Question 1

Society's production possibilities frontier

Accepted Answer

A) helps explain the immense complexity of the real economy 
B) demonstrates that, although resources are scarce for individuals, there is no problem of scarcity for society as a whole 
C) is based on unrealistic assumptions and therefore has no value as an economic tool 
D) is based on simplifying assumptions, but is still useful for illustrating scarcity, opportunity cost, and economic growth 
E) is based on the assumption that technology is constantly changing 
A) helps explain the immense complexity of the real economy 
B) demonstrates that, although resources are scarce for individuals, there is no problem of scarcity for society as a whole 
C) is based on unrealistic assumptions and therefore has no value as an economic tool 
D) is based on simplifying assumptions, but is still useful for illustrating scarcity, opportunity cost, and economic growth 
E) is based on the assumption that technology is constantly changing

Question 2

Along a bowed-out production possibilities frontier, as more of one good is produced,

Accepted Answer

A) the opportunity cost of producing that good remains constant 
B) the opportunity cost of producing that good decreases 
C) efficiency decreases 
D) the opportunity cost of producing both goods must remain constant 
E) technology remains constant 
A) the opportunity cost of producing that good remains constant 
B) the opportunity cost of producing that good decreases 
C) efficiency decreases 
D) the opportunity cost of producing both goods must remain constant 
E) technology remains constant

Question 3

Exhibit 2-12 Maria and Hans Production Possibilities for Laundry and Typing   According to Exhibit 2-12, Hans' opportunity cost of typing one page is

Accepted Answer

A) 12 loads of laundry 
B) 8 loads of laundry 
C) 3/2 of a load of laundry 
D) 2/3 of a load of laundry 
E) impossible to compute 
A) 12 loads of laundry 
B) 8 loads of laundry 
C) 3/2 of a load of laundry 
D) 2/3 of a load of laundry 
E) impossible to compute

Question 4

The term opportunity cost suggests that

Accepted Answer

A) in any exchange situation where one person gains, someone else must lose 
B) not all individuals make the most of life's opportunities 
C) executives do not always recognize opportunities for profit as quickly as they should 
D) the only factor that is important in decision making is cost 
E) because goods are scarce, in order to get some good you must give up some other good in return 
A) in any exchange situation where one person gains, someone else must lose 
B) not all individuals make the most of life's opportunities 
C) executives do not always recognize opportunities for profit as quickly as they should 
D) the only factor that is important in decision making is cost 
E) because goods are scarce, in order to get some good you must give up some other good in return

Question 5

Exhibit 2-3   Given the information in Exhibit 2-3, which product should Friday (an individual)make?

Accepted Answer

A) fishhooks because he can make 30 more per day than Crusoe but only 8 more fishing poles 
B) both because he is better at both 
C) fishing poles because that is where his comparative advantage lies 
D) neither because Crusoe is better at both 
E) we cannot tell from the given information 
A) fishhooks because he can make 30 more per day than Crusoe but only 8 more fishing poles 
B) both because he is better at both 
C) fishing poles because that is where his comparative advantage lies 
D) neither because Crusoe is better at both 
E) we cannot tell from the given information

Question 6

Exhibit 2-11     Refer to exhibit 2-11.The United States has a comparative advantage in the production of T-shirts.

Accepted Answer

A) True 
 B)False

Question 7

In one week, Mohammed can knit 5 sweaters or bake 240 cookies.The opportunity cost per cookie for Mohammed is

Accepted Answer

A) $5 
B) 5 sweaters 
C) 48 sweaters 
D) 1/48 of a sweater 
E) 48 cookies 
A) $5 
B) 5 sweaters 
C) 48 sweaters 
D) 1/48 of a sweater 
E) 48 cookies

Question 8

John takes 10 minutes to iron a shirt and 20 minutes to type a paper.Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper.Which of the following statements is correct?

Accepted Answer

A) Harry has a comparative advantage in ironing. 
B) Harry has a comparative advantage in typing. 
C) Harry has an absolute advantage in typing. 
D) Harry has an absolute advantage in ironing. 
E) Neither can gain from specialization and exchange. 
A) Harry has a comparative advantage in ironing. 
B) Harry has a comparative advantage in typing. 
C) Harry has an absolute advantage in typing. 
D) Harry has an absolute advantage in ironing. 
E) Neither can gain from specialization and exchange.

Question 9

The opportunity cost of going to college includes the costs of tuition, books, fees, and

Accepted Answer

A) nothing else 
B) housing 
C) housing and food 
D) earnings forgone by not working full-time 
E) housing, food, and earnings forgone by not working full-time 
A) nothing else 
B) housing 
C) housing and food 
D) earnings forgone by not working full-time 
E) housing, food, and earnings forgone by not working full-time

Question 10

The production possibilities frontier represents the boundary between attainable and unattainable prices of commodities.

