Question 1

Who faces the problem of scarcity?

Accepted Answer

A) Only the rich 
B) Only the poor 
C) Only people living next to wealthy people 
D) Everyone 
E) Only people running a business 
A) Only the rich 
B) Only the poor 
C) Only people living next to wealthy people 
D) Everyone 
E) Only people running a business

Question 2

Exhibit 1-3  
-Refer to Exhibit 1-3. Suppose John and Jack can produce the above combinations of candy bars and ice cream bars in one hour. John and Jack can maximize their total production if

Accepted Answer

A) both produce candy bars. 
B) both produce ice cream bars. 
C) John produces both candy bars and ice cream bars, while Jack produces nothing. 
D) Jack produces both candy bars and ice cream bars, while John produces nothing. 
E) each of them produces what he has a comparative advantage in producing. 
A) both produce candy bars. 
B) both produce ice cream bars. 
C) John produces both candy bars and ice cream bars, while Jack produces nothing. 
D) Jack produces both candy bars and ice cream bars, while John produces nothing. 
E) each of them produces what he has a comparative advantage in producing.

Question 3

A production possibilities curve shows

Accepted Answer

A) what happens to the amount of available resources if it is not possible to produce a good. 
B) what can be produced with unlimited resources. 
C) what happens as available resources in an economy are moved from producing one type of good to another type, or vice versa. 
D) the choice between producing some goods versus other goods with unlimited resources. 
E) the different kinds of products that a firm can produce. 
A) what happens to the amount of available resources if it is not possible to produce a good. 
B) what can be produced with unlimited resources. 
C) what happens as available resources in an economy are moved from producing one type of good to another type, or vice versa. 
D) the choice between producing some goods versus other goods with unlimited resources. 
E) the different kinds of products that a firm can produce.

Question 4

In general, what is economics the study of?

Accepted Answer

Economics is the study of choi

Question 5

It is impossible for two people to increase their total production if one has a comparative advantage in the production of one particular good.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 1-6  
-Refer to the production possibilities schedule in Exhibit 1-6. A combination of 20 units of computers and 2 TV sets

Accepted Answer

A) requires an infusion of technological know-how. 
B) illustrates underemployment of resources. 
C) is possible only with full and efficient use of all resources. 
D) is unattainable because it requires resources that are not available. 
E) cannot be produced with the current supply of resources. 
A) requires an infusion of technological know-how. 
B) illustrates underemployment of resources. 
C) is possible only with full and efficient use of all resources. 
D) is unattainable because it requires resources that are not available. 
E) cannot be produced with the current supply of resources.

Question 7

When an economy is operating on its production possibilities curve, more production of one good means less production of another because

Accepted Answer

A) wants are unlimited. 
B) resources are limited. 
C) some resources are not employed. 
D) wants are limited. 
E) resources are not perfectly adaptable to alternative uses. 
A) wants are unlimited. 
B) resources are limited. 
C) some resources are not employed. 
D) wants are limited. 
E) resources are not perfectly adaptable to alternative uses.

Question 8

What is division of labor, and why is this a reason for economic interaction?

Accepted Answer

A division of labor occurs when differen

Question 9

Exhibit 1-9  
-Refer to Exhibit 1-9. If the economy depicted is at Point B, then

Accepted Answer

A) more consumption can be produced, but at the expense of education. 
B) any further increase in education will involve a decrease in consumption. 
C) any further increase in consumption will involve a decrease in education. 
D) any further increase in either consumption or education will benefit everyone. 
E) any further increase in either consumption or education will hurt everyone. 
A) more consumption can be produced, but at the expense of education. 
B) any further increase in education will involve a decrease in consumption. 
C) any further increase in consumption will involve a decrease in education. 
D) any further increase in either consumption or education will benefit everyone. 
E) any further increase in either consumption or education will hurt everyone.

Question 10

Which of the following refers to a decline in production and employment that lasts for six months or more?

Accepted Answer

A) Financial crisis 
B) Economic growth 
C) Market failure 
D) Government failure 
E) Recession 
A) Financial crisis 
B) Economic growth 
C) Market failure 
D) Government failure 
E) Recession

Question 11

Exhibit 1-8  
-Refer to Exhibit 1-8. The optimal point for the economy is

Accepted Answer

A) D. 
B) C. 
C) B. 
D) E. 
E) impossible to determine from the given information. 
A) D. 
B) C. 
C) B. 
D) E. 
E) impossible to determine from the given information.

