Question 1

Table 2-3
  
-Refer to Table 2-3. The rancher has a comparative advantage in

Accepted Answer

A) neither good, and the farmer has a comparative advantage in both goods. 
B) both goods, and the farmer has a comparative advantage in neither good. 
C) potatoes, and the farmer has a comparative advantage in meat. 
D) meat, and the farmer has a comparative advantage in potatoes. 
A) neither good, and the farmer has a comparative advantage in both goods. 
B) both goods, and the farmer has a comparative advantage in neither good. 
C) potatoes, and the farmer has a comparative advantage in meat. 
D) meat, and the farmer has a comparative advantage in potatoes.

Question 2

In economics, the term that refers to the time, effort, and other resources needed to search out, negotiate, and consummate an exchange is

Accepted Answer

A) transaction costs. 
B) specialization costs. 
C) pecuniary costs. 
D) comparative costs. 
A) transaction costs. 
B) specialization costs. 
C) pecuniary costs. 
D) comparative costs.

Question 3

If an economy is operating at a point inside the production possibilities curve,

Accepted Answer

A) its resources are not being used efficiently. 
B) the curve will begin to shift inward. 
C) the curve will begin to shift outward. 
D) This is a trick question because an economy cannot produce at a point inside the curve. 
A) its resources are not being used efficiently. 
B) the curve will begin to shift inward. 
C) the curve will begin to shift outward. 
D) This is a trick question because an economy cannot produce at a point inside the curve.

Question 4

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

Accepted Answer

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

Question 5

Figure 2-8  
-Points A, B, and C in Figure 2-8 indicate consumption and investment for three economies. Other things constant, which of the economies is likely to grow more rapidly in the future?

Accepted Answer

A) economy A 
B) economy B 
C) economy C 
D) They would all be expected to grow at the same rate. 
A) economy A 
B) economy B 
C) economy C 
D) They would all be expected to grow at the same rate.

Question 6

The law of comparative advantage suggests that

Accepted Answer

A) curtailing U.S.trade with other countries would make U.S.consumers better off. 
B) everyone would be better off if they were self-sufficient. 
C) countries will tend to import commodities that they can produce at a relatively low opportunity cost. 
D) countries will tend to import commodities that they can produce at a relatively high opportunity cost. 
A) curtailing U.S.trade with other countries would make U.S.consumers better off. 
B) everyone would be better off if they were self-sufficient. 
C) countries will tend to import commodities that they can produce at a relatively low opportunity cost. 
D) countries will tend to import commodities that they can produce at a relatively high opportunity cost.

Question 7

Over time, an increase in a nation's stock of physical capital will

Accepted Answer

A) shift the production possibilities curve inward. 
B) cause an economy to operate inside its production possibilities curve. 
C) shift the production possibilities curve outward. 
D) eliminate the basic economic problem of scarcity. 
A) shift the production possibilities curve inward. 
B) cause an economy to operate inside its production possibilities curve. 
C) shift the production possibilities curve outward. 
D) eliminate the basic economic problem of scarcity.

Question 8

Which of the following statements about exchange is false?

Accepted Answer

A) The expectation of gain motivates people to engage in trade. 
B) If a party to a potential exchange does not believe that it will lead to personal gain, he or she can chose not to engage in the trade. 
C) Voluntary exchange is generally mutually beneficial to the trading partners. 
D) If one trading partner gains, the other must lose. 
A) The expectation of gain motivates people to engage in trade. 
B) If a party to a potential exchange does not believe that it will lead to personal gain, he or she can chose not to engage in the trade. 
C) Voluntary exchange is generally mutually beneficial to the trading partners. 
D) If one trading partner gains, the other must lose.

Question 9

Michael takes 10 minutes to iron a shirt and 20 minutes to type a paper. Aiden takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?

Accepted Answer

A) Aiden has a comparative advantage in ironing. 
B) Aiden has a comparative advantage in typing. 
C) Michael has a comparative advantage in ironing. 
D) Neither can gain from specialization and exchange. 
A) Aiden has a comparative advantage in ironing. 
B) Aiden has a comparative advantage in typing. 
C) Michael has a comparative advantage in ironing. 
D) Neither can gain from specialization and exchange.

