Question 1

With time, which one of the following strategies will most likely result in an outward shift in an economy's production possibilities curve?

Accepted Answer

A) passage of legislation reducing the workweek to 30 hours 
B) institution of a tax policy encouraging research that advances technology 
C) institution of a tax policy encouraging consumption at the expense of investment 
D) passage of a law requiring the minimum wage to increase every year 
A) passage of legislation reducing the workweek to 30 hours 
B) institution of a tax policy encouraging research that advances technology 
C) institution of a tax policy encouraging consumption at the expense of investment 
D) passage of a law requiring the minimum wage to increase every year

Question 2

The opportunity cost of an action is

Accepted Answer

A) objective and will be the same for all individuals. 
B) a measure of the undesirable aspects involved in the action. 
C) applicable only to choices involving material goods like commodities. 
D) the highest valued alternative forgone as the result of choosing an option. 
A) objective and will be the same for all individuals. 
B) a measure of the undesirable aspects involved in the action. 
C) applicable only to choices involving material goods like commodities. 
D) the highest valued alternative forgone as the result of choosing an option.

Question 3

Air travel from New York to Miami costs $300 and takes 6 hours. A bus ticket between the cities costs $150 and takes 56 hours. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be

Accepted Answer

A) $1 per hour. 
B) $3 per hour. 
C) $5 per hour. 
D) $50 per hour. 
A) $1 per hour. 
B) $3 per hour. 
C) $5 per hour. 
D) $50 per hour.

Question 4

When property rights are clearly defined and enforced, private owners will

Accepted Answer

A) use their property for selfish ends because they have little or no incentive to consider the desires of others. 
B) develop and direct their property toward uses that others value highly because the market will generally reward them for doing so. 
C) have little or no incentive to take care of their property or conserve it for the future. 
D) be unable to derive personal gain if they are sensitive to the desires of others when deciding how to use their property. 
A) use their property for selfish ends because they have little or no incentive to consider the desires of others. 
B) develop and direct their property toward uses that others value highly because the market will generally reward them for doing so. 
C) have little or no incentive to take care of their property or conserve it for the future. 
D) be unable to derive personal gain if they are sensitive to the desires of others when deciding how to use their property.

Question 5

Middlemen are individuals who

Accepted Answer

A) add to the buyer's expense without performing a useful function. 
B) add to the seller's cost without performing a useful function. 
C) provide services that reduce the cost of transactions and help achieve additional gains from trade. 
D) act as a middle person between the top management of a business firm and the hourly employees who actually produce the goods and services. 
A) add to the buyer's expense without performing a useful function. 
B) add to the seller's cost without performing a useful function. 
C) provide services that reduce the cost of transactions and help achieve additional gains from trade. 
D) act as a middle person between the top management of a business firm and the hourly employees who actually produce the goods and services.

Question 6

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are efficiently utilized. An economy that operates inside this production possibilities curve

Accepted Answer

A) is using its resources inefficiently. 
B) lacks the necessary technology to produce efficiently. 
C) lacks the resources to produce goods efficiently. 
D) is utilizing its available resources as efficiently as possible. 
A) is using its resources inefficiently. 
B) lacks the necessary technology to produce efficiently. 
C) lacks the resources to produce goods efficiently. 
D) is utilizing its available resources as efficiently as possible.

Question 7

Which of the following most accurately states the function of middlemen?

Accepted Answer

A) Middlemen add to the expense of buyers and sellers without providing any benefit. 
B) Our economy would work just as well without middlemen since they do not expand the availability of physical goods. 
C) Middlemen reduce the number of transactions since they increase the buyer's price and reduce the seller's net revenue. 
D) Middlemen create value by arranging trades and providing information to buyers and sellers. 
A) Middlemen add to the expense of buyers and sellers without providing any benefit. 
B) Our economy would work just as well without middlemen since they do not expand the availability of physical goods. 
C) Middlemen reduce the number of transactions since they increase the buyer's price and reduce the seller's net revenue. 
D) Middlemen create value by arranging trades and providing information to buyers and sellers.

Question 8

Opportunity costs differ among nations primarily because

Accepted Answer

A) nations employ different currencies. 
B) nations have different amounts of land, labor skills, capital, and technology. 
C) nations have different religious, political, and economic institutions. 
D) the work-leisure preferences of people vary considerably from one nation to another. 
A) nations employ different currencies. 
B) nations have different amounts of land, labor skills, capital, and technology. 
C) nations have different religious, political, and economic institutions. 
D) the work-leisure preferences of people vary considerably from one nation to another.

