2) Rational behavior

a) requires perfect information.

b) requires thinking at the margin.

c) requires people to consider the total costs and total benefits of their decisions.

d) means incentives don't matter.

3) Which statement about incentives is TRUE?

a) Each person is motivated by the same incentive.

b) Each person is motivated by different incentives.

c) Incentives can be manipulated with precision.

d) Price is the only relevant economic incentive.

4) When specialization is used

a) opportunity costs tend to be constant.

b) there are greater gains in overall well-being.

c) there is more emphasis on self-reliance.

d) society is more productive, while individuals are less productive.

5) Economists never assume that people respond to economic incentives.

a) True

b) False

7) When a society is producing the mix of goods that the society wants to consume, it is said to have:

a) solved the economic problem.

b) an equitable distribution of goods and services.

c) an efficient form of government.

d) obtained allocative efficiency.

8) _____ refers to the way an economy allocates goods and services to consumers.

a) Absolute advantage

b) Production

c) Distribution

d) Capital

9) An increase in the unemployment rate will shift the production possibilities frontier to the right.

a) False

b) True

10) Natural resources such as copper deposits are

a) land.

b) capital.

c) investment capital.

d) labor.

11) A market is a physical location that enables buyers and sellers to interact and transact with one another.

a) False

b) True

13) In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. As a result, we can expect a(n)

a) increase in the equilibrium price and quantity of cable television.

b) decrease in the equilibrium price and quantity of cable television.

c) unknown change in the equilibrium price but a decrease in the equilibrium quantity of cable television.

d) unknown change in the equilibrium quantity but a decrease in the equilibrium price of cable television.

14) Which type of payment would NOT be considered a market transaction?

a) payment for a used book purchased on eBay

b) payment for a soft drink at a vending machine

c) payment made to a victim of a natural disaster

d) payment for purchase of shares at a stock exchange

15) If sellers expect the price of their product to rise in the future, they are likely to increase their supply in the near future.

a) False

b) True