Question 1

The successful introduction and adoption of a new product or process is known as

Accepted Answer

A) invention. 
B) innovation. 
C) origination. 
D) adaptation. 
A) invention. 
B) innovation. 
C) origination. 
D) adaptation.

Question 2

Suppose an airline ticket from Charlotte to Dallas costs $525. A bus ticket is $325. Traveling by plane will take 5 hours, compared with 25 hours by bus. Thus, the plane costs $200 more but saves 20 hours of time (Hint: Note how we are "thinking at the margin" here by looking at the changes). Other things constant, an individual will gain by choosing air travel if, and only if, each hour of her time is valued at more than

Accepted Answer

A) $10 per hour. 
B) $13 per hour. 
C) $20 per hour. 
D) $105 per hour. 
A) $10 per hour. 
B) $13 per hour. 
C) $20 per hour. 
D) $105 per hour.

Question 3

Figure 2-10  
-Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?

Accepted Answer

A) 50 baseballs 
B) 100 baseballs 
C) 100 bananas 
D) 300 bananas 
A) 50 baseballs 
B) 100 baseballs 
C) 100 bananas 
D) 300 bananas

Question 4

The president of a large public university proclaims, "If we can get the state government to fund our new football stadium, it will not cost us anything." Evaluate this view from an economic perspective.

Accepted Answer

While it may not directly affect the uni

Question 5

Hutch Technology makes computer monitors, which sell for $500 each. What is the opportunity cost of producing ten monitors?

Accepted Answer

A) $5,000 
B) the other goods that could be produced with the resources that produce the ten monitors 
C) the profits that Hutch earns when it sells the ten monitors 
D) the profits that Hutch loses if it does not produce the monitors 
E) All of the above are correct. 
A) $5,000 
B) the other goods that could be produced with the resources that produce the ten monitors 
C) the profits that Hutch earns when it sells the ten monitors 
D) the profits that Hutch loses if it does not produce the monitors 
E) All of the above are correct.

Question 6

The law of comparative advantage explains why

Accepted Answer

A) specialization and exchange will make it possible for trading partners to expand their combined output. 
B) there will be an inverse relationship between the price of a product and the quantity of it that will be demanded. 
C) larger firms will have lower per unit costs than smaller firms. 
D) an increase in the price of a good will lead to an expansion in the quantity supplied by business firms. 
A) specialization and exchange will make it possible for trading partners to expand their combined output. 
B) there will be an inverse relationship between the price of a product and the quantity of it that will be demanded. 
C) larger firms will have lower per unit costs than smaller firms. 
D) an increase in the price of a good will lead to an expansion in the quantity supplied by business firms.

Question 7

Which of the following appropriately applies 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 Mexican labor is cheaper than American labor, trade between the countries results in exploitation of American workers. 
C) Since workers in countries such as the United States 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. 
D) Countries that are low cost producers of agricultural 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 Mexican labor is cheaper than American labor, trade between the countries results in exploitation of American workers. 
C) Since workers in countries such as the United States 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. 
D) Countries that are low cost producers of agricultural products should trade those products for goods they can produce only at a high opportunity cost.

Question 8

Figure 2-5  
-In Figure 2-5, which of the following is true?

Accepted Answer

A) Point A is inefficient. 
B) Point B is efficient. 
C) Point C is unattainable. 
D) All of the above are true. 
A) Point A is inefficient. 
B) Point B is efficient. 
C) Point C is unattainable. 
D) All of the above are true.

Question 9

The size of a country's "economic pie" is thought of as the total dollar value of all goods and services produced during some period of time. The economic pie

Accepted Answer

A) is a fixed total waiting to be divided up among people. 
B) determines how much wealth an individual can obtain. 
C) is variable, not fixed, across time periods. 
D) depends solely upon the natural resources of a country. 
A) is a fixed total waiting to be divided up among people. 
B) determines how much wealth an individual can obtain. 
C) is variable, not fixed, across time periods. 
D) depends solely upon the natural resources of a country.

Question 10

An economics professor points to a student in the front row and announces that "sitting in class is the thing you value most during this time period." Is the professor correct? Why or why not?

Accepted Answer

If the student is rational (and this is

Question 11

Increasing opportunity costs of producing goods imply that the production possibilities curve will be

Accepted Answer

A) downward sloping. 
B) upward sloping. 
C) bowed inward. 
D) bowed outward. 
A) downward sloping. 
B) upward sloping. 
C) bowed inward. 
D) bowed outward.

