Question 1

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 2

Private property rights involve

Accepted Answer

A)  the right to exclusive use of the property. 
B)  legal protection against those who would seek to use or abuse the property without the owner's permission. 
C)  the right to transfer, sell, exchange, or mortgage the property. 
D)  all of the above. 
A)  the right to exclusive use of the property. 
B)  legal protection against those who would seek to use or abuse the property without the owner's permission. 
C)  the right to transfer, sell, exchange, or mortgage the property. 
D)  all of the above.

Question 3

Land used to grow alfalfa could also be used to grow hay. Which of the following is true when the farmer plants hay and the market price of alfalfa rises?

Accepted Answer

A)  The opportunity cost of producing hay decreases. 
B)  The opportunity cost of producing hay increases. 
C)  There will be no change in the opportunity cost of producing hay. 
D)  The opportunity cost of producing alfalfa increases. 
A)  The opportunity cost of producing hay decreases. 
B)  The opportunity cost of producing hay increases. 
C)  There will be no change in the opportunity cost of producing hay. 
D)  The opportunity cost of producing alfalfa increases.

Question 4

When the Social Security system enters its deficit years and the bonds held in the trust fund are drawn down,

Accepted Answer

A)  overall taxes will be reduced as the trust funds are used to pay benefits to retirees. 
B)  the payroll taxes used to finance Social Security benefits can be reduced because the trust funds will be sufficient to pay the retirement benefits of the baby boom generation. 
C)  taxes will have to be raised (or additional funds will have to be borrowed) in order to redeem the bonds held in the trust fund. 
D)  income taxes will have to be reduced in order to keep the revenues and expenditures of the Social Security system in balance. 
A)  overall taxes will be reduced as the trust funds are used to pay benefits to retirees. 
B)  the payroll taxes used to finance Social Security benefits can be reduced because the trust funds will be sufficient to pay the retirement benefits of the baby boom generation. 
C)  taxes will have to be raised (or additional funds will have to be borrowed) in order to redeem the bonds held in the trust fund. 
D)  income taxes will have to be reduced in order to keep the revenues and expenditures of the Social Security system in balance.

Question 5

Use the production possibilities data below to answer the following question(s).
Table 2-3
  
-Refer to Table 2-3. The opportunity cost of 1 pound of potatoes for the farmer is

Accepted Answer

A)  8 hours of labor. 
B)  2 hours of labor. 
C)  4 pounds of meat. 
D)  1/4 pound of meat. 
A)  8 hours of labor. 
B)  2 hours of labor. 
C)  4 pounds of meat. 
D)  1/4 pound of meat.

Question 6

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 7

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 8

What will the federal government have to do in order to redeem the bonds in the Social Security Trust Fund?

Accepted Answer

A)  raise taxes 
B)  cut expenditures on other government programs 
C)  borrow additional funds 
D)  Some combination of a, b, and c. 
A)  raise taxes 
B)  cut expenditures on other government programs 
C)  borrow additional funds 
D)  Some combination of a, b, and c.

Question 9

Use the table below to choose the correct answer. The table outlines the production possibilities of Robinson Crusoe and Joe Friday.   If Crusoe and Friday want to maximize their consumption possibilities,

Accepted Answer

A)  Crusoe should specialize in producing good X and Friday in producing good Y, but no trade should be allowed. 
B)  Crusoe should specialize in producing good X and Friday in producing good Y; trade should occur to maximize joint consumption. 
C)  Crusoe should specialize in producing good Y and Friday in producing good X; trade should occur to maximize joint consumption. 
D)  both individuals should strive for self-sufficiency, which always maximizes output. 
A)  Crusoe should specialize in producing good X and Friday in producing good Y, but no trade should be allowed. 
B)  Crusoe should specialize in producing good X and Friday in producing good Y; trade should occur to maximize joint consumption. 
C)  Crusoe should specialize in producing good Y and Friday in producing good X; trade should occur to maximize joint consumption. 
D)  both individuals should strive for self-sufficiency, which always maximizes output.

Question 10

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 11

Figure 2-6  
-Which of the following will most likely shift the production possibilities curve for breadfruit and fish outward from AA to BB in Figure 2-6?

Accepted Answer

A)  an improvement in the form of economic organization 
B)  lower investment and a reduction in the country's capital stock 
C)  an increase in the price of breadfruit 
D)  a decrease in the average number of hours worked 
A)  an improvement in the form of economic organization 
B)  lower investment and a reduction in the country's capital stock 
C)  an increase in the price of breadfruit 
D)  a decrease in the average number of hours worked

Question 12

What are the three basic questions faced by every economy?

Accepted Answer

A)  What, how, and for whom will goods be produced? 
B)  When, where, and how much will be produced? 
C)  Why, where, and when will goods be produced? 
D)  How, how much, and why will goods be produced? 
A)  What, how, and for whom will goods be produced? 
B)  When, where, and how much will be produced? 
C)  Why, where, and when will goods be produced? 
D)  How, how much, and why will goods be produced?

