Question 1

Economic analysis suggests that gains from specialization and exchange

Accepted Answer

A)  will not be realized unless a central planning authority requires that all goods be produced by the low opportunity cost supplier. 
B)  will be realized if individuals are allowed to pursue goals that are in their own self-interest. 
C)  will not be realized unless business firms employ economists when making decisions about the proper combination of resources to utilize in the production process. 
D)  will be realized if individuals place the public interest above the pursuit of their own self-interest. 
A)  will not be realized unless a central planning authority requires that all goods be produced by the low opportunity cost supplier. 
B)  will be realized if individuals are allowed to pursue goals that are in their own self-interest. 
C)  will not be realized unless business firms employ economists when making decisions about the proper combination of resources to utilize in the production process. 
D)  will be realized if individuals place the public interest above the pursuit of their own self-interest.

Question 2

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 3

The Social Security system of the United States is based on the pay-as-you-go principle. This indicates that funding of the benefits paid to current retirees comes primarily from

Accepted Answer

A)  the income generated by the system's ownership of stock. 
B)  the tax payments of current workers. 
C)  the funds that current retirees paid into their personal savings accounts during their working years. 
D)  money created by the Federal Reserve system. 
A)  the income generated by the system's ownership of stock. 
B)  the tax payments of current workers. 
C)  the funds that current retirees paid into their personal savings accounts during their working years. 
D)  money created by the Federal Reserve system.

Question 4

Figure 2-9  
-Refer to Figure 2-9. If the economy moves from point A to point D, the opportunity cost is

Accepted Answer

A)  10 toasters. 
B)  20 toasters. 
C)  30 toasters. 
D)  30 toothbrushes. 
A)  10 toasters. 
B)  20 toasters. 
C)  30 toasters. 
D)  30 toothbrushes.

Question 5

Melanie has a choice of driving or flying from Durham, North Carolina to Knoxville, Tennessee for a one-day business trip. If she travels by air, she will be able to work seven hours in Knoxville, while if she drives, she will only have time to work four hours once there. Her expected income from each hour of work in Knoxville is $40. If Melanie a rational decision maker, she will chose to fly if and only if the price differential (air cost minus driving cost) is less than

Accepted Answer

A)  $40. 
B)  $120. 
C)  $160. 
D)  $280. 
A)  $40. 
B)  $120. 
C)  $160. 
D)  $280.

Question 6

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

Accepted Answer

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

Question 7

Which of the following best explains why the Social Security system will face financial difficulties in the future?

Accepted Answer

A)  Too much Social Security revenue was invested in the private sector rather than in government bonds. 
B)  In the next two decades, the number of workers paying into the system will decline sharply relative to the number of retirees collecting benefits. 
C)  The federal government does not pay interest on the money it borrows from the Social Security system. 
D)  The funds in the Social Security trust fund were invested in high-risk ventures that failed to pay off. 
A)  Too much Social Security revenue was invested in the private sector rather than in government bonds. 
B)  In the next two decades, the number of workers paying into the system will decline sharply relative to the number of retirees collecting benefits. 
C)  The federal government does not pay interest on the money it borrows from the Social Security system. 
D)  The funds in the Social Security trust fund were invested in high-risk ventures that failed to pay off.

Question 8

Social Security, officially known as Old Age and Survivors Insurance (OASI),

Accepted Answer

A)  collects funds from current workers and invests them in order to provide these workers with a stream of income during the retirement phase of life. 
B)  is based on the same principles as private insurance programs. 
C)  is an intergenerational income transfer program. 
D)  is a voluntary savings program run by the government. 
A)  collects funds from current workers and invests them in order to provide these workers with a stream of income during the retirement phase of life. 
B)  is based on the same principles as private insurance programs. 
C)  is an intergenerational income transfer program. 
D)  is a voluntary savings program run by the government.

Question 9

Jane states that "Social Security is an unfair program. It discriminates against married women in the workforce and middle-income recipients." Evaluate this view.

Accepted Answer

Social Security discriminates against ma

Question 10

The opportunity cost of an action is

Accepted Answer

A)  objective and will be the same for all individuals. 
B)  a measure of the undesirable aspects involved in the action. 
C)  applicable only to choices involving material goods like commodities. 
D)  the highest valued alternative forgone as the result of choosing an option. 
A)  objective and will be the same for all individuals. 
B)  a measure of the undesirable aspects involved in the action. 
C)  applicable only to choices involving material goods like commodities. 
D)  the highest valued alternative forgone as the result of choosing an option.