Question 12

Statistical data provided by the U.S. Department of Transportation shows that the median income of individuals traveling on the nation's bus systems is $18,000 compared to $65,000 for those who normally travel by air. This finding is best explained by which of the following statements?

Accepted Answer

A) Persons with high income are more likely to fly because the opportunity cost of their time is generally higher than those with lesser income. 
B) Traditionally, lower income groups prefer slower methods of transportation. 
C) Wealthy individuals own stock in the airlines and, therefore, receive preferential treatment. 
D) Low-income groups are generally located near bus stations; wealthy groups congregate around airports. 
A) Persons with high income are more likely to fly because the opportunity cost of their time is generally higher than those with lesser income. 
B) Traditionally, lower income groups prefer slower methods of transportation. 
C) Wealthy individuals own stock in the airlines and, therefore, receive preferential treatment. 
D) Low-income groups are generally located near bus stations; wealthy groups congregate around airports.

Question 13

Suppose you can type a paper in two hours or mow the lawn in four hours, while it takes your friend Gabriela eight hours to type a paper or two hours to mow the lawn. Which of the following is true?

Accepted Answer

A) You have a comparative advantage in typing. 
B) You have a comparative advantage in mowing the lawn. 
C) You and Gabriela could save time if you mowed her lawn while she typed your paper. 
D) You and Gabriela cannot gain from specialization and trade. 
A) You have a comparative advantage in typing. 
B) You have a comparative advantage in mowing the lawn. 
C) You and Gabriela could save time if you mowed her lawn while she typed your paper. 
D) You and Gabriela cannot gain from specialization and trade.

Question 14

Figure 2-2  
-Which of the following would most likely cause the production possibilities curve for breadfruit and fish to shift outward from AA to BB in Figure 2-2?

Accepted Answer

A) a decrease in the labor force of the country 
B) a sudden change in consumer preferences for more fish and less breadfruit 
C) a major technological advance 
D) a decrease in the capital stock 
A) a decrease in the labor force of the country 
B) a sudden change in consumer preferences for more fish and less breadfruit 
C) a major technological advance 
D) a decrease in the capital stock

Question 15

Which of the following is true of a production possibilities curve?

Accepted Answer

A) It reveals the maximum amount of any two goods that can be produced from a fixed quantity of resources. 
B) It reveals the ideal level of technology for a country. 
C) It assumes that the prices of the two products are equal. 
D) For a country that could produce many different goods, it shows which two goods are most important to produce. 
A) It reveals the maximum amount of any two goods that can be produced from a fixed quantity of resources. 
B) It reveals the ideal level of technology for a country. 
C) It assumes that the prices of the two products are equal. 
D) For a country that could produce many different goods, it shows which two goods are most important to produce.

Question 16

If the citizens of a country were to work harder and take less leisure time, it would

Accepted Answer

A) shift the production possibilities curve outward. 
B) cause an economy to operate inside its production possibilities curve. 
C) shift the production possibilities curve inward. 
D) cause an economy to move from one point on the production possibilities curve to another point on the curve. 
A) shift the production possibilities curve outward. 
B) cause an economy to operate inside its production possibilities curve. 
C) shift the production possibilities curve inward. 
D) cause an economy to move from one point on the production possibilities curve to another point on the curve.

Question 17

The wages of house painters will tend to rise when

Accepted Answer

A) more people recognize that house painters have very low incomes. 
B) the alternative earning opportunities of house painters improve. 
C) house painters can no longer find good paying alternatives for their labor. 
D) unemployment in the economy is high and there are few alternative jobs available for house painters. 
A) more people recognize that house painters have very low incomes. 
B) the alternative earning opportunities of house painters improve. 
C) house painters can no longer find good paying alternatives for their labor. 
D) unemployment in the economy is high and there are few alternative jobs available for house painters.

Question 18

When the production possibilities curve is bowed out, resources are

Accepted Answer

A) equally well-suited to production of both goods. 
B) not being used efficiently. 
C) not equally suited to the production of both goods. 
D) available in larger and larger quantities as more of one good is produced. 
A) equally well-suited to production of both goods. 
B) not being used efficiently. 
C) not equally suited to the production of both goods. 
D) available in larger and larger quantities as more of one good is produced.

Question 19

Which of the following attributes of trade explain why it is important for economic prosperity?

