Question 1

When private ownership rights are well-defined and enforced, owners

Accepted Answer

A)  can ignore the wishes of others, without bearing the cost. 
B)  have little incentive to take care of things. 
C)  can do anything they want with their property. 
D)  can be held accountable for damage to others through misuse of their property. 
A)  can ignore the wishes of others, without bearing the cost. 
B)  have little incentive to take care of things. 
C)  can do anything they want with their property. 
D)  can be held accountable for damage to others through misuse of their property.

Question 2

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 3

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 4

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 5

Given freedom of movement for both goods and resources, if Florida producers specialize in oranges and Georgia producers specialize in peaches, it would be reasonable to conclude that

Accepted Answer

A)  the opportunity cost of growing oranges is higher in Florida than in Georgia. 
B)  Georgia has a comparative advantage in producing oranges. 
C)  Florida has a comparative advantage in producing oranges. 
D)  total output will be expanded when Georgia allocates more resources to producing oranges and Florida allocates more resources to producing peaches. 
A)  the opportunity cost of growing oranges is higher in Florida than in Georgia. 
B)  Georgia has a comparative advantage in producing oranges. 
C)  Florida has a comparative advantage in producing oranges. 
D)  total output will be expanded when Georgia allocates more resources to producing oranges and Florida allocates more resources to producing peaches.

Question 6

Which of the following is true regarding private ownership?

Accepted Answer

A)  Relative to common ownership, private ownership generally leads to less conservation of resources. 
B)  With private ownership, owners are held accountable for using their resources in a manner that harms the resources of others. 
C)  Private ownership generally gives the owner little incentive to find ways to use the resource wisely. 
D)  With private ownership, resource owners have little incentive to consider the preferences of others when deciding how to employ a resource. 
A)  Relative to common ownership, private ownership generally leads to less conservation of resources. 
B)  With private ownership, owners are held accountable for using their resources in a manner that harms the resources of others. 
C)  Private ownership generally gives the owner little incentive to find ways to use the resource wisely. 
D)  With private ownership, resource owners have little incentive to consider the preferences of others when deciding how to employ a resource.

Question 7

A ticket to a concert costs $45. You have a ticket and can resell it for $75. Your opportunity cost of actually attending the concert is

Accepted Answer

A)  $30. 
B)  $45. 
C)  $75. 
D)  $120. 
A)  $30. 
B)  $45. 
C)  $75. 
D)  $120.

Question 8

Why is trade an important source of economic progress?

Accepted Answer

A)  It allows the trading partners to produce a larger joint output through specialization in the areas where they have a comparative advantage. 
B)  It allows the trading partners to produce a larger joint output as the result of greater realization of cost reductions that accompany the adoption of mass production methods. 
C)  It makes it possible to realize gains from the discovery and dissemination of innovative products and production processes. 
D)  All of the above are correct. 
A)  It allows the trading partners to produce a larger joint output through specialization in the areas where they have a comparative advantage. 
B)  It allows the trading partners to produce a larger joint output as the result of greater realization of cost reductions that accompany the adoption of mass production methods. 
C)  It makes it possible to realize gains from the discovery and dissemination of innovative products and production processes. 
D)  All of the above are correct.

Question 9

Will a large quantity of bonds held in the Social Security Trust Fund make it easier to deal with the retirement of the baby boomers?

Accepted Answer

A)  Yes; the federal government will be able to redeem these bonds in the future without raising taxes or increasing its borrowing. 
B)  Yes; the interest on these bonds will provide the federal government with a stream of net revenue in the future. 
C)  Yes, but only if the federal government holds these bonds until they mature. 
D)  No; the federal government cannot redeem the bonds without raising revenues for their redemption from other sources. 
A)  Yes; the federal government will be able to redeem these bonds in the future without raising taxes or increasing its borrowing. 
B)  Yes; the interest on these bonds will provide the federal government with a stream of net revenue in the future. 
C)  Yes, but only if the federal government holds these bonds until they mature. 
D)  No; the federal government cannot redeem the bonds without raising revenues for their redemption from other sources.

Question 10

Compared to a situation where transaction costs are zero, the existence of transaction costs

Accepted Answer

A)  will reduce the volume of trade. 
B)  will reduce the gains from trade. 
C)  may lead some buyers and sellers to employ middlemen. 
D)  All of the above are correct. 
A)  will reduce the volume of trade. 
B)  will reduce the gains from trade. 
C)  may lead some buyers and sellers to employ middlemen. 
D)  All of the above are correct.

Question 11

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 12

Which of the following will most likely cause an outward shift in the production possibilities curve?

Accepted Answer

A)  a reduction in the man-made productive resources available to the economy as the result of a decline in investment 
B)  an increase in government payments to farmers for taking land out of production 
C)  an increase from 40 to 50 hours in the average number of hours worked per week 
D)  None of the above would cause an outward shift in the production possibilities curve. 
A)  a reduction in the man-made productive resources available to the economy as the result of a decline in investment 
B)  an increase in government payments to farmers for taking land out of production 
C)  an increase from 40 to 50 hours in the average number of hours worked per week 
D)  None of the above would cause an outward shift in the production possibilities curve.