Question 11

Which of the following is not a basic question that each economy must answer?

Accepted Answer

A)  Which resources are scarce? 
B)  For whom shall the goods be produced? 
C)  How shall goods be produced? 
D)  What goods shall be produced? 
A)  Which resources are scarce? 
B)  For whom shall the goods be produced? 
C)  How shall goods be produced? 
D)  What goods shall be produced?

Question 12

In economics, transaction costs refer to the

Accepted Answer

A)  time, effort, and other resources needed to search out and negotiate an exchange. 
B)  dollar cost or price of the item traded. 
C)  cost an economy suffers when it allows specialization according to comparative advantage. 
D)  amount by which the price of an item increases due to the presence of a middleman. 
A)  time, effort, and other resources needed to search out and negotiate an exchange. 
B)  dollar cost or price of the item traded. 
C)  cost an economy suffers when it allows specialization according to comparative advantage. 
D)  amount by which the price of an item increases due to the presence of a middleman.

Question 13

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 14

As a general rule, technological progress

Accepted Answer

A)  shifts the production possibilities curve outward, away from the origin. 
B)  reduces the slope of the production possibilities curve, making it flatter. 
C)  increases the slope of the production possibilities curve, making it steeper. 
D)  shifts the production possibilities curve inward, toward the origin. 
A)  shifts the production possibilities curve outward, away from the origin. 
B)  reduces the slope of the production possibilities curve, making it flatter. 
C)  increases the slope of the production possibilities curve, making it steeper. 
D)  shifts the production possibilities curve inward, toward the origin.

Question 15

The Social Security system is currently generating tax revenues that exceed the benefits paid to recipients. This surplus is

Accepted Answer

A)  being invested in foreign bonds, which will provide Americans with a source of income when the baby boom generation retires. 
B)  separated from other government revenue so politicians will not spend the money during the current period. 
C)  being channeled into earmarked private savings accounts. 
D)  invested in government bonds, the redemption of which will require an increase in taxes (or additional Treasury borrowing). 
A)  being invested in foreign bonds, which will provide Americans with a source of income when the baby boom generation retires. 
B)  separated from other government revenue so politicians will not spend the money during the current period. 
C)  being channeled into earmarked private savings accounts. 
D)  invested in government bonds, the redemption of which will require an increase in taxes (or additional Treasury borrowing).

Question 16

Opportunity costs differ among nations primarily because

Accepted Answer

A)  nations employ different currencies. 
B)  nations have different amounts of land, labor skills, capital, and technology. 
C)  nations have different religious, political, and economic institutions. 
D)  the work-leisure preferences of people vary considerably from one nation to another. 
A)  nations employ different currencies. 
B)  nations have different amounts of land, labor skills, capital, and technology. 
C)  nations have different religious, political, and economic institutions. 
D)  the work-leisure preferences of people vary considerably from one nation to another.

Question 17

Recent legislation provides parents with a substantial reduction in their personal income tax liability for each child that they have. The economic way of thinking indicates that legislation of this type will

Accepted Answer

A)  make it more costly for parents to provide for their children. 
B)  reduce the value of children to their parents and, therefore, lead to a reduction in the birth rate. 
C)  reduce the after-tax cost of raising children and, therefore, increase the birth rate. 
D)  exert no impact on either the cost of raising children or the birth rate since having children is a not an economic activity. 
A)  make it more costly for parents to provide for their children. 
B)  reduce the value of children to their parents and, therefore, lead to a reduction in the birth rate. 
C)  reduce the after-tax cost of raising children and, therefore, increase the birth rate. 
D)  exert no impact on either the cost of raising children or the birth rate since having children is a not an economic activity.

Question 18

Production possibilities curve are usually bowed outward. This is because

Accepted Answer

A)  the more resources a society uses to produce one good, the fewer resources it has available to produce another good. 
B)  it reflects the fact that the opportunity cost of producing a good decreases as more and more of that good is produced. 
C)  of the effects of technological change. 
D)  resources are specialized, that is, some are better at producing particular goods rather than other goods. 
A)  the more resources a society uses to produce one good, the fewer resources it has available to produce another good. 
B)  it reflects the fact that the opportunity cost of producing a good decreases as more and more of that good is produced. 
C)  of the effects of technological change. 
D)  resources are specialized, that is, some are better at producing particular goods rather than other goods.

