efficiency and equality.
ANS: F DIF: Easy TOP: Ideas for Beyond the Final Exam
29. The United States has chosen to balance the competing claims of efficiency versus equality by
emphasizing greater efficiency over greater equality.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
30. The achievement of greater efficiency in the United States has been at the expense of growing
inequality.
ANS: T DIF: Easy TOP: Ideas for Beyond the Final Exam
31. One problem with the European Union's choice regarding equality versus efficiency is that it may
inadvertently shrink the size of its "economic pie".
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
32. The United States has been willing to trade off greater efficiency for greater wage equality.
ANS: F DIF: Easy TOP: Ideas for Beyond the Final Exam
33. One of the consequences of preventing wages from falling in the European Union has been growing
unemployment.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
34. One of the consequences of allowing wages to fall in the United States has been growing wage
inequality.
ANS: T DIF: Moderate TOP: Ideas for Beyond the Final Exam
35. Economic efficiency and income equality are often conflicting goals in an economy.
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