Question 1

The wages of house painters will tend to rise when

Accepted Answer

A)  more people recognize that house painters have very low incomes. 
B)  the alternative earning opportunities of house painters improve. 
C)  house painters can no longer find good paying alternatives for their labor. 
D)  unemployment in the economy is high and there are few alternative jobs available for house painters. 
A)  more people recognize that house painters have very low incomes. 
B)  the alternative earning opportunities of house painters improve. 
C)  house painters can no longer find good paying alternatives for their labor. 
D)  unemployment in the economy is high and there are few alternative jobs available for house painters.

Question 2

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 3

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 4

A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called

Accepted Answer

A)  a key man. 
B)  an entrepreneur. 
C)  a progressor. 
D)  a stakeholder. 
A)  a key man. 
B)  an entrepreneur. 
C)  a progressor. 
D)  a stakeholder.

Question 5

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 6

The most important source of gain from the division of labor is

Accepted Answer

A)  the repeal of the law of comparative advantage. 
B)  the reduction in work effort because incentives are adversely affected. 
C)  the increase in the number of jobs since more labor is used to produce goods. 
D)  the benefits that result from specialization, adoption of mass production techniques, and exchange. 
A)  the repeal of the law of comparative advantage. 
B)  the reduction in work effort because incentives are adversely affected. 
C)  the increase in the number of jobs since more labor is used to produce goods. 
D)  the benefits that result from specialization, adoption of mass production techniques, and exchange.

Question 7

Savannah is an attorney and also an excellent typist. She can type 120 words per minute, but charges attorney fees at $80 per hour. Matt would like some typing work but can only type 60 words per minute. The economic efficiency criterion indicates

Accepted Answer

A)  Savannah should do the typing. 
B)  Matt should do the typing, provided he is willing to do so for less than $80 per hour. 
C)  Matt should do the typing, provided he is willing to do so for less than $40 per hour. 
D)  Matt should do the typing, provided he is paid more than $40 per hour. 
A)  Savannah should do the typing. 
B)  Matt should do the typing, provided he is willing to do so for less than $80 per hour. 
C)  Matt should do the typing, provided he is willing to do so for less than $40 per hour. 
D)  Matt should do the typing, provided he is paid more than $40 per hour.

Question 8

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 9

Use the production possibilities data below for Lebos and Slavia to answer the following question(s). Table 2-1
   
Refer to Table 2-1. Which of the following is true?

Accepted Answer

A)  Lebos has the comparative advantage in both goods. 
B)  Lebos has the comparative advantage in food. 
C)  Slavia has the comparative advantage in food. 
D)  It would be impossible for Lebos and Slavia to gain from trade. 
A)  Lebos has the comparative advantage in both goods. 
B)  Lebos has the comparative advantage in food. 
C)  Slavia has the comparative advantage in food. 
D)  It would be impossible for Lebos and Slavia to gain from trade.

Question 10

"Henry Ford made millions of dollars producing and marketing automobiles. Many workers and consumers must have suffered in order for Ford to amass such enormous wealth." The person who made this observation

Accepted Answer

A)  has failed to understand the principle of opportunity cost. 
B)  has failed to comprehend the fallacy of composition. 
C)  has failed to understand that specialization and exchange generally result in mutual economic gain. 
D)  has utilized the economic way of thinking by thinking the gains of producers are made primarily at the expense of consumers and workers. 
A)  has failed to understand the principle of opportunity cost. 
B)  has failed to comprehend the fallacy of composition. 
C)  has failed to understand that specialization and exchange generally result in mutual economic gain. 
D)  has utilized the economic way of thinking by thinking the gains of producers are made primarily at the expense of consumers and workers.

Question 11

Suppose an economy produces only two goods, computers and TVs. If the economy operates at a point on its production possibilities curve, it can produce more computers only if

Accepted Answer

A)  it also produces more TVs. 
B)  it charges more for TVs. 
C)  it shifts to a point inside its production possibilities curve. 
D)  it produces fewer TVs. 
A)  it also produces more TVs. 
B)  it charges more for TVs. 
C)  it shifts to a point inside its production possibilities curve. 
D)  it produces fewer TVs.

Question 12

Because of a late night out with friends, Libby decided to sleep in rather than attend her 8 a.m. economics class. According to economic analysis, her choice was

Accepted Answer

A)  irrational, because economic analysis suggests you should always attend classes that you have already paid for. 
B)  irrational, because oversleeping is not in Libby's self-interest. 
C)  rational only if Libby has not missed any other classes. 
D)  rational if Libby values sleep more highly than the benefit she expects to receive from attending the class. 
A)  irrational, because economic analysis suggests you should always attend classes that you have already paid for. 
B)  irrational, because oversleeping is not in Libby's self-interest. 
C)  rational only if Libby has not missed any other classes. 
D)  rational if Libby values sleep more highly than the benefit she expects to receive from attending the class.

Question 13

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 14

According to the law of comparative advantage, if a firm or a nation desires to maximize its output, each productive assignment should be carried out by those who

Accepted Answer

A)  have the highest opportunity cost. 
B)  have the lowest opportunity cost. 
C)  have an absolute advantage in the productive activity. 
D)  can complete the productive activity most rapidly. 
A)  have the highest opportunity cost. 
B)  have the lowest opportunity cost. 
C)  have an absolute advantage in the productive activity. 
D)  can complete the productive activity most rapidly.

