Question 1

Which of the following is true regarding value, transaction costs, and exchange?

Accepted Answer

A) Middlemen can be viewed as agents who create value by reducing transaction costs and, thereby, facilitating gains from exchange. 
B) Middlemen fail to create value since they do not expand the supply of physical goods. 
C) A good or service has a given value regardless of who uses it or how it is used. 
D) Voluntary exchange reduces value by channeling goods into the hands of people who value them least. 
A) Middlemen can be viewed as agents who create value by reducing transaction costs and, thereby, facilitating gains from exchange. 
B) Middlemen fail to create value since they do not expand the supply of physical goods. 
C) A good or service has a given value regardless of who uses it or how it is used. 
D) Voluntary exchange reduces value by channeling goods into the hands of people who value them least.

Question 2

The economic principle that states that individuals or nations can gain by specializing in the production of goods that they produce cheaply and exchanging for other desired goods that they could only produce at a higher cost is

Accepted Answer

A) the law of absolute advantage. 
B) the law of comparative advantage. 
C) the law of production possibilities. 
D) the exchange maximum principle. 
A) the law of absolute advantage. 
B) the law of comparative advantage. 
C) the law of production possibilities. 
D) the exchange maximum principle.

Question 3

Suppose a country attempts to be self-sufficient and doesn't trade with any other countries. From an economic perspective, citizens of this nation can be expected to

Accepted Answer

A) gain materially from this policy because they can consume more goods over time than if they engaged in trade with foreigners. 
B) produce less total value than they could if they specialized and engaged in trade with other nations. 
C) gain from more rapid growth since home markets are reserved for home producers. 
D) be just as well off without trade since the value of what is sent to other nations in trade just equals the value of what is received in trade. 
A) gain materially from this policy because they can consume more goods over time than if they engaged in trade with foreigners. 
B) produce less total value than they could if they specialized and engaged in trade with other nations. 
C) gain from more rapid growth since home markets are reserved for home producers. 
D) be just as well off without trade since the value of what is sent to other nations in trade just equals the value of what is received in trade.

Question 4

A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called

Accepted Answer

A) a key man. 
B) an entrepreneur. 
C) a progressor. 
D) a stakeholder. 
A) a key man. 
B) an entrepreneur. 
C) a progressor. 
D) a stakeholder.

Question 5

Table 2-2
    
-Refer to Table 2-2. According to the law of comparative advantage, both Honduras and Nicaragua could gain if

Accepted Answer

A) Honduras produced all of the apples and oranges and Nicaragua did not produce anything. 
B) Honduras specialized in producing apples, Nicaragua specialized in producing oranges, and they traded. 
C) Honduras specialized in producing oranges, Nicaragua specialized in producing apples, and they traded. 
D) Nicaragua and Honduras were both were self-sufficient and did not trade. 
A) Honduras produced all of the apples and oranges and Nicaragua did not produce anything. 
B) Honduras specialized in producing apples, Nicaragua specialized in producing oranges, and they traded. 
C) Honduras specialized in producing oranges, Nicaragua specialized in producing apples, and they traded. 
D) Nicaragua and Honduras were both were self-sufficient and did not trade.

Question 6

A nation that protects its workers from unemployment by limiting the use (by employers) of technological improvements will

Accepted Answer

A) grow more rapidly because the rate of unemployment will be lower. 
B) grow more rapidly because investors prefer a stable business environment rather than the uncertainties that accompany technological change. 
C) grow less rapidly because technological change is an important factor contributing to the growth of output. 
D) grow just as much as nations that adopt more rapidly technological improvements. 
A) grow more rapidly because the rate of unemployment will be lower. 
B) grow more rapidly because investors prefer a stable business environment rather than the uncertainties that accompany technological change. 
C) grow less rapidly because technological change is an important factor contributing to the growth of output. 
D) grow just as much as nations that adopt more rapidly technological improvements.

Question 7

Economic analysis suggests that gains from specialization and exchange

Accepted Answer

A) will not be realized unless a central planning authority requires that all goods be produced by the low opportunity cost supplier. 
B) will be realized if individuals are allowed to pursue goals that are in their own self-interest. 
C) will not be realized unless business firms employ economists when making decisions about the proper combination of resources to utilize in the production process. 
D) will be realized if individuals place the public interest above the pursuit of their own self-interest. 
A) will not be realized unless a central planning authority requires that all goods be produced by the low opportunity cost supplier. 
B) will be realized if individuals are allowed to pursue goals that are in their own self-interest. 
C) will not be realized unless business firms employ economists when making decisions about the proper combination of resources to utilize in the production process. 
D) will be realized if individuals place the public interest above the pursuit of their own self-interest.

Question 8

Todd owns a truck that he values at $2,000. Susan, who does a lot of hauling, values the truck at $6,000. If these two are allowed to negotiate, which of the following will most likely occur?

