Question 1

The production possibilities frontier will shift if there is a change in

Accepted Answer

A) technology 
B) unemployment 
C) product prices 
D) society's preferences for commodities 
E) the quantities of the two goods being produced 
A) technology 
B) unemployment 
C) product prices 
D) society's preferences for commodities 
E) the quantities of the two goods being produced

Question 2

Suppose you have an hour before your next class starts.You can either read a book, get something to eat, or take a nap.The opportunity cost of getting something to eat is

Accepted Answer

A) the cost of what you eat 
B) the value of reading and sleeping 
C) the loss of value from not reading or sleeping 
D) the net benefit of sleeping for another hour 
E) impossible to determine because the most preferred alternative is not known 
A) the cost of what you eat 
B) the value of reading and sleeping 
C) the loss of value from not reading or sleeping 
D) the net benefit of sleeping for another hour 
E) impossible to determine because the most preferred alternative is not known

Question 3

Money facilitates trade because

Accepted Answer

A) it eliminates the need for specialization 
B) it prevents people from taking advantage of each other 
C) it serves as a medium of exchange 
D) division of labor allows money to be produced at a lower cost 
E) people do not benefit from barter unless money is used 
A) it eliminates the need for specialization 
B) it prevents people from taking advantage of each other 
C) it serves as a medium of exchange 
D) division of labor allows money to be produced at a lower cost 
E) people do not benefit from barter unless money is used

Question 4

A production possibilities frontier will be bowed out if

Accepted Answer

A) there is scarcity 
B) resources are used efficiently 
C) production of one good involves an opportunity cost 
D) resources are not perfectly adaptable to making each good 
E) technology is improving 
A) there is scarcity 
B) resources are used efficiently 
C) production of one good involves an opportunity cost 
D) resources are not perfectly adaptable to making each good 
E) technology is improving

Question 5

Sunk costs

Accepted Answer

A) can only be measured in monetary terms 
B) are opportunity costs 
C) should influence a person's choice if that person is a marginal decision maker 
D) lower the efficiency of production 
E) should not be considered when making economic decisions 
A) can only be measured in monetary terms 
B) are opportunity costs 
C) should influence a person's choice if that person is a marginal decision maker 
D) lower the efficiency of production 
E) should not be considered when making economic decisions

Question 6

A production possibilities frontier can shift inward if there is

Accepted Answer

A) an increase in the unemployment rate 
B) mandatory retirement at age 55 
C) an improvement in technology 
D) a larger work force 
E) a larger capital stock 
A) an increase in the unemployment rate 
B) mandatory retirement at age 55 
C) an improvement in technology 
D) a larger work force 
E) a larger capital stock

Question 7

Exhibit 2-4   Point f in Exhibit 2-4 represents

Accepted Answer

A) an efficient combination of good A and good B 
B) the only efficient combination of good A and good B 
C) the combination of good A and good B that the economy will produce 
D) an inefficient combination of good A and good B 
E) the only unattainable combination of good A and good B 
A) an efficient combination of good A and good B 
B) the only efficient combination of good A and good B 
C) the combination of good A and good B that the economy will produce 
D) an inefficient combination of good A and good B 
E) the only unattainable combination of good A and good B

Question 8

Exhibit 2-1 John and Harry's Production Possibilities for Ironing Shirts and Typing Papers   Exhibit 2-1 shows the production possibilities for ironing shirts and typing papers for John and Harry.Each has 5 hours per week to spend on these tasks.Which of the following statements is correct?

Accepted Answer

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

Question 9

A country has an absolute advantage in the production of a good if that country

Accepted Answer

A) can produce the good using fewer resources than another country would require 
B) has the lowest opportunity cost of producing the good and can produce it with the fewest resources 
C) has the lowest opportunity cost of producing the good regardless of whether it is produced with the fewest resources 
D) has the greatest opportunity cost of producing the good regardless of whether it is produced with the fewest resources 
E) has the greatest opportunity cost of producing the good and produces it with the fewest resources 
A) can produce the good using fewer resources than another country would require 
B) has the lowest opportunity cost of producing the good and can produce it with the fewest resources 
C) has the lowest opportunity cost of producing the good regardless of whether it is produced with the fewest resources 
D) has the greatest opportunity cost of producing the good regardless of whether it is produced with the fewest resources 
E) has the greatest opportunity cost of producing the good and produces it with the fewest resources

Question 10

Melissa is a self-employed lawyer who chooses a higher-priced restaurant 2 miles from home over a cheaper restaurant 15 miles from home.Which of the following is the most likely explanation for her behavior?

Accepted Answer

A) The opportunity cost of her time is very low. 
B) She doesn't take travel time into consideration. 
C) She doesn't like to cook or doesn't know how. 
D) The prices at the more expensive restaurant understate the opportunity cost of eating there. 
E) The higher monetary cost of the more expensive restaurant is offset by the higher opportunity cost of the lower-priced restaurant. 
A) The opportunity cost of her time is very low. 
B) She doesn't take travel time into consideration. 
C) She doesn't like to cook or doesn't know how. 
D) The prices at the more expensive restaurant understate the opportunity cost of eating there. 
E) The higher monetary cost of the more expensive restaurant is offset by the higher opportunity cost of the lower-priced restaurant.

Question 11

A production possibilities frontier will shift inward if there is more unemployment of labor.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 2-11     Refer to exhibit 2-11.The United States has an absolute advantage in bothe the production of T-shirts and rice.

