16.Inflation is defined as

a period of rising productivity in the economy.

b period of rising income in the economy.

c. an increase in the overall level of output in the economy.

d. an increase in the overall level of prices in the economy.

18.Production Possibilities for Batterland

Pancakes Waffles

600 0

450 150

300 250

150 325

0 375

What is the opportunity cost to Batterland of increasing the production of pancakes from 150 to 300?

a. 75 waffles

b. 150 waffles

c. 250 waffles

d. 325 waffles

19.The two loops in the circular-flow diagram represent

a. the flow of goods and the flow of services.

b. the flow of dollars and the flow of financial assets.

c. the flow of inputs into production processes and the flow of outputs from production processes.

d. the flows of inputs and outputs and the flow of dollars.

20.The phenomenon ofscarcitystems from the fact that

a. most economies' production methods are not very good.

b. in most economies, wealthy people consume disproportionate quantities of goods and services.

c. governments restrict production of too many goods and services.

d. resources are limited.

21.Which of the following is an example of an externality?

a. Annie purchases a handbag.

b. Bob's dog barks loudly during the night waking his neighbors.

c. Clark sells a book to Calvin.

d. David watches a scary movie.

22.Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?

a. Melissa can attend the concert only if she takes her sister with her

b. Greg is hungry and homeless

c. Brian must repair the tire on his bike before he can ride it to class

d. Kendra must decide between going to Colorado or Cancun for spring break

23.Economists view normative statements as

a. prescriptive, making a claim about how the world ought to be.

b. descriptive, making a claim about how the world is.

c. statements about the normal condition of the world.

d. pessimistic, putting the worst possible interpretation on things.

24.An example of an externality is the impact of

a. bad weather on the income of farmers.

b. the personal income tax on a person's ability to purchase goods and services.

c. pollution from a factory on the health of people in the vicinity of the factory.

d. increases in health care costs on the health of individuals in society.

25.Adam Smith's bookThe Wealth of Nationswas published in

a. 1692.

b. 1776.

c. 1816.

d. 1936.

26.Which of the following transactions does not take place in the markets for the factors of production in the cir-cular-flow diagram?

a. Jason provides plumbing services for a plumbing company and receives an hourly wage from the company for his services.

b. Jennifer works as a marriage counselor and her clients pay her on a per-hour basis for her services.

c. Brody owns several shopping malls and receives rent payments from the companies that operate those malls.

d. Bree sells advertising for a newspaper and receives a commission from the newspaper company for each advertisement that she sells.

27.Prior to the collapse of communism, communist countries worked on the premise that economic well-being could be best attained by

a. a market economy.

b. a strong reliance on prices and individuals' self-interests.

c. a system of large privately-owned firms.

d. the actions of government central planners.

28.The marginal benefit Claire gets from purchasing a third pair of flip-flops is

a. the same as the total benefit of purchasing three pairs of flip-flops.

b. more than the marginal cost of purchasing the third pair of flip-flops.

c. the total benefit Claire gets from purchasing three pairs of flip-flops minus the total benefit she gets from purchasing two pairs of flip-flops.

d. the total benefit Claire gets from purchasing four pairs of flip-flops minus the total benefit she gets from purchasing three pairs of flip-flops.

29.Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $5800. Bill discovers that he needs to do an additional $2400 of work to make the car worth $5800 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do?

a. He should sell the car now for $3800.

b. He should keep the car since it wouldn't be rational to spend $6400 restoring a car and then sell it for only $5800.

c. He should complete the additional work and sell the car for $5800.d)

d. It does not matter which action he takes since the outcome will be the same either way.

30.It is possible for an economy to increase its production of both goods if the economy.

a. moves downward and to the right along its production possibilities frontier and the frontier is bowed outward.

b. moves upward and to the left along its production possibilities frontier and the frontier is bowed outward.

c. moves in either direction along its production possibilities frontier and the frontier is a straight line.

d. moves from a situation of inefficient production to a situation of efficient production.