Question 1

Which of the following will most likely cause an outward shift in the production possibilities curve?

Accepted Answer

A) a reduction in the man-made productive resources available to the economy as the result of a decline in investment 
B) an increase in government payments to farmers for taking land out of production 
C) an increase from 40 to 50 hours in the average number of hours worked per week 
D) None of the above would cause an outward shift in the production possibilities curve. 
A) a reduction in the man-made productive resources available to the economy as the result of a decline in investment 
B) an increase in government payments to farmers for taking land out of production 
C) an increase from 40 to 50 hours in the average number of hours worked per week 
D) None of the above would cause an outward shift in the production possibilities curve.

Question 2

Why is trade an important source of economic progress?

Accepted Answer

A) It allows the trading partners to produce a larger joint output through specialization in the areas where they have a comparative advantage. 
B) It allows the trading partners to produce a larger joint output as the result of greater realization of cost reductions that accompany the adoption of mass production methods. 
C) It makes it possible to realize gains from the discovery and dissemination of innovative products and production processes. 
D) All of the above are correct. 
A) It allows the trading partners to produce a larger joint output through specialization in the areas where they have a comparative advantage. 
B) It allows the trading partners to produce a larger joint output as the result of greater realization of cost reductions that accompany the adoption of mass production methods. 
C) It makes it possible to realize gains from the discovery and dissemination of innovative products and production processes. 
D) All of the above are correct.

Question 3

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

Accepted Answer

A) an increase in the labor force 
B) an increase in unemployment 
C) development of an improved technological method of production 
D) a decrease in the stock of physical capital 
A) an increase in the labor force 
B) an increase in unemployment 
C) development of an improved technological method of production 
D) a decrease in the stock of physical capital

Question 4

Figure 2-7  
-If an economy operates at point A on the production possibilities curve shown in Figure 2-7,

Accepted Answer

A) to produce more food, it would have to reduce its production of clothing. 
B) to produce more clothing, it would have to reduce the production of food. 
C) it is operating efficiently. 
D) all of the above would be correct. 
A) to produce more food, it would have to reduce its production of clothing. 
B) to produce more clothing, it would have to reduce the production of food. 
C) it is operating efficiently. 
D) all of the above would be correct.

Question 5

Darryl can build picnic tables twice as fast as Trevon. Darryl can assemble swing sets three times as fast as Trevon. The law of comparative advantage suggests that

Accepted Answer

A) Darryl can gain only at Trevon's expense. 
B) Trevon can gain only at Darryl's expense. 
C) both can gain if Darryl specializes in assembling swing sets and Trevon in building picnic tables. 
D) both can gain if Darryl specializes in building picnic tables and Trevon in assembling swing sets. 
A) Darryl can gain only at Trevon's expense. 
B) Trevon can gain only at Darryl's expense. 
C) both can gain if Darryl specializes in assembling swing sets and Trevon in building picnic tables. 
D) both can gain if Darryl specializes in building picnic tables and Trevon in assembling swing sets.

Question 6

The law of comparative advantage implies that a nation, individual, or region should produce those economic goods for which it

Accepted Answer

A) has an absolute advantage. 
B) is a low opportunity cost producer. 
C) is a high opportunity cost producer. 
D) pays the highest wage rate. 
A) has an absolute advantage. 
B) is a low opportunity cost producer. 
C) is a high opportunity cost producer. 
D) pays the highest wage rate.

Question 7

In economics, the term for a person who reduces transaction costs by arranging trades for buyers and sellers is

Accepted Answer

A) an exchange broker. 
B) a middleman. 
C) a transactions specialist. 
D) an opportunity finder. 
A) an exchange broker. 
B) a middleman. 
C) a transactions specialist. 
D) an opportunity finder.

Question 8

Which of the following is true of private ownership?

Accepted Answer

A) Private ownership links responsibility with the right of control. 
B) Private owners have little incentive to conserve natural resources for the future. 
C) Private owners have little incentive to develop and use their assets in ways others value. 
D) Private owners can do anything they want with the things they own regardless of the damage it does to the property of others. 
A) Private ownership links responsibility with the right of control. 
B) Private owners have little incentive to conserve natural resources for the future. 
C) Private owners have little incentive to develop and use their assets in ways others value. 
D) Private owners can do anything they want with the things they own regardless of the damage it does to the property of others.