Accepted Answer

A) Todd will sell the truck for $1,500. 
B) Susan will buy the truck for $7,000. 
C) The truck will be sold at a price greater than $2,000 but less than $6,000, and both parties will benefit. 
D) Susan will benefit more than Todd if the truck is sold. 
A) Todd will sell the truck for $1,500. 
B) Susan will buy the truck for $7,000. 
C) The truck will be sold at a price greater than $2,000 but less than $6,000, and both parties will benefit. 
D) Susan will benefit more than Todd if the truck is sold.

Question 9

The number of cattle slaughtered every year for meat far exceeds the number of elephants slaughtered every year for their ivory. Despite this, cows can be found everywhere while elephants are on the verge of extinction in some countries. Which of the following best explains this difference?

Accepted Answer

A) Cows can be privately owned while in many countries elephants can not. 
B) The demand for ivory far exceeds the demand for beef. 
C) Animals slaughtered for their meat are generally better conserved by humans than animals slaughtered for nonfood uses. 
D) People tend to protest more every year to prevent cow extinction than they do for elephant extinction. 
A) Cows can be privately owned while in many countries elephants can not. 
B) The demand for ivory far exceeds the demand for beef. 
C) Animals slaughtered for their meat are generally better conserved by humans than animals slaughtered for nonfood uses. 
D) People tend to protest more every year to prevent cow extinction than they do for elephant extinction.

Question 10

When private ownership rights are well-defined and enforced, owners

Accepted Answer

A) can ignore the wishes of others, without bearing the cost. 
B) have little incentive to take care of things. 
C) can do anything they want with their property. 
D) can be held accountable for damage to others through misuse of their property. 
A) can ignore the wishes of others, without bearing the cost. 
B) have little incentive to take care of things. 
C) can do anything they want with their property. 
D) can be held accountable for damage to others through misuse of their property.

Question 11

When private ownership rights are well-defined and enforced, owners of physical assets and resources

Accepted Answer

A) have no incentive to consider the desires of others. 
B) incur the opportunity cost of ignoring the wishes of others. 
C) are not responsible if the use of their assets impose harm on others. 
D) have little incentive to take care of their assets. 
A) have no incentive to consider the desires of others. 
B) incur the opportunity cost of ignoring the wishes of others. 
C) are not responsible if the use of their assets impose harm on others. 
D) have little incentive to take care of their assets.

Question 12

As a general rule, technological progress

Accepted Answer

A) shifts the production possibilities curve outward, away from the origin. 
B) reduces the slope of the production possibilities curve, making it flatter. 
C) increases the slope of the production possibilities curve, making it steeper. 
D) shifts the production possibilities curve inward, toward the origin. 
A) shifts the production possibilities curve outward, away from the origin. 
B) reduces the slope of the production possibilities curve, making it flatter. 
C) increases the slope of the production possibilities curve, making it steeper. 
D) shifts the production possibilities curve inward, toward the origin.

Question 13

It can be said that, ultimately, consumers are the driving force in answering the three basic economic questions. Explain the consumer's role in providing these answers.

Accepted Answer

What will be produced is determined by b

Question 14

A point on the production possibilities curve represents a combination of goods that is

Accepted Answer

A) inefficient. 
B) efficient. 
C) unattainable. 
D) attainable. 
A) inefficient. 
B) efficient. 
C) unattainable. 
D) attainable.

Question 15

Trade creates value by

Accepted Answer

A) moving goods from people who value the goods less to people who value the goods more. 
B) permitting trading partners to expand output through specialization in areas where they each have a comparative advantage. 
C) permitting trading partners to expand output through the adoption of mass production methods. 
D) all of the above. 
A) moving goods from people who value the goods less to people who value the goods more. 
B) permitting trading partners to expand output through specialization in areas where they each have a comparative advantage. 
C) permitting trading partners to expand output through the adoption of mass production methods. 
D) all of the above.

Question 16

If a firm or a nation desires to maximize its output, each productive assignment should be carried out by those persons who

Accepted Answer

A) have the highest opportunity cost. 
B) have a comparative advantage in the productive activity. 
C) can complete the productive activity most rapidly. 
D) least enjoy performing the productive activity. 
A) have the highest opportunity cost. 
B) have a comparative advantage in the productive activity. 
C) can complete the productive activity most rapidly. 
D) least enjoy performing the productive activity.

Question 17

"Now that Terrance paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects

Accepted Answer

A) the importance of secondary effects. 
B) the fallacy of composition. 
C) the law of comparative advantage. 
D) behavior inconsistent with economizing. 
A) the importance of secondary effects. 
B) the fallacy of composition. 
C) the law of comparative advantage. 
D) behavior inconsistent with economizing.

