Question 1

Which of the following is a transaction cost?

Accepted Answer

A)  price of a ticket to a concert 
B)  price of food eaten before a concert 
C)  time spent standing in line to buy the ticket 
D)  price of a T-shirt at the concert 
A)  price of a ticket to a concert 
B)  price of food eaten before a concert 
C)  time spent standing in line to buy the ticket 
D)  price of a T-shirt at the concert C

Question 2

According to the law of comparative advantage,

Accepted Answer

A)  each producer should strive toward self-sufficiency in order to maximize the total production of the economy. 
B)  each product should be produced by the lowest opportunity cost producer in order to maximize output. 
C)  one should never compare one's abilities with those of another. 
D)  each product should be produced by the individual who can produce more of that product than any other individual. 
A)  each producer should strive toward self-sufficiency in order to maximize the total production of the economy. 
B)  each product should be produced by the lowest opportunity cost producer in order to maximize output. 
C)  one should never compare one's abilities with those of another. 
D)  each product should be produced by the individual who can produce more of that product than any other individual. B

Question 3

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. C

Question 4

Figure 2-9  
Refer to Figure 2-9. The opportunity cost of obtaining 10 additional toasters by moving from point B to point A is

Accepted Answer

A)  10 toothbrushes. 
B)  20 toothbrushes. 
C)  30 toothbrushes. 
D)  zero, since the economy has the additional resources to produce 10 additional toasters. 
A)  10 toothbrushes. 
B)  20 toothbrushes. 
C)  30 toothbrushes. 
D)  zero, since the economy has the additional resources to produce 10 additional toasters.

Question 5

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 6

The opportunity cost of an option

Accepted Answer

A)  measures the undesirable aspects of the option. 
B)  includes only the monetary cost of the option. 
C)  is the highest-valued alternative that must be given up as the result of choosing the option. 
D)  is objective, and it will be the same for all individuals. 
A)  measures the undesirable aspects of the option. 
B)  includes only the monetary cost of the option. 
C)  is the highest-valued alternative that must be given up as the result of choosing the option. 
D)  is objective, and it will be the same for all individuals.

Question 7

An airline ticket from Seattle to Miami costs $760. A bus ticket costs $360. Traveling by plane will take 6 hours, compared with 26 hours by bus. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be

Accepted Answer

A)  $18 per hour. 
B)  $20 per hour. 
C)  $38 per hour. 
D)  $44 per hour. 
A)  $18 per hour. 
B)  $20 per hour. 
C)  $38 per hour. 
D)  $44 per hour.

Question 8

Which of the following is not one of the basic economic questions that all economies must answer?

Accepted Answer

A)  What will be produced? 
B)  To whom will the goods produced be allocated? 
C)  How will goods be produced? 
D)  Which government agency will set the prices of the goods produced? 
A)  What will be produced? 
B)  To whom will the goods produced be allocated? 
C)  How will goods be produced? 
D)  Which government agency will set the prices of the goods produced?

Question 9

Jim values his car at $2,000, and Kelly values it at $5,000. Can value be created in this situation? How? Suppose Jim refuses to sell for less than $6,000. Is value destroyed? Why or why not?

Accepted Answer

Value can be created in this situation.

Question 10

The law of comparative advantage suggests that

Accepted Answer

A)  curtailing U.S. trade with other countries would make U.S. consumers better off. 
B)  everyone would be better off if they were self-sufficient. 
C)  countries will tend to import commodities that they can produce at a relatively low opportunity cost. 
D)  countries will tend to import commodities that they can produce at a relatively high opportunity cost. 
A)  curtailing U.S. trade with other countries would make U.S. consumers better off. 
B)  everyone would be better off if they were self-sufficient. 
C)  countries will tend to import commodities that they can produce at a relatively low opportunity cost. 
D)  countries will tend to import commodities that they can produce at a relatively high opportunity cost.

Question 11

The law of comparative advantage applies to exchange between

Accepted Answer

A)  individuals. 
B)  regions. 
C)  nations. 
D)  all of the above. 
A)  individuals. 
B)  regions. 
C)  nations. 
D)  all of the above.

Question 12

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 13

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 14

Steve values his boat at $4,000, and Jennifer values it at $9,000. If Jennifer buys it from Steve for $7,000, which of the following is true?

Accepted Answer

A)  Steve gains $3,000 of value, and Jennifer gains $2,000 of value. 
B)  Steve gains $7,000 of value, and Jennifer loses $7,000 of value. 
C)  Steve gains $7,000 of value, and Jennifer gains $6,000 of value. 
D)  Steve and Jennifer both gain $7,000 of value. 
A)  Steve gains $3,000 of value, and Jennifer gains $2,000 of value. 
B)  Steve gains $7,000 of value, and Jennifer loses $7,000 of value. 
C)  Steve gains $7,000 of value, and Jennifer gains $6,000 of value. 
D)  Steve and Jennifer both gain $7,000 of value.

