c. a situation in which competition among firms becomes ruthless.
d. a firm which is forced out of business because of losses.
ANSWER: b. a situation in which the market on its own fails to allocate resources efficiently.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y
[16]. An externality is the impact of
a. a person’s actions on that person’s well-being.
b. society’s decisions on the well-being of society.
c. one person’s actions on the well-being of a bystander.
d. society’s decisions on the well-being of one person.
ANSWER: c. one person’s actions on the well-being of a bystander.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y
[17]. If a copper refinery does NOT bear the entire cost of the smoke it emits, it will
a. emit too much smoke.
b. emit lower levels of smoke.
c. emit an acceptable level of smoke.
d. eliminate all smoke so as to avoid the entire cost of the smoke.
ANSWER: a. emit too much smoke.
TYPE: M KEY1: C SECTION: 2 OBJECTIVE: 7 RANDOM: Y
[18]. The two best reasons for a government to intervene in a market are to
a. promote equity and to raise revenues.
b. promote equity and to promote efficiency.
c. promote efficiency and to raise revenues.
d. raise revenues and to promote stability.
ANSWER: b. promote equity and to promote efficiency.
TYPE: M KEY1: C SECTION: 2 OBJECTIVE: 7 RANDOM: Y
[19]. Market power refers to the
a. power of the government to regulate a market.
b. relative importance of a market to the overall economy.
c. power of a single person (or small group of people) to unduly influence market prices.
d. ability of a person or group of people to successfully market new products.
ANSWER: c. power of a single person (or small group of people) to unduly influence market prices.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y
[20]. The income of a typical worker in a country is most closely linked to which of the following?
a. population
b. government policies
c. labor unions
d. productivity
ANSWER: d. productivity
TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 8 RANDOM: Y
[21]. Almost all variation in living standards is attributable to differences in countries’
a. population growth rates.
b. endowments of natural resources.
c. defense budgets.
d. productivity.
ANSWER: d. productivity.
TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 8 RANDOM: Y
[22]. Productivity is defined as the
a. amount of goods and services produced from each hour of a worker’s time.
b. number of workers required to produce a given amount of goods and services.
c. amount of labor which can be saved by replacing workers with machines.
d. actual amount of effort workers put into an hour of working time.