Chapter 1 Ten Principles of Economics1. Choices must be made in the use of resources ( a )a. because they are in finite supply.b. because they are in finite demand.c. only if the resources are nonrenewable.d. because they are in infinite supply.2. Social security programs are aimed at making the distribution of resources in an economy more ( c )a. efficient. c. equitable.b. inefficient. d. inequitable.3. The opportunity cost of building an additional parking lot at your school is ( b )a. the cost of concrete, labor, etc. used to build the lot.b. the value of the property and resources used at their next best alternative use.c. the value of the property and resources used at all of their alternative uses.d. infinite, and so we cannot estimate it.4. Suppose you are considering going to the movies, and you place a $12 value on your anticipated enjoyment of the movie. “The ticket price is $6 and you would be giving up two hours of work, where you earn $5 per hour. You would go to ( a )a. work; the opportunity cost of the movies exceeds the expected benefit.b. the movies; your incentive is the $6 excess expected benefit.c. the movies; your enjoyment will exceed the lost wages by $2.d. the movies; the benefit of $18 exceeds the lost wages.5. Metro North Railway is trying to decide whether or not to run an additional train into New York City from New Haven, Connecticut at 8:15 a.m. The total cost of running trains between 8:00 a.m. and 9:00 a.m. is $45,000 and the expected revenues on any given day are $100,000 during this time period. The cost of running the additional train is $4,000 and it is expected that revenues will rise to $103,500. Metro North should ( d )a. run the train because the total revenues are greater than the total costs.b. run the train because the firms revenues will rise.c. not run the train because the total costs are already too high.d. not run the train because the marginal cost of $4000 is greater than the marginal revenue of $3,500. 6. A nations standard of living can be increased by ( a )a. improvements in technology and international trade.b. improvements in technology but not international trade.c. international trade but not improvements in technology.d. neither international trade nor improvements in technology.7. In a market economy, the economic well-being of society is the responsibility of ( d )a. central planners.b. central bankers.c. government policymakers.d. no one; self-interested individuals bring about the well-being of society.8. An important element of the market process is that ( d )a. although people trade voluntarily, one party “wins” and the other party “loses”.b. the government determines the extent of market activity in order for all parties to benefit.c. people are better off if they are self-sufficient than if they trade with others in the market.d. people trade voluntarily and all parties expect to benefit.9. Adam Smith argues in The Wealth of Nations that an economy will produce more goods and services if ( b )a. people act in the public interest than if they act selfishly.b. people act selfishly, than if the government directs economic activity.c. the government controls the use of the nations scarce resources.d. people ignore their own interests and contribute to national wealth as a whole.10. If there is a way to change a situation so that at least some people gain while no one in the economy loses, the situation ( a )a. is economically inefficient.b. is economically efficient.c. is providing an inequitable distribution of resources to the community.d. is neither equitable nor efficient.11. The Department of Justice brought suit against Microsoft in 1990s for ( c )a. generating external costs.b. generating external benefits.c. creating excess market power for itself.d. providing public goods to the marketplace.12. Suppose that Rebecca throws her soda bottle out the car window and it smashes on the road. Jim drives over the broken glass and gets a flat tire. Rebeccas soda consumption has resulted in ( b )a. the production of a public good.b. an externality.c. monopoly power for Rebecca.d. greater efficiency in consumption.13. The market power that DUFEs “Department of Textbooks” has is now limited by ( d )a. new antitrust laws.b. public goods provided by the government.c. university policies against monopoly power.d. increased access to other booksellers.14. Assume that there are spillover benefits associated with keeping cars in good mechanical conditions. Without government intervention (i.e., with a free market), we would expect people to ( d )a. give their cars too much maintenance.b. stop driving and start walkin