Question 1

If an economy is operating at a point inside the production possibilities frontier, then

Accepted Answer

A) some of the nation's resources are unemployed 
B) the production decisions are made by the government 
C) unlimited resources must satisfy scarce desires 
D) there is a scarcity of human resources relative to human wants therefore society must have some mechanism for making choices 
E) society is paying too much for wages 
A) some of the nation's resources are unemployed 
B) the production decisions are made by the government 
C) unlimited resources must satisfy scarce desires 
D) there is a scarcity of human resources relative to human wants therefore society must have some mechanism for making choices 
E) society is paying too much for wages

Question 2

A mixed capitalist economy is one in which

Accepted Answer

A) decisions are based primarily on religion or custom 
B) all resources are publicly owned and economic planning is centralized 
C) all resources are privately owned and prices are used to coordinate economic activity 
D) resources are both publicly and privately owned and some markets are regulated 
E) all resources are publicly owned and prices are used to coordinate economic activity 
A) decisions are based primarily on religion or custom 
B) all resources are publicly owned and economic planning is centralized 
C) all resources are privately owned and prices are used to coordinate economic activity 
D) resources are both publicly and privately owned and some markets are regulated 
E) all resources are publicly owned and prices are used to coordinate economic activity

Question 3

An outward shift of the production possibilities frontier

Accepted Answer

A) reflects economic stability 
B) reflects economic growth 
C) reflects economic decline 
D) does not relate to the state of the economy 
E) is always a parallel shift 
A) reflects economic stability 
B) reflects economic growth 
C) reflects economic decline 
D) does not relate to the state of the economy 
E) is always a parallel shift

Question 4

The opportunity cost of an activity

Accepted Answer

A) depends on the individual's subjective values and opinions 
B) is the same for everyone 
C) must be calculated and known before undertaking that activity 
D) is irrelevant to decision making 
E) is not related to time 
A) depends on the individual's subjective values and opinions 
B) is the same for everyone 
C) must be calculated and known before undertaking that activity 
D) is irrelevant to decision making 
E) is not related to time

Question 5

Each point along a nation's production possibilities frontier represents efficient use of all resources.

Accepted Answer

A) True 
 B)False

Question 6

Eileen has a comparative advantage over Jan in piano tuning but not in shoe polishing.Therefore,

Accepted Answer

A) Jan must have an absolute advantage in piano tuning 
B) Eileen must have an absolute advantage in shoe polishing 
C) Jan must have a lower opportunity cost of shoe polishing 
D) Eileen must have an absolute advantage in shoe polishing and in piano tuning 
E) Eileen must have an absolute advantage in piano tuning 
A) Jan must have an absolute advantage in piano tuning 
B) Eileen must have an absolute advantage in shoe polishing 
C) Jan must have a lower opportunity cost of shoe polishing 
D) Eileen must have an absolute advantage in shoe polishing and in piano tuning 
E) Eileen must have an absolute advantage in piano tuning

Question 7

Which of the following is a characteristic of pure capitalism?

Accepted Answer

A) all resources are owned communally 
B) economic activity is coordinated by government decision makers 
C) the price system is used to guide resources to their highest-valued uses 
D) centralized economic planning is used to answer the basic economic questions 
E) individual choices are reflected only through collective decisions 
A) all resources are owned communally 
B) economic activity is coordinated by government decision makers 
C) the price system is used to guide resources to their highest-valued uses 
D) centralized economic planning is used to answer the basic economic questions 
E) individual choices are reflected only through collective decisions

Question 8

If Jason can wash a car in 20 minutes and wash a dog in 10 minutes, and Megan can wash a car in 15 minutes and wash a dog in 15 minutes, which of the following statements is true?

Accepted Answer

A) The opportunity cost of washing a car is greater for Megan. 
B) The opportunity cost of washing a car is one dog bath for Jason. 
C) Megan could wash two cars in the time it takes to wash a dog. 
D) Jason has both a comparative and an absolute advantage in washing a dog. 
E) The opportunity cost of washing a dog is greater for Jason. 
A) The opportunity cost of washing a car is greater for Megan. 
B) The opportunity cost of washing a car is one dog bath for Jason. 
C) Megan could wash two cars in the time it takes to wash a dog. 
D) Jason has both a comparative and an absolute advantage in washing a dog. 
E) The opportunity cost of washing a dog is greater for Jason.

Question 9

Inefficiency is a flaw of a command economy because there is less incentive for resources to flow to their highest-valued uses.