Question 9

For most students attending state universities, the largest cost component of going to college is

Accepted Answer

A) the cost of books and supplies. 
B) the cost of room and board. 
C) tuition. 
D) the opportunity cost in terms of forgone current income from the time spent attending college. 
A) the cost of books and supplies. 
B) the cost of room and board. 
C) tuition. 
D) the opportunity cost in terms of forgone current income from the time spent attending college.

Question 10

After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. Use the production possibilities curve to demonstrate how this might affect the production of other goods in the United States.

Accepted Answer

Increased resources devoted to

Question 11

Because private owners are held responsible for damages their property causes to the property of others, private owners have

Accepted Answer

A) a strong incentive to take steps to reduce the chance that they will harm the property of others. 
B) a strong incentive to use their property now rather than conserving it for the future. 
C) little incentive to take good care of the property. 
D) little incentive to consider the harm their property may do to the property of others. 
A) a strong incentive to take steps to reduce the chance that they will harm the property of others. 
B) a strong incentive to use their property now rather than conserving it for the future. 
C) little incentive to take good care of the property. 
D) little incentive to consider the harm their property may do to the property of others.

Question 12

Melanie decided to sleep in today rather than attend her 9 a.m.economics class.According to economic analysis, her choice was

Accepted Answer

A) irrational, because economic analysis suggests you should always attend classes that you have already paid for. 
B) irrational, because oversleeping is not in Melanie's self-interest. 
C) rational if Melanie has not missed any other classes. 
D) rational if Melanie values sleep more highly than the benefit she expects to receive from attending the class. 
A) irrational, because economic analysis suggests you should always attend classes that you have already paid for. 
B) irrational, because oversleeping is not in Melanie's self-interest. 
C) rational if Melanie has not missed any other classes. 
D) rational if Melanie values sleep more highly than the benefit she expects to receive from attending the class.

Question 13

The production possibilities curve illustrates the basic principle that

Accepted Answer

A) an economy's capacity to produce increases in proportion to its population. 
B) if the resources of an economy are being used efficiently, more of one good can be produced only if less of another is produced. 
C) an economy will automatically seek the output at which all of its resources are fully employed. 
D) the distribution of income among households is the major determinant of the economic welfare of a nation. 
A) an economy's capacity to produce increases in proportion to its population. 
B) if the resources of an economy are being used efficiently, more of one good can be produced only if less of another is produced. 
C) an economy will automatically seek the output at which all of its resources are fully employed. 
D) the distribution of income among households is the major determinant of the economic welfare of a nation.

Question 14

In voluntary exchange, if the seller of a product gains,

Accepted Answer

A) the buyer will generally lose an amount greater than the gain to the seller. 
B) the buyer must lose an amount equal to what the seller gains. 
C) someone else must lose an equal amount. 
D) the buyer must also gain; mutual gain provides the foundation for exchange. 
A) the buyer will generally lose an amount greater than the gain to the seller. 
B) the buyer must lose an amount equal to what the seller gains. 
C) someone else must lose an equal amount. 
D) the buyer must also gain; mutual gain provides the foundation for exchange.

Question 15

If Mia can either wash 10 cars or wax 2 cars during a day, and Daniel can either wash 17 cars or wax 2 cars during a day, then according to the law of comparative advantage,

Accepted Answer

A) Daniel's opportunity cost of waxing a car is less than Mia's. 
B) their total output can be expanded if Mia specializes in waxing and Daniel in washing. 
C) their total output can be expanded if Mia specializes in washing and Daniel in waxing. 
D) it would be impossible for Daniel and Mia to increase their total output through specialization and mutual exchange. 
A) Daniel's opportunity cost of waxing a car is less than Mia's. 
B) their total output can be expanded if Mia specializes in waxing and Daniel in washing. 
C) their total output can be expanded if Mia specializes in washing and Daniel in waxing. 
D) it would be impossible for Daniel and Mia to increase their total output through specialization and mutual exchange.

Question 16

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

Accepted Answer

A) Resource owners will fail to conserve vital resources, even if they expect their supply to be highly limited in the future. 
B) Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned. 
C) Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources. 
D) Resource owners will gain by discovering and employing their resources in ways that are highly valued by others. 
A) Resource owners will fail to conserve vital resources, even if they expect their supply to be highly limited in the future. 
B) Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned. 
C) Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources. 
D) Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.

Question 17

Table 2-3
  
-Refer to Table 2-3. The opportunity cost of 1 pound of potatoes for the farmer is

Accepted Answer

A) 8 hours of labor. 
B) 2 hours of labor. 
C) 4 pounds of meat. 
D) 1/4 pound of meat. 
A) 8 hours of labor. 
B) 2 hours of labor. 
C) 4 pounds of meat. 
D) 1/4 pound of meat.