Question 15

Middlemen, such as grocers, stockbrokers, and Realtors,

Accepted Answer

A)  specialize in reducing transactions costs. 
B)  provide nothing of value to either the buyer or the seller. 
C)  have no effect on economic output in society. 
D)  do not exist in capitalist economies. 
A)  specialize in reducing transactions costs. 
B)  provide nothing of value to either the buyer or the seller. 
C)  have no effect on economic output in society. 
D)  do not exist in capitalist economies.

Question 16

When private ownership of a resource is clearly defined and enforced, the private owner

Accepted Answer

A)  has little incentive to consider the wishes of others when deciding how to use the resource. 
B)  has little incentive to take care of the resource. 
C)  has a strong incentive to use the resource wisely and to consider seriously the wishes of others when deciding how to employ the resource. 
D)  has a strong incentive to consume the resource during the period rather than conserving it for future use. 
A)  has little incentive to consider the wishes of others when deciding how to use the resource. 
B)  has little incentive to take care of the resource. 
C)  has a strong incentive to use the resource wisely and to consider seriously the wishes of others when deciding how to employ the resource. 
D)  has a strong incentive to consume the resource during the period rather than conserving it for future use.

Question 17

If an economy is operating at a point inside the production possibilities curve,

Accepted Answer

A)  its resources are not being used efficiently. 
B)  the curve will begin to shift inward. 
C)  the curve will begin to shift outward. 
D)  This is a trick question because an economy cannot produce at a point inside the curve. 
A)  its resources are not being used efficiently. 
B)  the curve will begin to shift inward. 
C)  the curve will begin to shift outward. 
D)  This is a trick question because an economy cannot produce at a point inside the curve.

Question 18

An airline ticket from Seattle to Miami costs $525. A bus ticket is $325. Traveling by plane will take 5 hours, compared with 25 hours by bus. Thus, the plane costs $200 more but saves 20 hours of time. (Hint: Note how we are "thinking at the margin" here by looking at the changes.) Other things constant, an individual will gain by choosing air travel if, and only if, each hour of her time is valued at more than

Accepted Answer

A)  $10 per hour. 
B)  $13 per hour. 
C)  $20 per hour. 
D)  $105 per hour. 
A)  $10 per hour. 
B)  $13 per hour. 
C)  $20 per hour. 
D)  $105 per hour.

Question 19

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 20

The opportunity cost of an alternative

Accepted Answer

A)  includes only the direct monetary cost of whatever is chosen. 
B)  is subjective and can only be determined by the person who chooses the alternative. 
C)  is the value of all alternatives that must be forgone as the result of the choice. 
D)  is relevant only in cases where the choice involves alternatives that would be considered undesirable. 
A)  includes only the direct monetary cost of whatever is chosen. 
B)  is subjective and can only be determined by the person who chooses the alternative. 
C)  is the value of all alternatives that must be forgone as the result of the choice. 
D)  is relevant only in cases where the choice involves alternatives that would be considered undesirable.

The wages of house painters will tend to rise when

As a general rule, technological progress

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

A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called

The production possibilities curve illustrates the basic principle that

The most important source of gain from the division of labor is

Savannah is an attorney and also an excellent typist. She can type 120 words per minute, but charges attorney fees at $80 per hour. Matt would like some typing work but can only type 60 words per minute. The economic efficiency criterion indicates

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?

Use the production possibilities data below for Lebos and Slavia to answer the following question(s). Table 2-1 Refer to Table 2-1. Which of the following is true?

"Henry Ford made millions of dollars producing and marketing automobiles. Many workers and consumers must have suffered in order for Ford to amass such enormous wealth." The person who made this observation

Suppose an economy produces only two goods, computers and TVs. If the economy operates at a point on its production possibilities curve, it can produce more computers only if

Because of a late night out with friends, Libby decided to sleep in rather than attend her 8 a.m. economics class. According to economic analysis, her choice was

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

According to the law of comparative advantage, if a firm or a nation desires to maximize its output, each productive assignment should be carried out by those who

Middlemen, such as grocers, stockbrokers, and Realtors,

When private ownership of a resource is clearly defined and enforced, the private owner

If an economy is operating at a point inside the production possibilities curve,

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

The opportunity cost of an alternative

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

Exam 2: Some Tools of the Economist

The wages of house painters will tend to rise when

As a general rule, technological progress

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

A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called

The production possibilities curve illustrates the basic principle that

The most important source of gain from the division of labor is

Savannah is an attorney and also an excellent typist. She can type 120 words per minute, but charges attorney fees at $80 per hour. Matt would like some typing work but can only type 60 words per minute. The economic efficiency criterion indicates

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?

Use the production possibilities data below for Lebos and Slavia to answer the following question(s). Table 2-1 Refer to Table 2-1. Which of the following is true?

"Henry Ford made millions of dollars producing and marketing automobiles. Many workers and consumers must have suffered in order for Ford to amass such enormous wealth." The person who made this observation

Suppose an economy produces only two goods, computers and TVs. If the economy operates at a point on its production possibilities curve, it can produce more computers only if

Because of a late night out with friends, Libby decided to sleep in rather than attend her 8 a.m. economics class. According to economic analysis, her choice was

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

According to the law of comparative advantage, if a firm or a nation desires to maximize its output, each productive assignment should be carried out by those who

Middlemen, such as grocers, stockbrokers, and Realtors,

When private ownership of a resource is clearly defined and enforced, the private owner

If an economy is operating at a point inside the production possibilities curve,

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

The opportunity cost of an alternative

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