Question 10

The production possibilities curve illustrates the basic principle that

Accepted Answer

A) an economy's capacity to produce is unrelated to its population. 
B) if all the resources of an economy are being used efficiently, more of one good can be produced only if more of another good is produced. 
C) an economy will automatically move toward a point at which all of its resources are being used inefficiently. 
D) if all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. 
A) an economy's capacity to produce is unrelated to its population. 
B) if all the resources of an economy are being used efficiently, more of one good can be produced only if more of another good is produced. 
C) an economy will automatically move toward a point at which all of its resources are being used inefficiently. 
D) if all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.

Question 11

Explain the idea of capital investment by using the story of Robinson Crusoe. What is sacrificed, and what is gained?

Accepted Answer

For Robinson Crusoe, engaging in capital

Question 12

Market economies are often criticized for how they answer the basic question, "For whom are goods produced?" This criticism usually comes from people who believe that the distribution of income is not "fair." Is there some way to separate production from distribution so that we can leave production just as it is but make the distribution of income "fairer"?

Accepted Answer

Unfortunately, there is no way to totall

Question 13

The government enforces property rights by

Accepted Answer

A) requiring property owners to pay property taxes. 
B) providing police and courts. 
C) forcing people to own property. 
D) providing public parks and recreation facilities. 
A) requiring property owners to pay property taxes. 
B) providing police and courts. 
C) forcing people to own property. 
D) providing public parks and recreation facilities.

Question 14

Middlemen, such as grocers, stockbrokers, and realtors

Accepted Answer

A) specialize in reducing transactions costs. 
B) provide nothing of value to either the buyer or the seller. 
C) have no effect on economic output in society. 
D) do not exist in capitalist economies. 
A) specialize in reducing transactions costs. 
B) provide nothing of value to either the buyer or the seller. 
C) have no effect on economic output in society. 
D) do not exist in capitalist economies.

Question 15

Abigail wishes to spend more time this week studying for her classes. Using the idea of a production possibilities curve, and assuming Abigail is currently spending all of her time efficiently, Abigail can spend more time studying this week only if

Accepted Answer

A) she also spends more time doing other things. 
B) she spends less time doing other things. 
C) Daylight Savings Time begins this week, so everyone moves their clocks ahead one hour. 
D) none of the above. 
A) she also spends more time doing other things. 
B) she spends less time doing other things. 
C) Daylight Savings Time begins this week, so everyone moves their clocks ahead one hour. 
D) none of the above.

Question 16

Which of the following is true with regard to value and exchange?

Accepted Answer

A) Exchange generally moves a good from a person who values it more to a person who values it less. 
B) Transaction costs reduce our ability to gain from potentially advantageous trades. 
C) Middlemen increase transaction costs and, thereby, reduce the potential gains derived from trade. 
D) Physical goods have an objective value that is unrelated to time and the person of ownership. 
A) Exchange generally moves a good from a person who values it more to a person who values it less. 
B) Transaction costs reduce our ability to gain from potentially advantageous trades. 
C) Middlemen increase transaction costs and, thereby, reduce the potential gains derived from trade. 
D) Physical goods have an objective value that is unrelated to time and the person of ownership.

Question 17

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

Accepted Answer

A) If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. 
B) If all the resources of an economy are being used efficiently, it is generally possible to produce more of one good without having to sacrifice the production of other goods. 
C) Over time, it is generally impossible for a country to expand its production of goods. 
D) An economy will automatically move toward a point that lies outside of the production possibilities curve unless proper government policy constrains production. 
A) If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. 
B) If all the resources of an economy are being used efficiently, it is generally possible to produce more of one good without having to sacrifice the production of other goods. 
C) Over time, it is generally impossible for a country to expand its production of goods. 
D) An economy will automatically move toward a point that lies outside of the production possibilities curve unless proper government policy constrains production.

Question 18

A point inside 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 19

Three basic decisions must be made by all economies. What are they?