Accepted Answer

A) True 
 B)False

Question 10

People have less incentive to invest the more concerned they are that their investment will not be

Accepted Answer

A) appropriated by government 
B) stolen by thieves 
C) protected from high tax rates 
D) destroyed by civil unrest 
E) blown up by terrorists 
A) appropriated by government 
B) stolen by thieves 
C) protected from high tax rates 
D) destroyed by civil unrest 
E) blown up by terrorists

Question 11

Exhibit 2-4   In Exhibit 2-4, if resources are used fully and efficiently, then the economy can produce at point(s)

Accepted Answer

A) f 
B) h, d, or e 
C) a, b, or c 
D) d or e 
E) g, h, or i 
A) f 
B) h, d, or e 
C) a, b, or c 
D) d or e 
E) g, h, or i

Question 12

Any movement along the production possibilities frontier involves the production of

Accepted Answer

A) more of both goods 
B) more of one good and less of the other 
C) less of both goods 
D) more resources 
E) better technology 
A) more of both goods 
B) more of one good and less of the other 
C) less of both goods 
D) more resources 
E) better technology

Question 13

The law of increasing opportunity cost explains why

Accepted Answer

A) opportunity cost is constant along the production possibilities frontier 
B) the production possibilities frontier is downward sloping 
C) the production possibilities frontier is curved 
D) efficient points lie along the production possibilities frontier 
E) technology remains constant along a production possibilities frontier 
A) opportunity cost is constant along the production possibilities frontier 
B) the production possibilities frontier is downward sloping 
C) the production possibilities frontier is curved 
D) efficient points lie along the production possibilities frontier 
E) technology remains constant along a production possibilities frontier

Question 14

On a given production possibilities frontier, which of the following is not assumed to be fixed?

Accepted Answer

A) the amount of labor available 
B) the amount of capital available 
C) the level of technology 
D) the amount of land and natural resources available 
E) production of each item 
A) the amount of labor available 
B) the amount of capital available 
C) the level of technology 
D) the amount of land and natural resources available 
E) production of each item

Question 15

A PPF will not shift because of an increase in

Accepted Answer

A) the stability of the rules of the game 
B) capital stock 
C) resource availability 
D) unemployment 
E) technological change 
A) the stability of the rules of the game 
B) capital stock 
C) resource availability 
D) unemployment 
E) technological change

Question 16

A rational decision maker engages in an activity if that activity is more attractive than the best alternative.

Accepted Answer

A) True 
 B)False

Question 17

Based on an analysis of opportunity cost, everyone should go to college.

Accepted Answer

A) True 
 B)False

Question 18

Exhibit 2-6   In moving from point f to point g in Exhibit 2-6, the

Accepted Answer

A) production of B increases without a change in the production of A 
B) production of A increases without a change in the production of B 
C) production of both A and B increase 
D) production of both A and B decrease 
E) production of B increases and production of A decreases 
A) production of B increases without a change in the production of A 
B) production of A increases without a change in the production of B 
C) production of both A and B increase 
D) production of both A and B decrease 
E) production of B increases and production of A decreases

Question 19

"Efficiency" refers to

Accepted Answer

A) producing output using the least amount of labor 
B) producing output using the least amount of capital 
C) producing as far inside the production possibilities frontier as possible 
D) producing only one out of many possible commodities 
E) getting the maximum possible output from available resources 
A) producing output using the least amount of labor 
B) producing output using the least amount of capital 
C) producing as far inside the production possibilities frontier as possible 
D) producing only one out of many possible commodities 
E) getting the maximum possible output from available resources

Question 20

Suppose you have a choice of working full-time during the summer or going full-time to summer school.Summer tuition and books are $2, 200.If you worked, you could make $7, 000.Your rent is $1, 000 for the summer, regardless of your choice.The opportunity cost of going to summer school is, therefore,

Accepted Answer

A) $2, 200 
B) $7, 000 
C) $8, 000 
D) $9, 200 
E) $10, 200 
A) $2, 200 
B) $7, 000 
C) $8, 000 
D) $9, 200 
E) $10, 200

Exam 2: Economic Tools and Economics Systems

If an economy is operating at a point inside the production possibilities frontier, then

A mixed capitalist economy is one in which

An outward shift of the production possibilities frontier

The opportunity cost of an activity

Each point along a nation's production possibilities frontier represents efficient use of all resources.

Eileen has a comparative advantage over Jan in piano tuning but not in shoe polishing.Therefore,

Which of the following is a characteristic of pure capitalism?

If Jason can wash a car in 20 minutes and wash a dog in 10 minutes, and Megan can wash a car in 15 minutes and wash a dog in 15 minutes, which of the following statements is true?

Inefficiency is a flaw of a command economy because there is less incentive for resources to flow to their highest-valued uses.

People have less incentive to invest the more concerned they are that their investment will not be

Exhibit 2-4 In Exhibit 2-4, if resources are used fully and efficiently, then the economy can produce at point(s)

Any movement along the production possibilities frontier involves the production of

The law of increasing opportunity cost explains why

On a given production possibilities frontier, which of the following is not assumed to be fixed?

A PPF will not shift because of an increase in

A rational decision maker engages in an activity if that activity is more attractive than the best alternative.

Based on an analysis of opportunity cost, everyone should go to college.

Exhibit 2-6 In moving from point f to point g in Exhibit 2-6, the

"Efficiency" refers to

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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