Accepted Answer

A) True 
 B)False

Question 13

If I trade a ginger snap for a chocolate chip cookie, I am engaging in

Accepted Answer

A) barter 
B) comparative advantage 
C) absolute advantage 
D) privatization 
E) division of labor 
A) barter 
B) comparative advantage 
C) absolute advantage 
D) privatization 
E) division of labor

Question 14

If Sam can chop up more carrots per minute than Joe can, then

Accepted Answer

A) Joe has an absolute advantage in carrot chopping 
B) Joe must have a comparative advantage in carrot chopping 
C) Sam has an absolute advantage in carrot chopping 
D) Sam must have a comparative advantage in carrot chopping 
E) we can conclude nothing about absolute advantage 
A) Joe has an absolute advantage in carrot chopping 
B) Joe must have a comparative advantage in carrot chopping 
C) Sam has an absolute advantage in carrot chopping 
D) Sam must have a comparative advantage in carrot chopping 
E) we can conclude nothing about absolute advantage

Question 15

Exhibit 2-11     Refer to exhibit 2-11.Costa Rica has a comparative advantage in the production of T-shirts.

Accepted Answer

A) True 
 B)False

Question 16

If Jeremy has an absolute advantage in cooking and Margaret has an absolute advantage in cleaning, then

Accepted Answer

A) Jeremy has a comparative advantage in cooking, and Margaret has a comparative advantage in cleaning 
B) Jeremy has a comparative advantage in cleaning, and Margaret has a comparative advantage in cooking 
C) we can conclude nothing about comparative advantage 
D) Jeremy has a comparative advantage in cooking, but we can conclude nothing about Margaret 
E) Margaret has a comparative advantage in cleaning, but we can conclude nothing about Jeremy 
A) Jeremy has a comparative advantage in cooking, and Margaret has a comparative advantage in cleaning 
B) Jeremy has a comparative advantage in cleaning, and Margaret has a comparative advantage in cooking 
C) we can conclude nothing about comparative advantage 
D) Jeremy has a comparative advantage in cooking, but we can conclude nothing about Margaret 
E) Margaret has a comparative advantage in cleaning, but we can conclude nothing about Jeremy

Question 17

Exhibit 2-5   In Exhibit 2-5, what is the opportunity cost of moving from point c to point b?

Accepted Answer

A) 3 units of food 
B) 22 units of education 
C) 1 unit of food 
D) 12 units of education 
E) 62 units of education 
A) 3 units of food 
B) 22 units of education 
C) 1 unit of food 
D) 12 units of education 
E) 62 units of education

Question 18

The division of labor facilitates productivity increases for all of the following reasons, except one.Which is the exception?

Accepted Answer

A) It allows people to do those tasks for which they have the greatest natural ability. 
B) Workers get better at tasks, the more they repeat them. 
C) The more experience workers gain by specializing in a task, the more likely they will enjoy that task. 
D) More sophisticated production techniques are introduced. 
E) The division of labor often permits the introduction of labor-saving machinery. 
A) It allows people to do those tasks for which they have the greatest natural ability. 
B) Workers get better at tasks, the more they repeat them. 
C) The more experience workers gain by specializing in a task, the more likely they will enjoy that task. 
D) More sophisticated production techniques are introduced. 
E) The division of labor often permits the introduction of labor-saving machinery.

Question 19

A university should not disband its football team if it has already paid for the stadium.

Accepted Answer

A) True 
 B)False

Question 20

The bowed-out shape of the production possibilities frontier indicates increasing opportunity costs.

Accepted Answer

A) True 
 B)False

Exam 2: Economic Tools and Economics Systems

The production possibilities frontier will shift if there is a change in

Suppose you have an hour before your next class starts.You can either read a book, get something to eat, or take a nap.The opportunity cost of getting something to eat is

Money facilitates trade because

A production possibilities frontier will be bowed out if

Sunk costs

A production possibilities frontier can shift inward if there is

Exhibit 2-4 Point f in Exhibit 2-4 represents

Exhibit 2-1 John and Harry's Production Possibilities for Ironing Shirts and Typing Papers Exhibit 2-1 shows the production possibilities for ironing shirts and typing papers for John and Harry.Each has 5 hours per week to spend on these tasks.Which of the following statements is correct?

A country has an absolute advantage in the production of a good if that country

Melissa is a self-employed lawyer who chooses a higher-priced restaurant 2 miles from home over a cheaper restaurant 15 miles from home.Which of the following is the most likely explanation for her behavior?

A production possibilities frontier will shift inward if there is more unemployment of labor.

Exhibit 2-11 Refer to exhibit 2-11.The United States has an absolute advantage in bothe the production of T-shirts and rice.

If I trade a ginger snap for a chocolate chip cookie, I am engaging in

If Sam can chop up more carrots per minute than Joe can, then

Exhibit 2-11 Refer to exhibit 2-11.Costa Rica has a comparative advantage in the production of T-shirts.

If Jeremy has an absolute advantage in cooking and Margaret has an absolute advantage in cleaning, then

Exhibit 2-5 In Exhibit 2-5, what is the opportunity cost of moving from point c to point b?

The division of labor facilitates productivity increases for all of the following reasons, except one.Which is the exception?

A university should not disband its football team if it has already paid for the stadium.

The bowed-out shape of the production possibilities frontier indicates increasing opportunity costs.

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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