Question 1

The book Wealth of Nations was written by
A) Adam Smith in 1776.
B) John Maynard Keynes in 1776.
C) Adam Smith in 1936.
D) John Maynard Keynes in 1936.

Accepted Answer

The Wealth of Nations was written by Adam Smith in 1776. John Maynard Keynes wrote The General Theory of Employment, Interest and Money in 1936.

Question 2

When a curve shifts, the underlying relationship between the two variables has changed.

Accepted Answer

When a curve shifts, it indicates that the relationship between the two variables has changed, either by a change in one of the variables or a change in the underlying factors that affect the relationship.

Question 3

The Latin phrase ceteris paribus refers to holding other variables constant.

Accepted Answer

The Latin phrase ceteris paribus means "all other things being equal" or "other things held constant." Therefore, A is the correct answer.

Question 4

All output combinations that lie outside a production possibilities curve are attainable with available resources and technology.

Accepted Answer

Output combinations outside the production possibilities curve are unattainable with available resources and technology.

Question 5

Output combinations that lie inside the production possibilities curve are characterized by efficient use of resources.

Accepted Answer

Output combinations that lie inside the production possibilities curve represent underutilization of resources, not efficient use. Efficient use is represented by points on the curve.

Question 6

Explain why an economist would say, "There is no such thing as a free lunch."

Accepted Answer

The answer of Explain why an economist would say, "There...

Question 7

The essential feature of the market mechanism is the price signal.

Accepted Answer

The price signal is the primary way in which buyers and sellers communicate their preferences and decisions in a market. The price of a good or service is determined by the interaction of supply and demand, and this price then sends a signal to buyers and sellers about the relative scarcity or abundance of that good or service. This signal helps to allocate resources efficiently and generates incentives for market participants to adjust their behavior in response to changing market conditions.

Question 8

Opportunity cost is a theoretical concept with no practical application.

Accepted Answer

Opportunity cost is a crucial concept in economics and has practical applications in decision-making processes, resource allocation, and cost-benefit analyses. It refers to the value of the next best alternative forgone in a decision or choice.

Question 9

Every time we use scarce resources in one way, we give up the opportunity to use them in other ways.

Accepted Answer

This is the concept of opportunity cost, which states that when we choose to allocate resources towards a specific use, we are forgoing the opportunity to use those resources in other ways.

Question 10

Microeconomics is concerned with individual performance as well as the economy as a whole.

Accepted Answer

Microeconomics focuses on the actions of individuals and industries, like the dynamics between buyers and sellers, labor and employers, etc., rather than the economy as a whole, which is the focus of macroeconomics.

Question 11

Scarcity results when available resources cannot satisfy all desired uses of those resources.

Accepted Answer

Scarcity is defined as a situation where there are limited resources but unlimited wants and needs, which leads to competition for those resources and the need to make choices about how to allocate them.

Question 12

All economies must make decisions concerning what to produce, how to produce it, and for whom to produce.

Accepted Answer

This statement is true. These are the three basic questions of economics that every economy must address in order to allocate its limited resources to meet the needs and wants of its population.

Question 13

If the economy is inside the production possibilities curve, then more output can be produced using existing resources.

Accepted Answer

If the economy is inside the production possibilities curve, it means that resources are not being fully utilized and therefore there is potential for more output to be produced using existing resources.

Question 14

Why do opportunity costs increase as society produces more of a good?

Accepted Answer

The answer of Why do opportunity costs increase as society...

Question 15

To calculate the slope of a line, find the vertical distance between two points and divide it by the horizontal distance between the same two points.

Accepted Answer

This is the correct formula for finding the slope of a line. It is often represented as "rise over run," meaning the vertical distance is the rise and the horizontal distance is the run.

Question 16

Critics of government regulation argue that government interference in the marketplace stifles the animal spirits of entrepreneurship.

Accepted Answer

Critics of government regulation believe that regulations create barriers to entry and limit the ability for entrepreneurs to innovate and take risks, ultimately slowing economic growth.

Question 17

Describe the shape of the typical production possibilities curve and explain why it has this shape.

Accepted Answer

The answer of Describe the shape of the typical production...

Question 18

Government failure occurs when government intervention fails to improve economic outcomes or makes them worse.

Accepted Answer

Government failure occurs when government intervention in the market fails to achieve the desired outcome or creates unintended consequences that are worse than the original problem. This can happen due to information asymmetry, lack of market knowledge, bureaucratic inefficiencies, or political motivations. Examples include price controls, subsidies for inefficient industries, and regulation that stifles innovation and competition.

Question 19

The slope of a production possibilities curve is positive.

Accepted Answer

The slope of a production possibilities curve is typically negative, reflecting the trade-off between producing one good versus another.

Question 20

The production possibilities decrease as more resources and better technology are utilized.

Accepted Answer

The production possibilities increase as more resources and better technology are utilized. This is because more can be produced with the same amount of resources, or the same can be produced with fewer resources, allowing for the production of additional goods and services.

Quiz 1: Economics: the Core Issues

The book Wealth of Nations was written by