a. marginal benefit is greater than the marginal cost.
b. average benefit is greater than the average cost.
c. marginal benefit is less than the marginal cost.
d. marginal benefit is greater than both the average cost and the marginal cost.
ANSWER: a. marginal benefit is greater than the marginal cost.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 4 RANDOM: Y
[9]. A marginal change is a
a. long-term trend.
b. change for the worse.
c. small incremental adjustment.
d. large, significant adjustment.
ANSWER: c. small incremental adjustment.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 4 RANDOM: Y
[10]. Economists understand that people respond to
a. the wishes of policymakers.
b. tax breaks, but not tax hikes.
c. threats more than rewards.
d. incentives.
ANSWER: d. incentives.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 5 RANDOM: Y
[11]. Which is the most accurate statement about trade?
a. Trade can make every nation better off.
b. Trade makes some nations better off and others worse off.
c. Trade helps rich nations and hurts poor nations.
d. Trading for a good can make a nation better off only if the nation cannot produce that good.
ANSWER: a. Trade can make every nation better off.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 6 RANDOM: Y
[12]. If Canada is better than the United States at producing hockey sticks, but the United States is better than Canada at producing roller blades, the United States should
a. put a quota on the amount of Canadian hockey sticks imported.
b. subsidize its hockey stick industry so that it can compete with Canadian hockey sticks.
c. sell roller blades to Canada, and buy Canadian hockey sticks.
d. impose a tariff on Canadian hockey sticks in order to protect jobs in the U.S. roller blade industry.
ANSWER: c. sell roller blades to Canada, and buy Canadian hockey sticks.
TYPE: M KEY1: C SECTION: 2 OBJECTIVE: 6 RANDOM: Y
[13]. In a market economy, economic activity is guided by
a. the government.
b. corporations.
c. central planners.
d. prices.
ANSWER: d. prices.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y
[14]. One advantage market economies have over central planning is that market economies
a. solve the problem of scarcity.
b. are more efficient.
c. establish government economic control.
d. provide an equal distribution of goods and services to consumers.
ANSWER: b. are more efficient.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y
[15]. The term market failure refers to
a. an unsuccessful advertising campaign.
b. a situation in which the market on its own fails to allocate resources efficiently.