Question 1

Table 2-1
    
-Refer to Table 2-1. According to the law of comparative advantage, both Austria and Italy could gain if

Accepted Answer

A) Austria produced all of the food and clothing and Italy did not produce anything. 
B) Austria specialized in producing clothing, Italy specialized in producing food, and they traded. 
C) Austria specialized in producing food, Italy specialized in producing clothing, and they traded. 
D) Italy and Austria were both were self-sufficient and did not trade. 
A) Austria produced all of the food and clothing and Italy did not produce anything. 
B) Austria specialized in producing clothing, Italy specialized in producing food, and they traded. 
C) Austria specialized in producing food, Italy specialized in producing clothing, and they traded. 
D) Italy and Austria were both were self-sufficient and did not trade.

Question 2

Suppose that in Australia, the government allows private ownership of chickens but not of cows. If the people of Australia permanently increase their desire to purchase more chicken and beef, in the long run, we would expect

Accepted Answer

A) the population of chickens to rise and the population of cows to fall. 
B) the population of cows to rise and the population of chickens to fall. 
C) the populations of both chickens and cows to increase. 
D) both chickens and cows to become extinct in Australia unless the government places the animals on the endangered species list. 
A) the population of chickens to rise and the population of cows to fall. 
B) the population of cows to rise and the population of chickens to fall. 
C) the populations of both chickens and cows to increase. 
D) both chickens and cows to become extinct in Australia unless the government places the animals on the endangered species list.

Question 3

Which of the following most accurately states the economic significance of exchange?

Accepted Answer

A) Physical goods have value because they exist; exchange can neither increase nor decrease their value. 
B) Production of physical goods creates value; exchange merely redistributes this value. 
C) Exchange creates value by moving goods from parties who value them less to parties who value them more. 
D) Exchange reduces value since it consumes resources without adding to the physical supply of goods. 
A) Physical goods have value because they exist; exchange can neither increase nor decrease their value. 
B) Production of physical goods creates value; exchange merely redistributes this value. 
C) Exchange creates value by moving goods from parties who value them less to parties who value them more. 
D) Exchange reduces value since it consumes resources without adding to the physical supply of goods.

Question 4

When private ownership of a resource is clearly defined and enforced, the private owner

Accepted Answer

A) has little incentive to consider the wishes of others when deciding how to employ the resource. 
B) has little incentive to use the resource wisely. 
C) has a strong incentive to consume the resource during the period rather than conserving it for the future. 
D) has a strong incentive to use the resource wisely. 
A) has little incentive to consider the wishes of others when deciding how to employ the resource. 
B) has little incentive to use the resource wisely. 
C) has a strong incentive to consume the resource during the period rather than conserving it for the future. 
D) has a strong incentive to use the resource wisely.

Question 5

The student government associations at several universities have experimented with purchasing bicycles to leave around campus for everyone's use. Anyone who needs the bike can use it, and they are not allowed to lock the bike up or take it home, but rather must leave it on campus for someone else to use. Economic theory would predict that

Accepted Answer

A) students will take better care of these commonly owned bicycles than they do their own bicycles. 
B) students will take equally as good care of these commonly owned bicycles as they do their own bicycles. 
C) students will not take as good of care of these commonly owned bicycles as they do their own bicycles. 
D) because universities have a lot of money, these bikes will be better maintained than the ones owned privately by college students who tend to have little money. 
A) students will take better care of these commonly owned bicycles than they do their own bicycles. 
B) students will take equally as good care of these commonly owned bicycles as they do their own bicycles. 
C) students will not take as good of care of these commonly owned bicycles as they do their own bicycles. 
D) because universities have a lot of money, these bikes will be better maintained than the ones owned privately by college students who tend to have little money.

Question 6

Figure 2-10  
-Refer to Figure 2-10. If this economy put all available resources into the production of bananas, it could produce

Accepted Answer

A) 200 bananas and also 150 baseballs. 
B) 300 bananas and also 100 baseballs. 
C) 400 bananas and no baseballs. 
D) It is impossible to know unless we know the quantity of resources available. 
A) 200 bananas and also 150 baseballs. 
B) 300 bananas and also 100 baseballs. 
C) 400 bananas and no baseballs. 
D) It is impossible to know unless we know the quantity of resources available.

Question 7

Mark and John are 10-year-old twins who do not get along. They have opened separate lemonade stands and are competing with each other, selling lemonade on their block. Their mother observes that Mark is very good at making lemonade and John is an excellent young salesman. She suggests they both could make more money if they worked together. John counters that two stands will always make more money than one. Who is right? Why?

Accepted Answer

The mother makes the point that gains fr

Question 8

In a market economy,

Accepted Answer

A) a larger income for one person means a smaller one for another. 
B) the government answers all the basic economic questions. 
C) a larger income for one person means it is possible for others to earn more too. 
D) economic output shrinks as we discover better ways of doing things. 
A) a larger income for one person means a smaller one for another. 
B) the government answers all the basic economic questions. 
C) a larger income for one person means it is possible for others to earn more too. 
D) economic output shrinks as we discover better ways of doing things.