Question 9

A nation with cheap, efficient communications is likely to be

Accepted Answer

A) richer, ceteris paribus, because transaction costs will be lower and trade greater. 
B) richer only if production of goods is cheaper, too, since trade itself cannot create value. 
C) poorer since it spends so much on communication instead of true productivity. 
D) spending too much on communications, which adds nothing to the value of output. 
A) richer, ceteris paribus, because transaction costs will be lower and trade greater. 
B) richer only if production of goods is cheaper, too, since trade itself cannot create value. 
C) poorer since it spends so much on communication instead of true productivity. 
D) spending too much on communications, which adds nothing to the value of output.

Question 10

A production possibilities curve indicates that when resources are being used efficiently,

Accepted Answer

A) you can only produce more of one good only if you lower its price. 
B) you can only produce more of one good only if you produce more of another good. 
C) you can only produce more of one good only if you produce less of another good. 
D) it is impossible to expand the total output of goods over time. 
A) you can only produce more of one good only if you lower its price. 
B) you can only produce more of one good only if you produce more of another good. 
C) you can only produce more of one good only if you produce less of another good. 
D) it is impossible to expand the total output of goods over time.

Question 11

Specialization in production is beneficial because

Accepted Answer

A) it allows everyone to have a job that they like. 
B) it permits people to expand production and achieve rates of output that would otherwise be unattainable. 
C) it allows everyone to be self-sufficient. 
D) it eliminates the need for the division of labor. 
A) it allows everyone to have a job that they like. 
B) it permits people to expand production and achieve rates of output that would otherwise be unattainable. 
C) it allows everyone to be self-sufficient. 
D) it eliminates the need for the division of labor.

Question 12

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,

Accepted Answer

A) the role of markets will be replaced by political decision making. 
B) centralized decision making in all areas is inevitable. 
C) the preferences of individuals are of no importance. 
D) economic efficiency will be assured. 
A) the role of markets will be replaced by political decision making. 
B) centralized decision making in all areas is inevitable. 
C) the preferences of individuals are of no importance. 
D) economic efficiency will be assured.

Question 13

Table 2-3
  
-Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in

Accepted Answer

A) meat and the rancher were to specialize in potatoes. 
B) potatoes and the rancher were to specialize in meat. 
C) neither good and the rancher were to specialize in both goods. 
D) none of the above; they cannot both benefit by specialization and trade. 
A) meat and the rancher were to specialize in potatoes. 
B) potatoes and the rancher were to specialize in meat. 
C) neither good and the rancher were to specialize in both goods. 
D) none of the above; they cannot both benefit by specialization and trade.

Question 14

Which of the following activities describes the opportunity cost of attending an economics class?

Accepted Answer

A) the value of the time it takes to get to campus every day 
B) the cost of the gasoline needed to drive a car to campus 
C) the value of the highest valued alternative that must be forgone because of attending the class 
D) transportation costs plus the cost of tuition and textbooks for the course 
A) the value of the time it takes to get to campus every day 
B) the cost of the gasoline needed to drive a car to campus 
C) the value of the highest valued alternative that must be forgone because of attending the class 
D) transportation costs plus the cost of tuition and textbooks for the course

Question 15

Which of the following is true?

Accepted Answer

A) The production possibilities curve indicates that it will be impossible to expand total output with the passage of time. 
B) As long as resources are scarce, output cannot be increased. 
C) The size of the economic pie is fixed, and therefore, if one individual has more income, others must have less. 
D) Over time, the output of goods and services can be increased through human ingenuity and discovery of better ways of doing things. 
A) The production possibilities curve indicates that it will be impossible to expand total output with the passage of time. 
B) As long as resources are scarce, output cannot be increased. 
C) The size of the economic pie is fixed, and therefore, if one individual has more income, others must have less. 
D) Over time, the output of goods and services can be increased through human ingenuity and discovery of better ways of doing things.

Question 16

Which of the following is true regarding private ownership?

Accepted Answer

A) Relative to common ownership, private ownership generally leads to less conservation of resources. 
B) With private ownership, owners are held accountable for using their resources in a manner that harms the resources of others. 
C) Private ownership generally gives the owner little incentive to find ways to use the resource wisely. 
D) With private ownership, resource owners have little incentive to consider the preferences of others when deciding how to employ a resource. 
A) Relative to common ownership, private ownership generally leads to less conservation of resources. 
B) With private ownership, owners are held accountable for using their resources in a manner that harms the resources of others. 
C) Private ownership generally gives the owner little incentive to find ways to use the resource wisely. 
D) With private ownership, resource owners have little incentive to consider the preferences of others when deciding how to employ a resource.