Question 13

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 14

If Terrell can produce more bagels in one day than Zori can produce in one day, then

Accepted Answer

A)  Terrell has a comparative advantage in the production of bagels. 
B)  Zori has a comparative advantage in the production of bagels. 
C)  Terrell has an absolute advantage in the production of bagels. 
D)  Terrell should produce bagels and Zori should spend her time on a different activity. 
A)  Terrell has a comparative advantage in the production of bagels. 
B)  Zori has a comparative advantage in the production of bagels. 
C)  Terrell has an absolute advantage in the production of bagels. 
D)  Terrell should produce bagels and Zori should spend her time on a different activity.

Question 15

Todd owns a truck that he values at $2,000. Susan, who does a lot of hauling, values the truck at $6,000. If these two are allowed to negotiate, which of the following will most likely occur?

Accepted Answer

A)  Todd will sell the truck for $1,500. 
B)  Susan will buy the truck for $7,000. 
C)  The truck will be sold at a price greater than $2,000 but less than $6,000, and both parties will benefit. 
D)  Susan will benefit more than Todd if the truck is sold. 
A)  Todd will sell the truck for $1,500. 
B)  Susan will buy the truck for $7,000. 
C)  The truck will be sold at a price greater than $2,000 but less than $6,000, and both parties will benefit. 
D)  Susan will benefit more than Todd if the truck is sold.

Question 16

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 17

Ashley is an attorney and also an excellent typist. She can type 120 words per minute, but she charges attorney fees at $100 per hour. Benjamin would like some typing work but can only type 60 words per minute. According to the law of comparative advantage, Ashley should hire Benjamin to do her typing if and only if his wage rate is less than

Accepted Answer

A)  $10 per hour. 
B)  $50 per hour. 
C)  $60 per hour. 
D)  $100 per hour. 
A)  $10 per hour. 
B)  $50 per hour. 
C)  $60 per hour. 
D)  $100 per hour.

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

For most students attending state universities, the largest cost component of going to college is

Accepted Answer

A)  the cost of books and supplies. 
B)  the cost of room and board. 
C)  tuition. 
D)  the opportunity cost in terms of forgone current income from the time spent attending college. 
A)  the cost of books and supplies. 
B)  the cost of room and board. 
C)  tuition. 
D)  the opportunity cost in terms of forgone current income from the time spent attending college.

Question 20

Figure 2-1  
-In Figure 2-1, point A is

Accepted Answer

A)  unattainable. 
B)  inefficient. 
C)  efficient. 
D)  preferable to point B. 
A)  unattainable. 
B)  inefficient. 
C)  efficient. 
D)  preferable to point B.

When private ownership rights are well-defined and enforced, owners

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 appropriately applies the law of comparative advantage?

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

Given freedom of movement for both goods and resources, if Florida producers specialize in oranges and Georgia producers specialize in peaches, it would be reasonable to conclude that

Which of the following is true regarding private ownership?

A ticket to a concert costs $45. You have a ticket and can resell it for $75. Your opportunity cost of actually attending the concert is

Why is trade an important source of economic progress?

Will a large quantity of bonds held in the Social Security Trust Fund make it easier to deal with the retirement of the baby boomers?

Compared to a situation where transaction costs are zero, the existence of transaction costs

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

Which of the following will most likely cause an outward shift in the production possibilities curve?

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?

If Terrell can produce more bagels in one day than Zori can produce in one day, then

Todd owns a truck that he values at $2,000. Susan, who does a lot of hauling, values the truck at $6,000. If these two are allowed to negotiate, which of the following will most likely occur?

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

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

For most students attending state universities, the largest cost component of going to college is

Figure 2-1 -In Figure 2-1, point A is

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

When private ownership rights are well-defined and enforced, owners

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 appropriately applies the law of comparative advantage?

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

Given freedom of movement for both goods and resources, if Florida producers specialize in oranges and Georgia producers specialize in peaches, it would be reasonable to conclude that

Which of the following is true regarding private ownership?

A ticket to a concert costs $45. You have a ticket and can resell it for $75. Your opportunity cost of actually attending the concert is

Why is trade an important source of economic progress?

Will a large quantity of bonds held in the Social Security Trust Fund make it easier to deal with the retirement of the baby boomers?

Compared to a situation where transaction costs are zero, the existence of transaction costs

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

Which of the following will most likely cause an outward shift in the production possibilities curve?

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?

If Terrell can produce more bagels in one day than Zori can produce in one day, then

Todd owns a truck that he values at $2,000. Susan, who does a lot of hauling, values the truck at $6,000. If these two are allowed to negotiate, which of the following will most likely occur?

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

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

For most students attending state universities, the largest cost component of going to college is

Figure 2-1 -In Figure 2-1, point A is

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