Question 9

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

Accepted Answer

A) 5 hours of labor. 
B) 4 hours of labor. 
C) 5/4 pounds of meat. 
D) 4/5 pound of meat. 
A) 5 hours of labor. 
B) 4 hours of labor. 
C) 5/4 pounds of meat. 
D) 4/5 pound of meat.

Question 10

The law of comparative advantage applies to exchange between

Accepted Answer

A) individuals. 
B) regions. 
C) nations. 
D) all of the above. 
A) individuals. 
B) regions. 
C) nations. 
D) all of the above.

Question 11

An improvement in a country's legal system that enhanced the ability of citizens to protect their property rights and enforce contracts would result in which of the following changes to the country's production possibilities curve?

Accepted Answer

A) a movement from a point on the curve to a point outside the curve 
B) a movement from one point to another point along the curve 
C) an outward shift of the curve 
D) a movement from a point on the curve to a point inside the curve 
A) a movement from a point on the curve to a point outside the curve 
B) a movement from one point to another point along the curve 
C) an outward shift of the curve 
D) a movement from a point on the curve to a point inside the curve

Question 12

According to the law of comparative advantage,

Accepted Answer

A) individuals and nations gain when they specialize in producing those goods they consume. 
B) individuals and nations gain when they specialize in producing goods they can produce at a high opportunity cost and can exchange for other desired goods they can produce cheaply. 
C) individuals and nations gain when they specialize in producing those items for which they are the low opportunity cost producers and exchange for other desired goods they can't produce as cheaply. 
D) all of the above are true. 
A) individuals and nations gain when they specialize in producing those goods they consume. 
B) individuals and nations gain when they specialize in producing goods they can produce at a high opportunity cost and can exchange for other desired goods they can produce cheaply. 
C) individuals and nations gain when they specialize in producing those items for which they are the low opportunity cost producers and exchange for other desired goods they can't produce as cheaply. 
D) all of the above are true.

Question 13

Sophia is an architect and she is trying to decide whether to hire Jacob, a draftsman, to assist with her work. Sophia could hire Jacob at $20 per hour but it would take him three times as long to complete a task as it takes Sophia. Sophia is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true?

Accepted Answer

A) Sophia should not hire Jacob because it would be faster for her to do the work herself. 
B) Sophia should do the drafting work herself because she has the lower opportunity cost. 
C) Jacob should be hired at the $20 per hour wage rate. 
D) Jacob should be hired, but only if he is paid more than $30 per hour. 
A) Sophia should not hire Jacob because it would be faster for her to do the work herself. 
B) Sophia should do the drafting work herself because she has the lower opportunity cost. 
C) Jacob should be hired at the $20 per hour wage rate. 
D) Jacob should be hired, but only if he is paid more than $30 per hour.

Question 14

The reason that the production possibilities curve is usually a bow-shaped curve instead of a straight line is that

Accepted Answer

A) it makes it easier to illustrate the concepts of scarcity and prices with a bow-shaped curve than it is with a straight line 
B) early economists began drawing them in this way and the convention has continued throughout the years 
C) output eventually reaches a maximum and then declines 
D) resources are not perfectly adaptable to the production of all goods 
A) it makes it easier to illustrate the concepts of scarcity and prices with a bow-shaped curve than it is with a straight line 
B) early economists began drawing them in this way and the convention has continued throughout the years 
C) output eventually reaches a maximum and then declines 
D) resources are not perfectly adaptable to the production of all goods

Question 15

Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?

Accepted Answer

A) the dollars spent on his previously acquired education in pharmacy 
B) the revenue derived from operating the cab 
C) zero if the pharmacist received his education on a scholarship that paid his full tuition 
D) the value of the pharmacist's time in its highest valued use other than driving a cab 
A) the dollars spent on his previously acquired education in pharmacy 
B) the revenue derived from operating the cab 
C) zero if the pharmacist received his education on a scholarship that paid his full tuition 
D) the value of the pharmacist's time in its highest valued use other than driving a cab

Question 16

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are being used efficiently. If an economy operates at a point inside its production possibilities curve,

Accepted Answer

A) it lacks the resources necessary to produce at full employment. 
B) it is utilizing some resources inefficiently. 
C) it does not confront the problem of scarce goods relative to unlimited wants. 
D) it does not exist in the real world since it is impossible for an economy to operate inside its production possibilities curve. 
A) it lacks the resources necessary to produce at full employment. 
B) it is utilizing some resources inefficiently. 
C) it does not confront the problem of scarce goods relative to unlimited wants. 
D) it does not exist in the real world since it is impossible for an economy to operate inside its production possibilities curve.

Question 17

In Zimbabwe and Botswana, elephants can be owned by local tribes and trade in ivory is legal, while in countries such as Kenya, it is illegal to trade in ivory and elephants cannot be privately owned but are protected by the government. Which of the following is true regarding the change in the elephant populations since 1979 in these countries?