Question 18

Which of the following about trade is true?

Accepted Answer

A) Trade does not produce anything new; therefore, it cannot create value. 
B) The value of a good is determined by the cost of the material resources required for its production. 
C) The value of a good generally depends on who uses it and circumstances such as when and where it is used. 
D) All of the above are true. 
A) Trade does not produce anything new; therefore, it cannot create value. 
B) The value of a good is determined by the cost of the material resources required for its production. 
C) The value of a good generally depends on who uses it and circumstances such as when and where it is used. 
D) All of the above are true.

Question 19

If the Internet makes it easier for sellers to find buyers and makes it easier for buyers to learn about the products that are available for sale, we would expect that

Accepted Answer

A) the volume of trade will decline. 
B) transaction costs will rise. 
C) the gains from trade will increase. 
D) buyers and sellers will be worse off. 
A) the volume of trade will decline. 
B) transaction costs will rise. 
C) the gains from trade will increase. 
D) buyers and sellers will be worse off.

Question 20

Figure 2-9  
-Refer to Figure 2-9. The opportunity cost of obtaining 10 additional toasters by moving from point B to point A is

Accepted Answer

A) 10 toothbrushes. 
B) 20 toothbrushes. 
C) 30 toothbrushes. 
D) zero, since the economy has the additional resources to produce 10 additional toasters. 
A) 10 toothbrushes. 
B) 20 toothbrushes. 
C) 30 toothbrushes. 
D) zero, since the economy has the additional resources to produce 10 additional toasters.

Which of the following will most likely cause an outward shift in the production possibilities curve?

Why is trade an important source of economic progress?

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

Figure 2-7 -If an economy operates at point A on the production possibilities curve shown in Figure 2-7,

Darryl can build picnic tables twice as fast as Trevon. Darryl can assemble swing sets three times as fast as Trevon. The law of comparative advantage suggests that

The law of comparative advantage implies that a nation, individual, or region should produce those economic goods for which it

In economics, the term for a person who reduces transaction costs by arranging trades for buyers and sellers is

Which of the following is true of private ownership?

For most students attending state universities, the largest cost component of going to college is

Because private owners are held responsible for damages their property causes to the property of others, private owners have

Melanie decided to sleep in today rather than attend her 9 a.m.economics class.According to economic analysis, her choice was

The production possibilities curve illustrates the basic principle that

In voluntary exchange, if the seller of a product gains,

If Mia can either wash 10 cars or wax 2 cars during a day, and Daniel can either wash 17 cars or wax 2 cars during a day, then according to the law of comparative advantage,

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

Table 2-3 -Refer to Table 2-3. The opportunity cost of 1 pound of potatoes for the farmer is

Which of the following about trade is true?

If the Internet makes it easier for sellers to find buyers and makes it easier for buyers to learn about the products that are available for sale, we would expect that

Figure 2-9 -Refer to Figure 2-9. The opportunity cost of obtaining 10 additional toasters by moving from point B to point A is

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 will most likely cause an outward shift in the production possibilities curve?

Why is trade an important source of economic progress?

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

Figure 2-7 -If an economy operates at point A on the production possibilities curve shown in Figure 2-7,

Darryl can build picnic tables twice as fast as Trevon. Darryl can assemble swing sets three times as fast as Trevon. The law of comparative advantage suggests that

The law of comparative advantage implies that a nation, individual, or region should produce those economic goods for which it

In economics, the term for a person who reduces transaction costs by arranging trades for buyers and sellers is

Which of the following is true of private ownership?

For most students attending state universities, the largest cost component of going to college is

Because private owners are held responsible for damages their property causes to the property of others, private owners have

Melanie decided to sleep in today rather than attend her 9 a.m.economics class.According to economic analysis, her choice was

The production possibilities curve illustrates the basic principle that

In voluntary exchange, if the seller of a product gains,

If Mia can either wash 10 cars or wax 2 cars during a day, and Daniel can either wash 17 cars or wax 2 cars during a day, then according to the law of comparative advantage,

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

Table 2-3 -Refer to Table 2-3. The opportunity cost of 1 pound of potatoes for the farmer is

Which of the following about trade is true?

If the Internet makes it easier for sellers to find buyers and makes it easier for buyers to learn about the products that are available for sale, we would expect that

Figure 2-9 -Refer to Figure 2-9. The opportunity cost of obtaining 10 additional toasters by moving from point B to point A is

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