Question 15

The opportunity cost of an activity

Accepted Answer

A)  depends on the individual's subjective values and opinions 
B)  is the same for everyone 
C)  must be calculated and known before undertaking that activity 
D)  is irrelevant to decision making 
E)  is not influenced by time costs 
A)  depends on the individual's subjective values and opinions 
B)  is the same for everyone 
C)  must be calculated and known before undertaking that activity 
D)  is irrelevant to decision making 
E)  is not influenced by time costs

Question 16

If Shawn can produce more donuts in one day than Sue can produce in one day, then

Accepted Answer

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

Question 17

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 18

"The economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by that transaction." This statement indicates the speaker

Accepted Answer

A)  fails to comprehend the idea that all voluntary trades benefit both parties involved. 
B)  fails to comprehend the fallacy of composition. 
C)  fails to understand the significance of the production possibilities curve. 
D)  uses the economic way of thinking. The statement is essentially correct. 
A)  fails to comprehend the idea that all voluntary trades benefit both parties involved. 
B)  fails to comprehend the fallacy of composition. 
C)  fails to understand the significance of the production possibilities curve. 
D)  uses the economic way of thinking. The statement is essentially correct.

Question 19

Kelly is an architect and she is trying to decide whether to hire Mike, a draftsman, to assist with her work. Kelly could hire Mike at $20 per hour but it would take him three times as long to complete a task as it takes Kelly. Kelly 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)  Kelly should not hire Mike because it would be faster for her to do the work herself. 
B)  Kelly should do the drafting work herself because she has the lower opportunity cost. 
C)  Mike should be hired at the $20 per hour wage rate. 
D)  Mike should be hired, but only if he is paid more than $30 per hour. 
A)  Kelly should not hire Mike because it would be faster for her to do the work herself. 
B)  Kelly should do the drafting work herself because she has the lower opportunity cost. 
C)  Mike should be hired at the $20 per hour wage rate. 
D)  Mike should be hired, but only if he is paid more than $30 per hour.

Question 20

Ken values his boat at $5,000, and Monica values it at $8,000. If Monica buys it from Ken for $7,000, which of the following is true?

Accepted Answer

A)  Ken gains $2,000 of value, and Monica gains $1,000 of value. 
B)  Ken gains $7,000 of value, and Monica loses $7,000 of value. 
C)  Ken gains $7,000 of value, and Monica gains $3,000 of value. 
D)  Ken and Monica both gain $7,000 of value. 
A)  Ken gains $2,000 of value, and Monica gains $1,000 of value. 
B)  Ken gains $7,000 of value, and Monica loses $7,000 of value. 
C)  Ken gains $7,000 of value, and Monica gains $3,000 of value. 
D)  Ken and Monica both gain $7,000 of value.

Which of the following is a transaction cost?

According to the law of comparative advantage,

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

Figure 2-9 Refer to Figure 2-9. The opportunity cost of obtaining 10 additional toasters by moving from point B to point A is

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

The opportunity cost of an option

An airline ticket from Seattle to Miami costs $760. A bus ticket costs $360. Traveling by plane will take 6 hours, compared with 26 hours by bus. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be

Which of the following is not one of the basic economic questions that all economies must answer?

Jim values his car at $2,000, and Kelly values it at $5,000. Can value be created in this situation? How? Suppose Jim refuses to sell for less than $6,000. Is value destroyed? Why or why not?

The law of comparative advantage suggests that

The law of comparative advantage applies to exchange between

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?

Steve values his boat at $4,000, and Jennifer values it at $9,000. If Jennifer buys it from Steve for $7,000, which of the following is true?

The opportunity cost of an activity

If Shawn can produce more donuts in one day than Sue can produce in one day, then

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

"The economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by that transaction." This statement indicates the speaker

Ken values his boat at $5,000, and Monica values it at $8,000. If Monica buys it from Ken for $7,000, which of the following is true?

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

Applying the Basics: Special Topics in Economics

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Exam 2: Some Tools of the Economist

Which of the following is a transaction cost?

According to the law of comparative advantage,

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

Figure 2-9 Refer to Figure 2-9. The opportunity cost of obtaining 10 additional toasters by moving from point B to point A is

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

The opportunity cost of an option

An airline ticket from Seattle to Miami costs $760. A bus ticket costs $360. Traveling by plane will take 6 hours, compared with 26 hours by bus. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be

Which of the following is not one of the basic economic questions that all economies must answer?

Jim values his car at $2,000, and Kelly values it at $5,000. Can value be created in this situation? How? Suppose Jim refuses to sell for less than $6,000. Is value destroyed? Why or why not?

The law of comparative advantage suggests that

The law of comparative advantage applies to exchange between

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?

Steve values his boat at $4,000, and Jennifer values it at $9,000. If Jennifer buys it from Steve for $7,000, which of the following is true?

The opportunity cost of an activity

If Shawn can produce more donuts in one day than Sue can produce in one day, then

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

"The economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by that transaction." This statement indicates the speaker

Ken values his boat at $5,000, and Monica values it at $8,000. If Monica buys it from Ken for $7,000, which of the following is true?

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

Applying the Basics: Special Topics in Economics

Filters