Question 1

If Monica has a comparative advantage in baking and George has a comparative advantage in sewing, then

Accepted Answer

A) Monica must have an absolute advantage in baking 
B) Monica must have an absolute advantage in sewing 
C) George must have an absolute advantage in baking 
D) George must have an absolute advantage in sewing 
E) we can conclude nothing about absolute advantage 
A) Monica must have an absolute advantage in baking 
B) Monica must have an absolute advantage in sewing 
C) George must have an absolute advantage in baking 
D) George must have an absolute advantage in sewing 
E) we can conclude nothing about absolute advantage

Question 2

On a straight-line production possibilities frontier, which of the following is true?

Accepted Answer

A) The problem of scarcity does not exist. 
B) Resources are imperfect substitutes. 
C) Opportunity costs are constant. 
D) Technology is rapidly expanding. 
E) Some resources are not being used efficiently. 
A) The problem of scarcity does not exist. 
B) Resources are imperfect substitutes. 
C) Opportunity costs are constant. 
D) Technology is rapidly expanding. 
E) Some resources are not being used efficiently.

Question 3

Increases in resources or improvements in technology will cause the production possibilities frontier to

Accepted Answer

A) shift outward 
B) shift inward 
C) become a straight line 
D) become horizontal 
E) become vertical 
A) shift outward 
B) shift inward 
C) become a straight line 
D) become horizontal 
E) become vertical

Question 4

Which economic question does the decision to give all of the butter the economy produces to the homeless answer?

Accepted Answer

A) What to produce? 
B) How to produce? 
C) For whom to produce? 
D) Who has a comparative advantage in butter production? 
E) Who has an absolute advantage in butter production? 
A) What to produce? 
B) How to produce? 
C) For whom to produce? 
D) Who has a comparative advantage in butter production? 
E) Who has an absolute advantage in butter production?

Question 5

Recognizing the incentive power of property rights and markets, some of the most die-hard central planners are now allowing

Accepted Answer

A) more influence from custom or religion 
B) family relations to play significant roles 
C) a role for markets 
D) communal ownership of property 
E) inefficient use of resources 
A) more influence from custom or religion 
B) family relations to play significant roles 
C) a role for markets 
D) communal ownership of property 
E) inefficient use of resources

Question 6

Suppose you have an hour before your next class starts.From your most preferred alternative to the least, 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 an hour's worth of reading your book 
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 an hour's worth of reading your book 
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 7

The opportunity cost of an activity is best measured

Accepted Answer

A) only by the monetary costs 
B) by the number of alternative activities that were forgone 
C) by the cost difference between the chosen activity and the next best alternative 
D) by the value expected from the best alternative that is forgone 
E) as the time wasted choosing among various activities 
A) only by the monetary costs 
B) by the number of alternative activities that were forgone 
C) by the cost difference between the chosen activity and the next best alternative 
D) by the value expected from the best alternative that is forgone 
E) as the time wasted choosing among various activities

Question 8

Fast food is faster and cheaper than a similar meal you could prepare for yourself.Which of the following does not explain that fact?

Accepted Answer

A) meal preparation has been divided into many separate tasks 
B) larger-scale production allows the introduction of more efficient machines 
C) workers gain productivity at a task over time 
D) there is less time lost moving from one task to another 
E) workers are more productive when they are being paid 
A) meal preparation has been divided into many separate tasks 
B) larger-scale production allows the introduction of more efficient machines 
C) workers gain productivity at a task over time 
D) there is less time lost moving from one task to another 
E) workers are more productive when they are being paid

Question 9

Exhibit 2-12 Maria and Hans Production Possibilities for Laundry and Typing   According to Exhibit 2-12, 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 10

If the production possibilities curve is a downward-sloping straight line, that would indicate

Accepted Answer

A) that society cannot decide which good it prefers 
B) an absence of scarcity 
C) constant opportunity cost 
D) inefficiency 
E) specialization 
A) that society cannot decide which good it prefers 
B) an absence of scarcity 
C) constant opportunity cost 
D) inefficiency 
E) specialization

Question 11

Which of the following is a characteristic of a pure command economy?

Accepted Answer

A) all resources are privately owned 
B) economic activity is coordinated by the price system 
C) competitive markets guide resources to their highest-valued uses 
D) centralized economic planning is used to answer the basic economic questions 
E) economic choices are voluntary and are based on rational self-interest 
A) all resources are privately owned 
B) economic activity is coordinated by the price system 
C) competitive markets guide resources to their highest-valued uses 
D) centralized economic planning is used to answer the basic economic questions 
E) economic choices are voluntary and are based on rational self-interest

Question 12

A point inside the production possibilities curve illustrates a situation in which resources are not fully employed

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 2-12 Maria and Hans Production Possibilities for Laundry and Typing   According to Exhibit 2-12, if Maria types one fewer page, how many loads of laundry can she do in the time saved on typing?