Accepted Answer

A) Trade moves goods from people who value them less to people who value them more. 
B) Trade makes it possible to produce a larger output as a result of lower per unit costs that often accompany large-scale production. 
C) Trade makes it possible to produce a larger output as a result of gains from division of labor and specialization. 
D) All of the above. 
A) Trade moves goods from people who value them less to people who value them more. 
B) Trade makes it possible to produce a larger output as a result of lower per unit costs that often accompany large-scale production. 
C) Trade makes it possible to produce a larger output as a result of gains from division of labor and specialization. 
D) All of the above.

Question 20

Which of the following is true of exchange?

Accepted Answer

A) The value of a good is determined by the cost of the resources required to produce the good. 
B) Exchange makes it possible for trading partners to produce more goods through division of labor and adoption of mass production methods. 
C) Nothing new is created by exchange; if one party to an exchange gains, the other must lose an equal amount. 
D) Both a and b are true. 
A) The value of a good is determined by the cost of the resources required to produce the good. 
B) Exchange makes it possible for trading partners to produce more goods through division of labor and adoption of mass production methods. 
C) Nothing new is created by exchange; if one party to an exchange gains, the other must lose an equal amount. 
D) Both a and b are true.

The successful introduction and adoption of a new product or process is known as

Figure 2-10 -Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?

The president of a large public university proclaims, "If we can get the state government to fund our new football stadium, it will not cost us anything." Evaluate this view from an economic perspective.

Hutch Technology makes computer monitors, which sell for $500 each. What is the opportunity cost of producing ten monitors?

The law of comparative advantage explains why

Which of the following appropriately applies the law of comparative advantage?

Figure 2-5 -In Figure 2-5, which of the following is true?

The size of a country's "economic pie" is thought of as the total dollar value of all goods and services produced during some period of time. The economic pie

An economics professor points to a student in the front row and announces that "sitting in class is the thing you value most during this time period." Is the professor correct? Why or why not?

Increasing opportunity costs of producing goods imply that the production possibilities curve will be

Statistical data provided by the U.S. Department of Transportation shows that the median income of individuals traveling on the nation's bus systems is $18,000 compared to $65,000 for those who normally travel by air. This finding is best explained by which of the following statements?

Suppose you can type a paper in two hours or mow the lawn in four hours, while it takes your friend Gabriela eight hours to type a paper or two hours to mow the lawn. Which of the following is true?

Figure 2-2 -Which of the following would most likely cause the production possibilities curve for breadfruit and fish to shift outward from AA to BB in Figure 2-2?

Which of the following is true of a production possibilities curve?

If the citizens of a country were to work harder and take less leisure time, it would

The wages of house painters will tend to rise when

When the production possibilities curve is bowed out, resources are

Which of the following attributes of trade explain why it is important for economic prosperity?

Which of the following is true of exchange?

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

The successful introduction and adoption of a new product or process is known as

Figure 2-10 -Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?

The president of a large public university proclaims, "If we can get the state government to fund our new football stadium, it will not cost us anything." Evaluate this view from an economic perspective.

Hutch Technology makes computer monitors, which sell for $500 each. What is the opportunity cost of producing ten monitors?

The law of comparative advantage explains why

Which of the following appropriately applies the law of comparative advantage?

Figure 2-5 -In Figure 2-5, which of the following is true?

The size of a country's "economic pie" is thought of as the total dollar value of all goods and services produced during some period of time. The economic pie

An economics professor points to a student in the front row and announces that "sitting in class is the thing you value most during this time period." Is the professor correct? Why or why not?

Increasing opportunity costs of producing goods imply that the production possibilities curve will be

Statistical data provided by the U.S. Department of Transportation shows that the median income of individuals traveling on the nation's bus systems is $18,000 compared to $65,000 for those who normally travel by air. This finding is best explained by which of the following statements?

Suppose you can type a paper in two hours or mow the lawn in four hours, while it takes your friend Gabriela eight hours to type a paper or two hours to mow the lawn. Which of the following is true?

Figure 2-2 -Which of the following would most likely cause the production possibilities curve for breadfruit and fish to shift outward from AA to BB in Figure 2-2?

Which of the following is true of a production possibilities curve?

If the citizens of a country were to work harder and take less leisure time, it would

The wages of house painters will tend to rise when

When the production possibilities curve is bowed out, resources are

Which of the following attributes of trade explain why it is important for economic prosperity?

Which of the following is true of exchange?

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