Question 19

If Mia can either wash 10 cars or wax 2 cars during a day, and Daniel can either wash 17 cars or wax 2 cars during a day, then according to the law of comparative advantage,

Accepted Answer

A)  Daniel's opportunity cost of waxing a car is less than Mia's. 
B)  their total output can be expanded if Mia specializes in waxing and Daniel in washing. 
C)  their total output can be expanded if Mia specializes in washing and Daniel in waxing. 
D)  it would be impossible for Daniel and Mia to increase their total output through specialization and mutual exchange. 
A)  Daniel's opportunity cost of waxing a car is less than Mia's. 
B)  their total output can be expanded if Mia specializes in waxing and Daniel in washing. 
C)  their total output can be expanded if Mia specializes in washing and Daniel in waxing. 
D)  it would be impossible for Daniel and Mia to increase their total output through specialization and mutual exchange.

Question 20

Which of the following is true of exchange?

Accepted Answer

A)  Exchange is a zero sum activity; if one party to an exchange gains, the other must lose an equal amount. 
B)  The exchange value of a good is determined by the cost of the resources required to produce the good. 
C)  The total output trading partners are able to produce is not influenced by whether the partners trade with each other. 
D)  Exchange permits trading partners to expand their total output of goods and services as the result of greater specialization in areas where each has a comparative advantage. 
A)  Exchange is a zero sum activity; if one party to an exchange gains, the other must lose an equal amount. 
B)  The exchange value of a good is determined by the cost of the resources required to produce the good. 
C)  The total output trading partners are able to produce is not influenced by whether the partners trade with each other. 
D)  Exchange permits trading partners to expand their total output of goods and services as the result of greater specialization in areas where each has a comparative advantage.

Economic analysis suggests that gains from specialization and exchange

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

The Social Security system of the United States is based on the pay-as-you-go principle. This indicates that funding of the benefits paid to current retirees comes primarily from

Figure 2-9 -Refer to Figure 2-9. If the economy moves from point A to point D, the opportunity cost is

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

Which of the following best explains why the Social Security system will face financial difficulties in the future?

Social Security, officially known as Old Age and Survivors Insurance (OASI),

Jane states that "Social Security is an unfair program. It discriminates against married women in the workforce and middle-income recipients." Evaluate this view.

The opportunity cost of an action is

Which of the following is not a basic question that each economy must answer?

In economics, transaction costs refer to the

As a general rule, technological progress

The Social Security system is currently generating tax revenues that exceed the benefits paid to recipients. This surplus is

Opportunity costs differ among nations primarily because

Recent legislation provides parents with a substantial reduction in their personal income tax liability for each child that they have. The economic way of thinking indicates that legislation of this type will

Production possibilities curve are usually bowed outward. This is because

If Mia can either wash 10 cars or wax 2 cars during a day, and Daniel can either wash 17 cars or wax 2 cars during a day, then according to the law of comparative advantage,

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

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

Economic analysis suggests that gains from specialization and exchange

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

The Social Security system of the United States is based on the pay-as-you-go principle. This indicates that funding of the benefits paid to current retirees comes primarily from

Figure 2-9 -Refer to Figure 2-9. If the economy moves from point A to point D, the opportunity cost is

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

Which of the following best explains why the Social Security system will face financial difficulties in the future?

Social Security, officially known as Old Age and Survivors Insurance (OASI),

Jane states that "Social Security is an unfair program. It discriminates against married women in the workforce and middle-income recipients." Evaluate this view.

The opportunity cost of an action is

Which of the following is not a basic question that each economy must answer?

In economics, transaction costs refer to the

As a general rule, technological progress

The Social Security system is currently generating tax revenues that exceed the benefits paid to recipients. This surplus is

Opportunity costs differ among nations primarily because

Recent legislation provides parents with a substantial reduction in their personal income tax liability for each child that they have. The economic way of thinking indicates that legislation of this type will

Production possibilities curve are usually bowed outward. This is because

If Mia can either wash 10 cars or wax 2 cars during a day, and Daniel can either wash 17 cars or wax 2 cars during a day, then according to the law of comparative advantage,

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

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