Question 17

Suppose the price of an airline ticket from Dallas to Boston costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than

Accepted Answer

A) $6 per hour. 
B) $8 per hour. 
C) $10 per hour. 
D) $15 per hour. 
A) $6 per hour. 
B) $8 per hour. 
C) $10 per hour. 
D) $15 per hour.

Question 18

A form of economic organization that relies primarily on private ownership of productive assets, freedom of exchange, and market prices to allocate goods and resources is often called

Accepted Answer

A) national socialism. 
B) the welfare state. 
C) a corporate economy. 
D) capitalism. 
A) national socialism. 
B) the welfare state. 
C) a corporate economy. 
D) capitalism.

Question 19

Recent legislation provides parents with a substantial reduction in their personal income tax liability for each child that they have. The economic way of thinking indicates that legislation of this type will

Accepted Answer

A) make it more costly for parents to provide for their children. 
B) reduce the value of children to their parents and, therefore, lead to a reduction in the birth rate. 
C) reduce the after-tax cost of raising children and, therefore, increase the birth rate. 
D) exert no impact on either the cost of raising children or the birth rate since having children is a not an economic activity. 
A) make it more costly for parents to provide for their children. 
B) reduce the value of children to their parents and, therefore, lead to a reduction in the birth rate. 
C) reduce the after-tax cost of raising children and, therefore, increase the birth rate. 
D) exert no impact on either the cost of raising children or the birth rate since having children is a not an economic activity.

Question 20

In order to prosper, entrepreneurs must

Accepted Answer

A) undertake projects that create wealth and increase the value of resources. 
B) find ways to prevent technological change. 
C) have their own wealth with which to finance projects that they want to undertake. 
D) undertake projects that use resources that are more valuable than is the output they produce. 
A) undertake projects that create wealth and increase the value of resources. 
B) find ways to prevent technological change. 
C) have their own wealth with which to finance projects that they want to undertake. 
D) undertake projects that use resources that are more valuable than is the output they produce.

With time, which one of the following strategies will most likely result in an outward shift in an economy's production possibilities curve?

The opportunity cost of an action is

Air travel from New York to Miami costs $300 and takes 6 hours. A bus ticket between the cities costs $150 and takes 56 hours. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be

When property rights are clearly defined and enforced, private owners will

Middlemen are individuals who

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are efficiently utilized. An economy that operates inside this production possibilities curve

Which of the following most accurately states the function of middlemen?

Opportunity costs differ among nations primarily because

A nation with cheap, efficient communications is likely to be

A production possibilities curve indicates that when resources are being used efficiently,

Specialization in production is beneficial because

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,

Table 2-3 -Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in

Which of the following activities describes the opportunity cost of attending an economics class?

Which of the following is true?

Which of the following is true regarding private ownership?

Suppose the price of an airline ticket from Dallas to Boston costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than

A form of economic organization that relies primarily on private ownership of productive assets, freedom of exchange, and market prices to allocate goods and resources is often called

Recent legislation provides parents with a substantial reduction in their personal income tax liability for each child that they have. The economic way of thinking indicates that legislation of this type will

In order to prosper, entrepreneurs must

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

With time, which one of the following strategies will most likely result in an outward shift in an economy's production possibilities curve?

The opportunity cost of an action is

Air travel from New York to Miami costs $300 and takes 6 hours. A bus ticket between the cities costs $150 and takes 56 hours. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be

When property rights are clearly defined and enforced, private owners will

Middlemen are individuals who

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are efficiently utilized. An economy that operates inside this production possibilities curve

Which of the following most accurately states the function of middlemen?

Opportunity costs differ among nations primarily because

A nation with cheap, efficient communications is likely to be

A production possibilities curve indicates that when resources are being used efficiently,

Specialization in production is beneficial because

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,

Table 2-3 -Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in

Which of the following activities describes the opportunity cost of attending an economics class?

Which of the following is true?

Which of the following is true regarding private ownership?

Suppose the price of an airline ticket from Dallas to Boston costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than

A form of economic organization that relies primarily on private ownership of productive assets, freedom of exchange, and market prices to allocate goods and resources is often called

Recent legislation provides parents with a substantial reduction in their personal income tax liability for each child that they have. The economic way of thinking indicates that legislation of this type will

In order to prosper, entrepreneurs must

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