Accepted Answer

A) In Zimbabwe and Botswana, elephants are near the verge of extinction, while in Kenya, the population of elephants is growing rapidly. 
B) There has been a similar decline in the population of elephants in all of these countries. 
C) There has been a similar increase in the population of elephants in all of these countries. 
D) In Zimbabwe and Botswana, elephant populations have more than doubled, while in Kenya, the population of elephants has fallen to less than one-third of its previous level. 
A) In Zimbabwe and Botswana, elephants are near the verge of extinction, while in Kenya, the population of elephants is growing rapidly. 
B) There has been a similar decline in the population of elephants in all of these countries. 
C) There has been a similar increase in the population of elephants in all of these countries. 
D) In Zimbabwe and Botswana, elephant populations have more than doubled, while in Kenya, the population of elephants has fallen to less than one-third of its previous level.

Question 18

Which of the following is an implication of the law of comparative advantage?

Accepted Answer

A) Countries with small amounts of labor relative to capital should specialize in producing labor-intensive commodities. 
B) Since workers in high-income countries utilize larger amounts of capital than workers in less developed nations, trade between capital-rich and capital-poor nations results in the exploitation of labor in the less developed countries. 
C) Countries that are high cost producers of agricultural products should trade those products for goods they can produce only at a low opportunity cost. 
D) Countries that are low opportunity cost producers of timber products should trade those products for goods they can produce only at a high opportunity cost. 
A) Countries with small amounts of labor relative to capital should specialize in producing labor-intensive commodities. 
B) Since workers in high-income countries utilize larger amounts of capital than workers in less developed nations, trade between capital-rich and capital-poor nations results in the exploitation of labor in the less developed countries. 
C) Countries that are high cost producers of agricultural products should trade those products for goods they can produce only at a low opportunity cost. 
D) Countries that are low opportunity cost producers of timber products should trade those products for goods they can produce only at a high opportunity cost.

Question 19

According to the law of comparative advantage, a particular task is performed most efficiently by the individual with the lowest

Accepted Answer

A) wage rate. 
B) tax liability. 
C) net worth. 
D) opportunity cost. 
A) wage rate. 
B) tax liability. 
C) net worth. 
D) opportunity cost.

Question 20

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

Accepted Answer

A) passage of legislation reducing the workweek to 30 hours 
B) instituting a tax policy encouraging consumption at the expense of investment 
C) instituting a tax policy encouraging investment at the expense of consumption 
D) an increase in the marginal income tax rate, which would reduce the work effort of individuals 
A) passage of legislation reducing the workweek to 30 hours 
B) instituting a tax policy encouraging consumption at the expense of investment 
C) instituting a tax policy encouraging investment at the expense of consumption 
D) an increase in the marginal income tax rate, which would reduce the work effort of individuals

Table 2-1 -Refer to Table 2-1. According to the law of comparative advantage, both Austria and Italy could gain if

Suppose that in Australia, the government allows private ownership of chickens but not of cows. If the people of Australia permanently increase their desire to purchase more chicken and beef, in the long run, we would expect

Which of the following most accurately states the economic significance of exchange?

When private ownership of a resource is clearly defined and enforced, the private owner

Figure 2-10 -Refer to Figure 2-10. If this economy put all available resources into the production of bananas, it could produce

In a market economy,

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

The law of comparative advantage applies to exchange between

An improvement in a country's legal system that enhanced the ability of citizens to protect their property rights and enforce contracts would result in which of the following changes to the country's production possibilities curve?

According to the law of comparative advantage,

The reason that the production possibilities curve is usually a bow-shaped curve instead of a straight line is that

Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are being used efficiently. If an economy operates at a point inside its production possibilities curve,

Which of the following is an implication of the law of comparative advantage?

According to the law of comparative advantage, a particular task is performed most efficiently by the individual with the lowest

With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an 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

Table 2-1 -Refer to Table 2-1. According to the law of comparative advantage, both Austria and Italy could gain if

Suppose that in Australia, the government allows private ownership of chickens but not of cows. If the people of Australia permanently increase their desire to purchase more chicken and beef, in the long run, we would expect

Which of the following most accurately states the economic significance of exchange?

When private ownership of a resource is clearly defined and enforced, the private owner

Figure 2-10 -Refer to Figure 2-10. If this economy put all available resources into the production of bananas, it could produce

In a market economy,

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

The law of comparative advantage applies to exchange between

An improvement in a country's legal system that enhanced the ability of citizens to protect their property rights and enforce contracts would result in which of the following changes to the country's production possibilities curve?

According to the law of comparative advantage,

The reason that the production possibilities curve is usually a bow-shaped curve instead of a straight line is that

Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are being used efficiently. If an economy operates at a point inside its production possibilities curve,

Which of the following is an implication of the law of comparative advantage?

According to the law of comparative advantage, a particular task is performed most efficiently by the individual with the lowest

With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an 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