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

In voluntary exchange, if the seller of a product gains,

Accepted Answer

A)  the buyer will generally lose an amount greater than the gain to the seller. 
B)  the buyer must lose an amount equal to what the seller gains. 
C)  someone else must lose an equal amount. 
D)  the buyer must also gain; mutual gain provides the foundation for exchange. 
A)  the buyer will generally lose an amount greater than the gain to the seller. 
B)  the buyer must lose an amount equal to what the seller gains. 
C)  someone else must lose an equal amount. 
D)  the buyer must also gain; mutual gain provides the foundation for exchange.

Question 15

Which of the following statements about exchange is true?

Accepted Answer

A)  If everyone starts off with the same quantities of each good, it would be impossible to realize gains from trade. 
B)  Exchange tends to move each good toward those individuals who value the good more highly. 
C)  Exchange always results in one party being made better off and the other being made worse off. 
D)  For trade to occur, everyone must start off with the same value of the good that is traded. 
A)  If everyone starts off with the same quantities of each good, it would be impossible to realize gains from trade. 
B)  Exchange tends to move each good toward those individuals who value the good more highly. 
C)  Exchange always results in one party being made better off and the other being made worse off. 
D)  For trade to occur, everyone must start off with the same value of the good that is traded.

Question 16

Opportunity cost is defined

Accepted Answer

A)  only in terms of money spent 
B)  as the value of all alternatives not chosen 
C)  as the value of the best alternative not chosen 
D)  as the difference between the benefits from a choice and the benefits from the next best alternative 
E)  as the difference between the benefits from a choice and the costs of that choice 
A)  only in terms of money spent 
B)  as the value of all alternatives not chosen 
C)  as the value of the best alternative not chosen 
D)  as the difference between the benefits from a choice and the benefits from the next best alternative 
E)  as the difference between the benefits from a choice and the costs of that choice

Question 17

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 18

Given the current tax rate structure and promised benefit levels, persons that are currently 40 years old or younger can expect to earn approximately what real rate of return on their Social Security contributions?

Accepted Answer

A)  0 percent 
B)  2 percent 
C)  10 to 12 percent 
D)  15 to 20 percent 
A)  0 percent 
B)  2 percent 
C)  10 to 12 percent 
D)  15 to 20 percent

Question 19

Under the current Social Security system, married persons may draw benefits based on

Accepted Answer

A)  only their own earnings. 
B)  their own earnings or draw 50 percent of the benefits earned by their spouse. 
C)  their own earnings plus 50 percent of their spouse's earnings. 
D)  their own earnings plus 100 percent of their spouse's earnings. 
A)  only their own earnings. 
B)  their own earnings or draw 50 percent of the benefits earned by their spouse. 
C)  their own earnings plus 50 percent of their spouse's earnings. 
D)  their own earnings plus 100 percent of their spouse's earnings.

Question 20

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.

The government enforces property rights by

Private property rights involve

Land used to grow alfalfa could also be used to grow hay. Which of the following is true when the farmer plants hay and the market price of alfalfa rises?

When the Social Security system enters its deficit years and the bonds held in the trust fund are drawn down,

Use the production possibilities data below to answer the following question(s). Table 2-3 -Refer to Table 2-3. The opportunity cost of 1 pound of potatoes for the farmer is

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

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

What will the federal government have to do in order to redeem the bonds in the Social Security Trust Fund?

Use the table below to choose the correct answer. The table outlines the production possibilities of Robinson Crusoe and Joe Friday. If Crusoe and Friday want to maximize their consumption possibilities,

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?

Figure 2-6 -Which of the following will most likely shift the production possibilities curve for breadfruit and fish outward from AA to BB in Figure 2-6?

What are the three basic questions faced by every economy?

In voluntary exchange, if the seller of a product gains,

Which of the following statements about exchange is true?

Opportunity cost is defined

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?

Given the current tax rate structure and promised benefit levels, persons that are currently 40 years old or younger can expect to earn approximately what real rate of return on their Social Security contributions?

Under the current Social Security system, married persons may draw benefits based on

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

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

The government enforces property rights by

Private property rights involve

Land used to grow alfalfa could also be used to grow hay. Which of the following is true when the farmer plants hay and the market price of alfalfa rises?

When the Social Security system enters its deficit years and the bonds held in the trust fund are drawn down,

Use the production possibilities data below to answer the following question(s). Table 2-3 -Refer to Table 2-3. The opportunity cost of 1 pound of potatoes for the farmer is

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

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

What will the federal government have to do in order to redeem the bonds in the Social Security Trust Fund?

Use the table below to choose the correct answer. The table outlines the production possibilities of Robinson Crusoe and Joe Friday. If Crusoe and Friday want to maximize their consumption possibilities,

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?

Figure 2-6 -Which of the following will most likely shift the production possibilities curve for breadfruit and fish outward from AA to BB in Figure 2-6?

What are the three basic questions faced by every economy?

In voluntary exchange, if the seller of a product gains,

Which of the following statements about exchange is true?

Opportunity cost is defined

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?

Given the current tax rate structure and promised benefit levels, persons that are currently 40 years old or younger can expect to earn approximately what real rate of return on their Social Security contributions?

Under the current Social Security system, married persons may draw benefits based on

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

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