Accepted Answer

A) How much will be produced; when will it be produced; who will produce it? 
B) What goods will be produced; how will goods be produced; for whom will goods be produced? 
C) What will be consumed; how will goods be consumed; for whom will goods be consumed? 
D) How will the opportunity cost principle be applied; if the law of comparative advantage will be utilized, how will it be utilized; will the production possibilities constraint apply? 
A) How much will be produced; when will it be produced; who will produce it? 
B) What goods will be produced; how will goods be produced; for whom will goods be produced? 
C) What will be consumed; how will goods be consumed; for whom will goods be consumed? 
D) How will the opportunity cost principle be applied; if the law of comparative advantage will be utilized, how will it be utilized; will the production possibilities constraint apply?

Question 20

Noah values his car at $10,000, and Emily values it at $14,000. If Emily buys it from Noah for $11,000, which of the following is true?

Accepted Answer

A) Noah gains $1,000 of value, and Emily gains $3,000 of value. 
B) Noah gains $11,000 of value, and Emily loses $11,000 of value. 
C) Noah gains $10,000 of value, and Emily loses $14,000 of value. 
D) Noah and Emily both gain $11,000 of value. 
A) Noah gains $1,000 of value, and Emily gains $3,000 of value. 
B) Noah gains $11,000 of value, and Emily loses $11,000 of value. 
C) Noah gains $10,000 of value, and Emily loses $14,000 of value. 
D) Noah and Emily both gain $11,000 of value.

Table 2-3 -Refer to Table 2-3. The rancher has a comparative advantage in

In economics, the term that refers to the time, effort, and other resources needed to search out, negotiate, and consummate an exchange is

If an economy is operating at a point inside the production possibilities curve,

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

Figure 2-8 -Points A, B, and C in Figure 2-8 indicate consumption and investment for three economies. Other things constant, which of the economies is likely to grow more rapidly in the future?

The law of comparative advantage suggests that

Over time, an increase in a nation's stock of physical capital will

Which of the following statements about exchange is false?

Michael takes 10 minutes to iron a shirt and 20 minutes to type a paper. Aiden takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?

The production possibilities curve illustrates the basic principle that

Explain the idea of capital investment by using the story of Robinson Crusoe. What is sacrificed, and what is gained?

The government enforces property rights by

Middlemen, such as grocers, stockbrokers, and realtors

Abigail wishes to spend more time this week studying for her classes. Using the idea of a production possibilities curve, and assuming Abigail is currently spending all of her time efficiently, Abigail can spend more time studying this week only if

Which of the following is true with regard to value and exchange?

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

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

Three basic decisions must be made by all economies. What are they?

Noah values his car at $10,000, and Emily values it at $14,000. If Emily buys it from Noah for $11,000, which of the following is true?

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

Table 2-3 -Refer to Table 2-3. The rancher has a comparative advantage in

In economics, the term that refers to the time, effort, and other resources needed to search out, negotiate, and consummate an exchange is

If an economy is operating at a point inside the production possibilities curve,

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

Figure 2-8 -Points A, B, and C in Figure 2-8 indicate consumption and investment for three economies. Other things constant, which of the economies is likely to grow more rapidly in the future?

The law of comparative advantage suggests that

Over time, an increase in a nation's stock of physical capital will

Which of the following statements about exchange is false?

Michael takes 10 minutes to iron a shirt and 20 minutes to type a paper. Aiden takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?

The production possibilities curve illustrates the basic principle that

Explain the idea of capital investment by using the story of Robinson Crusoe. What is sacrificed, and what is gained?

The government enforces property rights by

Middlemen, such as grocers, stockbrokers, and realtors

Abigail wishes to spend more time this week studying for her classes. Using the idea of a production possibilities curve, and assuming Abigail is currently spending all of her time efficiently, Abigail can spend more time studying this week only if

Which of the following is true with regard to value and exchange?

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

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

Three basic decisions must be made by all economies. What are they?

Noah values his car at $10,000, and Emily values it at $14,000. If Emily buys it from Noah for $11,000, which of the following is true?

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