Question 12

If available resources are being used efficiently,

Accepted Answer

A) a society can increase the production of one good or service only by decreasing the production of some other good or service. 
B) society need no longer worry about tradeoffs. 
C) a society can increase the production of one good or service only by increasing the production of some other good or service. 
D) resources are no longer limited. 
E) scarcity is no longer a problem. 
A) a society can increase the production of one good or service only by decreasing the production of some other good or service. 
B) society need no longer worry about tradeoffs. 
C) a society can increase the production of one good or service only by increasing the production of some other good or service. 
D) resources are no longer limited. 
E) scarcity is no longer a problem.

Question 13

Economic growth can be shown by

Accepted Answer

A) a shift of the production possibilities curve outward. 
B) a point inside the production possibilities curve. 
C) movement along the production possibilities curve. 
D) a shift of the production possibilities curve inward. 
E) changing the shape of the production possibilities curve. 
A) a shift of the production possibilities curve outward. 
B) a point inside the production possibilities curve. 
C) movement along the production possibilities curve. 
D) a shift of the production possibilities curve inward. 
E) changing the shape of the production possibilities curve.

Question 14

Trade enables people to specialize in activities in which they have a comparative advantage.

Accepted Answer

A) True 
 B)False

Question 15

Buyers and sellers interact in a

Accepted Answer

A) government. 
B) face-to-face forum. 
C) family. 
D) market. 
E) classroom. 
A) government. 
B) face-to-face forum. 
C) family. 
D) market. 
E) classroom.

Question 16

If an increase in the price of lemonade results in people with lemonade stands having more income, then it can be argued that the price increase

Accepted Answer

A) acted as an incentive. 
B) resulted in a redistribution of income. 
C) acted as a transfer price. 
D) reduced competition. 
E) acted a signal. 
A) acted as an incentive. 
B) resulted in a redistribution of income. 
C) acted as a transfer price. 
D) reduced competition. 
E) acted a signal.

Question 17

In a command economy, the what, how, and for whom problems are determined by

Accepted Answer

A) consumers. 
B) firms. 
C) the government. 
D) both consumers and firms. 
E) markets. 
A) consumers. 
B) firms. 
C) the government. 
D) both consumers and firms. 
E) markets.

Question 18

In a market economy, prices are

Accepted Answer

A) mainly transfer prices. 
B) affordable by all consumers. 
C) determined by the government. 
D) freely determined. 
E) determined solely by firms and not by consumers. 
A) mainly transfer prices. 
B) affordable by all consumers. 
C) determined by the government. 
D) freely determined. 
E) determined solely by firms and not by consumers.

Question 19

Amy's parents tell her that the grades of the two courses (biology and economics) she takes will decline if she chooses to work a full-time job while going to college. How might this be possible? How would you represent this situation graphically using the production possibilities curve?

Accepted Answer

It is possible for Amy to have a lower g

Question 20

When people specialize in the activity in which they have a comparative advantage,

Accepted Answer

A) there cannot be a division of labor, though production will increase. 
B) there will likely be a division of labor as well as an increase in output. 
C) there will be a gain from trade, but production will not be increased. 
D) there will likely be a division of labor, and output will stay the same. 
E) there will likely be a division of labor, and output will decline. 
A) there cannot be a division of labor, though production will increase. 
B) there will likely be a division of labor as well as an increase in output. 
C) there will be a gain from trade, but production will not be increased. 
D) there will likely be a division of labor, and output will stay the same. 
E) there will likely be a division of labor, and output will decline.

Exam 1: The Central Idea

Who faces the problem of scarcity?

Exhibit 1-3 -Refer to Exhibit 1-3. Suppose John and Jack can produce the above combinations of candy bars and ice cream bars in one hour. John and Jack can maximize their total production if

A production possibilities curve shows

In general, what is economics the study of?

It is impossible for two people to increase their total production if one has a comparative advantage in the production of one particular good.

Exhibit 1-6 -Refer to the production possibilities schedule in Exhibit 1-6. A combination of 20 units of computers and 2 TV sets

When an economy is operating on its production possibilities curve, more production of one good means less production of another because

What is division of labor, and why is this a reason for economic interaction?

Exhibit 1-9 -Refer to Exhibit 1-9. If the economy depicted is at Point B, then

Which of the following refers to a decline in production and employment that lasts for six months or more?

Exhibit 1-8 -Refer to Exhibit 1-8. The optimal point for the economy is

If available resources are being used efficiently,

Economic growth can be shown by

Trade enables people to specialize in activities in which they have a comparative advantage.

Buyers and sellers interact in a

If an increase in the price of lemonade results in people with lemonade stands having more income, then it can be argued that the price increase

In a command economy, the what, how, and for whom problems are determined by

In a market economy, prices are

Amy's parents tell her that the grades of the two courses (biology and economics) she takes will decline if she chooses to work a full-time job while going to college. How might this be possible? How would you represent this situation graphically using the production possibilities curve?

When people specialize in the activity in which they have a comparative advantage,

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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