Accepted Answer

A) True 
 B)False

Question 11

The idea that resources are scarce but wants are unlimited is known as

Accepted Answer

A) marginal cost 
B) opportunity cost 
C) sunk cost 
D) resource cost 
E) production cost 
A) marginal cost 
B) opportunity cost 
C) sunk cost 
D) resource cost 
E) production cost

Question 12

Attending college can be viewed as a form of

Accepted Answer

A) investment in which costs are borne today and benefits are received in the future 
B) investment in which benefits are received today and costs are borne in the future 
C) consumption, because learning is an enjoyable activity 
D) leisure, because learning is an enjoyable activity 
E) saving for the future 
A) investment in which costs are borne today and benefits are received in the future 
B) investment in which benefits are received today and costs are borne in the future 
C) consumption, because learning is an enjoyable activity 
D) leisure, because learning is an enjoyable activity 
E) saving for the future

Question 13

If dairy farmers use automatic milking machines instead of milking by hand, which economic question does their decision answer?

Accepted Answer

A) What to produce? 
B) How to produce? 
C) For whom to produce? 
D) Who has a comparative advantage in milking? 
E) What is the price of milk? 
A) What to produce? 
B) How to produce? 
C) For whom to produce? 
D) Who has a comparative advantage in milking? 
E) What is the price of milk?

Question 14

Exhibit 2-7   In Exhibit 2-7, the opportunity cost of moving from point b to d is

Accepted Answer

A) 30 mufflers 
B) 50 mufflers 
C) 100 socks 
D) 150 socks 
E) 250 socks 
A) 30 mufflers 
B) 50 mufflers 
C) 100 socks 
D) 150 socks 
E) 250 socks

Question 15

Exhibit 2-2   According to Exhibit 2-2, Hans' opportunity cost of doing a load of laundry is

Accepted Answer

A) 12 papers 
B) 8 papers 
C) 1 1/2 pages 
D) 2/3 of a page 
E) impossible to compute 
A) 12 papers 
B) 8 papers 
C) 1 1/2 pages 
D) 2/3 of a page 
E) impossible to compute

Question 16

Division of labor allows people to do tasks for which they have greater natural ability.

Accepted Answer

A) True 
 B)False

Question 17

The "invisible hand" described by Adam Smith refers to the

Accepted Answer

A) allocative role of markets and market forces 
B) importance of government intervention and central planning 
C) actions of successful entrepreneurs in directing the economy 
D) role of monopolized industries in leading the nation 
E) value of religious belief in creating an ideal economy 
A) allocative role of markets and market forces 
B) importance of government intervention and central planning 
C) actions of successful entrepreneurs in directing the economy 
D) role of monopolized industries in leading the nation 
E) value of religious belief in creating an ideal economy

Question 18

If Robin has an absolute advantage in both gardening and baking when compared to Robert, then

Accepted Answer

A) Robin cannot benefit by trading with Robert 
B) Robin can benefit by specializing in gardening if Robert specializes in baking 
C) Robin can benefit by specializing in baking if Robert specializes in gardening 
D) Robin and Robert may benefit from trading, but there is insufficient information to determine who should specialize in what 
E) neither Robin nor Robert can benefit from trading with the other 
A) Robin cannot benefit by trading with Robert 
B) Robin can benefit by specializing in gardening if Robert specializes in baking 
C) Robin can benefit by specializing in baking if Robert specializes in gardening 
D) Robin and Robert may benefit from trading, but there is insufficient information to determine who should specialize in what 
E) neither Robin nor Robert can benefit from trading with the other

Question 19

It is impossible for one person to have a comparative advantage in all tasks.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 2-2   According to Exhibit 2-2, Maria's opportunity cost of doing a load of laundry is

Accepted Answer

A) 4 pages 
B) 6 pages 
C) 2/3 of a page 
D) 3/2 of a page 
E) impossible to compute 
A) 4 pages 
B) 6 pages 
C) 2/3 of a page 
D) 3/2 of a page 
E) impossible to compute

Exam 2: Economic Tools and Economics Systems

Society's production possibilities frontier

Along a bowed-out production possibilities frontier, as more of one good is produced,

Exhibit 2-12 Maria and Hans Production Possibilities for Laundry and Typing According to Exhibit 2-12, Hans' opportunity cost of typing one page is

The term opportunity cost suggests that

Exhibit 2-3 Given the information in Exhibit 2-3, which product should Friday (an individual)make?

Exhibit 2-11 Refer to exhibit 2-11.The United States has a comparative advantage in the production of T-shirts.

In one week, Mohammed can knit 5 sweaters or bake 240 cookies.The opportunity cost per cookie for Mohammed is

John takes 10 minutes to iron a shirt and 20 minutes to type a paper.Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper.Which of the following statements is correct?

The opportunity cost of going to college includes the costs of tuition, books, fees, and

The production possibilities frontier represents the boundary between attainable and unattainable prices of commodities.

The idea that resources are scarce but wants are unlimited is known as

Attending college can be viewed as a form of

If dairy farmers use automatic milking machines instead of milking by hand, which economic question does their decision answer?

Exhibit 2-7 In Exhibit 2-7, the opportunity cost of moving from point b to d is

Exhibit 2-2 According to Exhibit 2-2, Hans' opportunity cost of doing a load of laundry is

Division of labor allows people to do tasks for which they have greater natural ability.

The "invisible hand" described by Adam Smith refers to the

If Robin has an absolute advantage in both gardening and baking when compared to Robert, then

It is impossible for one person to have a comparative advantage in all tasks.

Exhibit 2-2 According to Exhibit 2-2, Maria's opportunity cost of doing a load of laundry is

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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