Accepted Answer

A) 4 loads 
B) 6 loads 
C) 2/3 of a load 
D) 3/2 of a load 
E) it cannot be determined 
A) 4 loads 
B) 6 loads 
C) 2/3 of a load 
D) 3/2 of a load 
E) it cannot be determined

Question 14

Suppose you have purchased a non-refundable plane ticket and, at the last moment, you cannot take the trip.You can, however, sell the ticket.If you paid $700 for the ticket, the cost of sending the ticket to someone through overnight mail is $20, and you spend $10 on a courier to get the ticket to the post office for overnight delivery, what is the minimum you should accept for the ticket?

Accepted Answer

A) $700 because that is what the ticket cost. 
B) $720 because that is the cost of the ticket and of getting it to the buyer. 
C) $730 because that is the total cost of the ticket and getting it to the buyer. 
D) More than $730, so that you can make a profit. 
E) $30 because the $700 is a sunk cost. 
A) $700 because that is what the ticket cost. 
B) $720 because that is the cost of the ticket and of getting it to the buyer. 
C) $730 because that is the total cost of the ticket and getting it to the buyer. 
D) More than $730, so that you can make a profit. 
E) $30 because the $700 is a sunk cost.

Question 15

Exhibit 2-10         Refer to Exhibit 2-10.Which of the graphs best illustrates the impact on the production possibilities frontier of a dramatic increase in the rate of immigration into a country?

Accepted Answer

A) a 
B) b 
C) c 
D) d 
E) b and c 
A) a 
B) b 
C) c 
D) d 
E) b and c

Question 16

The production possibilities frontier represents all desirable combinations of two goods

Accepted Answer

A) True 
 B)False

Question 17

The opportunity cost of college is the same for all students who are receiving full-tuition scholarships.

Accepted Answer

A) True 
 B)False

Question 18

A point outside the production possibilities frontier

Accepted Answer

A) represents unemployment of resources 
B) represents full employment of resources 
C) would not represent an efficient combination of goods 
D) cannot be reached using the available technology 
E) is less desirable than one that lies inside the frontier 
A) represents unemployment of resources 
B) represents full employment of resources 
C) would not represent an efficient combination of goods 
D) cannot be reached using the available technology 
E) is less desirable than one that lies inside the frontier

Question 19

If one person has the absolute advantage in producing both of two goods, then that person

Accepted Answer

A) must also have a comparative advantage in both goods 
B) cannot benefit from trade 
C) cannot have a comparative advantage in either good 
D) will have the comparative advantage in only one good 
E) should specialize in the production of both goods 
A) must also have a comparative advantage in both goods 
B) cannot benefit from trade 
C) cannot have a comparative advantage in either good 
D) will have the comparative advantage in only one good 
E) should specialize in the production of both goods

Question 20

If you and I agree to exchange four ginger snaps for one chocolate chip cookie, then it must be true that

Accepted Answer

A) we are both at least as well off as we were before 
B) I am better off than I was before, but you are not 
C) you are better off than you were before, but I am not 
D) we are both better off than before 
E) we are both worse off than before 
A) we are both at least as well off as we were before 
B) I am better off than I was before, but you are not 
C) you are better off than you were before, but I am not 
D) we are both better off than before 
E) we are both worse off than before

Exam 2: Economic Tools and Economics Systems

If Monica has a comparative advantage in baking and George has a comparative advantage in sewing, then

On a straight-line production possibilities frontier, which of the following is true?

Increases in resources or improvements in technology will cause the production possibilities frontier to

Which economic question does the decision to give all of the butter the economy produces to the homeless answer?

Recognizing the incentive power of property rights and markets, some of the most die-hard central planners are now allowing

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

The opportunity cost of an activity is best measured

Fast food is faster and cheaper than a similar meal you could prepare for yourself.Which of the following does not explain that fact?

Exhibit 2-12 Maria and Hans Production Possibilities for Laundry and Typing According to Exhibit 2-12, Hans' opportunity cost of doing a load of laundry is

If the production possibilities curve is a downward-sloping straight line, that would indicate

Which of the following is a characteristic of a pure command economy?

A point inside the production possibilities curve illustrates a situation in which resources are not fully employed

Exhibit 2-12 Maria and Hans Production Possibilities for Laundry and Typing According to Exhibit 2-12, if Maria types one fewer page, how many loads of laundry can she do in the time saved on typing?

Exhibit 2-10 Refer to Exhibit 2-10.Which of the graphs best illustrates the impact on the production possibilities frontier of a dramatic increase in the rate of immigration into a country?

The production possibilities frontier represents all desirable combinations of two goods

The opportunity cost of college is the same for all students who are receiving full-tuition scholarships.

A point outside the production possibilities frontier

If one person has the absolute advantage in producing both of two goods, then that person

If you and I agree to exchange four ginger snaps for one chocolate chip cookie, then it must be true that

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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