Question 18

Creative destruction refers to the process where

Accepted Answer

A) new products and methods of production are continuously replacing old ones 
B) producing more of one good causes you to produce less of another 
C) everybody involved is made worse off 
D) new ways to destroy buildings are employed 
A) new products and methods of production are continuously replacing old ones 
B) producing more of one good causes you to produce less of another 
C) everybody involved is made worse off 
D) new ways to destroy buildings are employed

Question 19

Table 2-2
    
-Refer to Table 2-2. Which of the following would be a mutually agreeable rate of exchange?

Accepted Answer

A) Nicaragua trades one orange to Honduras for every one apple. 
B) Nicaragua trades one orange to Honduras for every two apples. 
C) Nicaragua trades one orange to Honduras for every three apples. 
D) Nicaragua trades one orange to Honduras for every four apples. 
A) Nicaragua trades one orange to Honduras for every one apple. 
B) Nicaragua trades one orange to Honduras for every two apples. 
C) Nicaragua trades one orange to Honduras for every three apples. 
D) Nicaragua trades one orange to Honduras for every four apples.

Question 20

What are the three basic questions faced by every economy?

Accepted Answer

A) What, how, and for whom will goods be produced? 
B) When, where, and how much will be produced? 
C) Why, where, and when will goods be produced? 
D) How, how much, and why will goods be produced? 
A) What, how, and for whom will goods be produced? 
B) When, where, and how much will be produced? 
C) Why, where, and when will goods be produced? 
D) How, how much, and why will goods be produced?

Which of the following is true regarding value, transaction costs, and exchange?

The economic principle that states that individuals or nations can gain by specializing in the production of goods that they produce cheaply and exchanging for other desired goods that they could only produce at a higher cost is

Suppose a country attempts to be self-sufficient and doesn't trade with any other countries. From an economic perspective, citizens of this nation can be expected to

A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called

Table 2-2 -Refer to Table 2-2. According to the law of comparative advantage, both Honduras and Nicaragua could gain if

A nation that protects its workers from unemployment by limiting the use (by employers) of technological improvements will

Economic analysis suggests that gains from specialization and exchange

Todd owns a truck that he values at $2,000. Susan, who does a lot of hauling, values the truck at $6,000. If these two are allowed to negotiate, which of the following will most likely occur?

The number of cattle slaughtered every year for meat far exceeds the number of elephants slaughtered every year for their ivory. Despite this, cows can be found everywhere while elephants are on the verge of extinction in some countries. Which of the following best explains this difference?

When private ownership rights are well-defined and enforced, owners

When private ownership rights are well-defined and enforced, owners of physical assets and resources

As a general rule, technological progress

It can be said that, ultimately, consumers are the driving force in answering the three basic economic questions. Explain the consumer's role in providing these answers.

A point on the production possibilities curve represents a combination of goods that is

Trade creates value by

If a firm or a nation desires to maximize its output, each productive assignment should be carried out by those persons who

"Now that Terrance paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects

Creative destruction refers to the process where

Table 2-2 -Refer to Table 2-2. Which of the following would be a mutually agreeable rate of exchange?

What are the three basic questions faced by every economy?

The Economic Approach

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 2: Some Tools of the Economist

Which of the following is true regarding value, transaction costs, and exchange?

The economic principle that states that individuals or nations can gain by specializing in the production of goods that they produce cheaply and exchanging for other desired goods that they could only produce at a higher cost is

Suppose a country attempts to be self-sufficient and doesn't trade with any other countries. From an economic perspective, citizens of this nation can be expected to

A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called

Table 2-2 -Refer to Table 2-2. According to the law of comparative advantage, both Honduras and Nicaragua could gain if

A nation that protects its workers from unemployment by limiting the use (by employers) of technological improvements will

Economic analysis suggests that gains from specialization and exchange

Todd owns a truck that he values at $2,000. Susan, who does a lot of hauling, values the truck at $6,000. If these two are allowed to negotiate, which of the following will most likely occur?

The number of cattle slaughtered every year for meat far exceeds the number of elephants slaughtered every year for their ivory. Despite this, cows can be found everywhere while elephants are on the verge of extinction in some countries. Which of the following best explains this difference?

When private ownership rights are well-defined and enforced, owners

When private ownership rights are well-defined and enforced, owners of physical assets and resources

As a general rule, technological progress

It can be said that, ultimately, consumers are the driving force in answering the three basic economic questions. Explain the consumer's role in providing these answers.

A point on the production possibilities curve represents a combination of goods that is

Trade creates value by

If a firm or a nation desires to maximize its output, each productive assignment should be carried out by those persons who

"Now that Terrance paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects

Creative destruction refers to the process where

Table 2-2 -Refer to Table 2-2. Which of the following would be a mutually agreeable rate of exchange?

What are the three basic questions faced by every economy?

The Economic Approach

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters