Question 1

Internet sites such as eBay make it easier for sellers and buyers to find one another and, by doing so,

Accepted Answer

A)  reduce transactions costs. 
B)  increase transaction costs. 
C)  reduce the number of exchanges that occur. 
D)  lower the value created by the goods and services available. 
A)  reduce transactions costs. 
B)  increase transaction costs. 
C)  reduce the number of exchanges that occur. 
D)  lower the value created by the goods and services available. A

Question 2

The opportunity cost of building a park in your hometown would be the

Accepted Answer

A)  money cost of constructing the park. 
B)  highest valued bundle of other goods and services that must be forgone because of the park construction. 
C)  necessary increase in tax revenues to finance the construction. 
D)  amount of time spent in leisure activities in the park once it is constructed. 
A)  money cost of constructing the park. 
B)  highest valued bundle of other goods and services that must be forgone because of the park construction. 
C)  necessary increase in tax revenues to finance the construction. 
D)  amount of time spent in leisure activities in the park once it is constructed. B

Question 3

When the Social Security surplus is used to cover the current operating expenses of the federal government, it will

Accepted Answer

A)  make it easier for future taxpayers to provide promised Social Security benefits to baby boomers. 
B)  reduce the outstanding debt of the federal government. 
C)  make it possible for Congress and the president to spend more without raising current taxes or borrowing from the general public. 
D)  increase the credibility of the Social Security benefits promised to future retirees. 
A)  make it easier for future taxpayers to provide promised Social Security benefits to baby boomers. 
B)  reduce the outstanding debt of the federal government. 
C)  make it possible for Congress and the president to spend more without raising current taxes or borrowing from the general public. 
D)  increase the credibility of the Social Security benefits promised to future retirees. C

Question 4

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 5

If a firm or a nation desires to maximize its output, each productive assignment should be carried out by those persons who

Accepted Answer

A)  have the highest opportunity cost. 
B)  have a comparative advantage in the productive activity. 
C)  can complete the productive activity most rapidly. 
D)  least enjoy performing the productive activity. 
A)  have the highest opportunity cost. 
B)  have a comparative advantage in the productive activity. 
C)  can complete the productive activity most rapidly. 
D)  least enjoy performing the productive activity.

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

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 8

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 9

Which of the following about Social Security is true?

Accepted Answer

A)  Labor participation tends to increase as spousal earnings increase. 
B)  Social Security works to the disadvantage of low-wage workers due to their shorter life expectancy. 
C)  Low-wage workers derive a higher rate of return from their Social Security taxes than high-wage workers. 
D)  High-wage workers generally begin full-time work at younger ages than low-wage workers. 
A)  Labor participation tends to increase as spousal earnings increase. 
B)  Social Security works to the disadvantage of low-wage workers due to their shorter life expectancy. 
C)  Low-wage workers derive a higher rate of return from their Social Security taxes than high-wage workers. 
D)  High-wage workers generally begin full-time work at younger ages than low-wage workers.

Question 10

Detailed studies indicate that, on balance, the Social Security retirement system

Accepted Answer

A)  redistributes a substantial amount of income from the rich to the poor. 
B)  redistributes a substantial amount of income from whites to blacks. 
C)  is particularly advantageous to those with a shorter life expectancy. 
D)  is not particularly advantageous to the poor due to their shorter life expectancy. 
A)  redistributes a substantial amount of income from the rich to the poor. 
B)  redistributes a substantial amount of income from whites to blacks. 
C)  is particularly advantageous to those with a shorter life expectancy. 
D)  is not particularly advantageous to the poor due to their shorter life expectancy.

Question 11

The creation of a new product or process, often facilitated by the knowledge of engineering and scientific relationships, is known as

Accepted Answer

A)  invention. 
B)  innovation. 
C)  application. 
D)  sublimation. 
A)  invention. 
B)  innovation. 
C)  application. 
D)  sublimation.

Question 12

Retired persons travel by bus and automobile more frequently than do business executives, who more commonly use air travel. An economic explanation for this would be that

Accepted Answer

A)  business executives have more time to travel. 
B)  it is more important for retired persons to save time. 
C)  business executives value their time more highly. 
D)  retired persons have more money than do business executives. 
A)  business executives have more time to travel. 
B)  it is more important for retired persons to save time. 
C)  business executives value their time more highly. 
D)  retired persons have more money than do business executives.

Question 13

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 14

Entrepreneurs are

Accepted Answer

A)  profit-seeking decision makers who decide which business projects to undertake. 
B)  people who loan money to other business decision makers. 
C)  managers who generally work for a salary because they are unwilling to take risks. 
D)  none of the above. 
A)  profit-seeking decision makers who decide which business projects to undertake. 
B)  people who loan money to other business decision makers. 
C)  managers who generally work for a salary because they are unwilling to take risks. 
D)  none of the above.

Question 15

Beginning in the early 1990s, private landowners in Zimbabwe have started fencing in large areas of land that contain black rhinos, which were on the verge of extinction. These private owners charge fees for a stay at the lodges on the property (eco-tourism) and also sell hunting safaris and photo safaris. As a result,

Accepted Answer

A)  the population of black rhinos has fallen substantially. 
B)  the population of black rhinos has increased. 
C)  many black rhinos are being poached. 
D)  the incomes of residents in Zimbabwe has fallen substantially. 
A)  the population of black rhinos has fallen substantially. 
B)  the population of black rhinos has increased. 
C)  many black rhinos are being poached. 
D)  the incomes of residents in Zimbabwe has fallen substantially.

Question 16

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 17

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 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

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 20

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.

Internet sites such as eBay make it easier for sellers and buyers to find one another and, by doing so,

The opportunity cost of building a park in your hometown would be the

When the Social Security surplus is used to cover the current operating expenses of the federal government, it will

The production possibilities curve illustrates the basic principle that

If a firm or a nation desires to maximize its output, each productive assignment should be carried out by those persons who

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

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

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?

Which of the following about Social Security is true?

Detailed studies indicate that, on balance, the Social Security retirement system

The creation of a new product or process, often facilitated by the knowledge of engineering and scientific relationships, is known as

Retired persons travel by bus and automobile more frequently than do business executives, who more commonly use air travel. An economic explanation for this would be that

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

Entrepreneurs are

Specialization in production is beneficial because

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

When the production possibilities curve is bowed out, resources are

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

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 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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 2: Some Tools of the Economist

Internet sites such as eBay make it easier for sellers and buyers to find one another and, by doing so,

The opportunity cost of building a park in your hometown would be the

When the Social Security surplus is used to cover the current operating expenses of the federal government, it will

The production possibilities curve illustrates the basic principle that

If a firm or a nation desires to maximize its output, each productive assignment should be carried out by those persons who

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

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

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?

Which of the following about Social Security is true?

Detailed studies indicate that, on balance, the Social Security retirement system

The creation of a new product or process, often facilitated by the knowledge of engineering and scientific relationships, is known as

Retired persons travel by bus and automobile more frequently than do business executives, who more commonly use air travel. An economic explanation for this would be that

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

Entrepreneurs are

Specialization in production is beneficial because

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

When the production possibilities curve is bowed out, resources are

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

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 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

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters