Question 1

If the resources of an economy are being used inefficiently, it would be

Accepted Answer

A)  possible to increase production of all goods simultaneously. 
B)  possible to increase production of one good only if production decreased for the other goods. 
C)  not possible to increase production of any good. 
D)  not possible to increase economic growth. 
E)  possible to increase production with no effort. 
A)  possible to increase production of all goods simultaneously. 
B)  possible to increase production of one good only if production decreased for the other goods. 
C)  not possible to increase production of any good. 
D)  not possible to increase economic growth. 
E)  possible to increase production with no effort.

Question 2

Which of the following is true of the production possibilities curve?

Accepted Answer

A)  It assumes a fixed level of technology. 
B)  It assumes that the prices of the products considered are equal. 
C)  It assumes some inefficiency will result in the use of resources. 
D)  All of the above are correct. 
A)  It assumes a fixed level of technology. 
B)  It assumes that the prices of the products considered are equal. 
C)  It assumes some inefficiency will result in the use of resources. 
D)  All of the above are correct.

Question 3

When private ownership rights are well-defined and enforced, owners of physical assets and resources

Accepted Answer

A)  have no incentive to consider the desires of others. 
B)  incur the opportunity cost of ignoring the wishes of others. 
C)  are not responsible if the use of their assets impose harm on others. 
D)  have little incentive to take care of their assets. 
A)  have no incentive to consider the desires of others. 
B)  incur the opportunity cost of ignoring the wishes of others. 
C)  are not responsible if the use of their assets impose harm on others. 
D)  have little incentive to take care of their assets.

Question 4

According to the law of comparative advantage,

Accepted Answer

A)  individuals and nations gain when they specialize in producing those goods they consume. 
B)  individuals and nations gain when they specialize in producing goods they can produce at a high opportunity cost and can exchange for other desired goods they can produce cheaply. 
C)  individuals and nations gain when they specialize in producing those items for which they are the low opportunity cost producers and exchange for other desired goods they can't produce as cheaply. 
D)  all of the above are true. 
A)  individuals and nations gain when they specialize in producing those goods they consume. 
B)  individuals and nations gain when they specialize in producing goods they can produce at a high opportunity cost and can exchange for other desired goods they can produce cheaply. 
C)  individuals and nations gain when they specialize in producing those items for which they are the low opportunity cost producers and exchange for other desired goods they can't produce as cheaply. 
D)  all of the above are true.

Question 5

Sean can build sandboxes twice as fast as Matt. Sean can assemble swing sets three times as fast as Matt. The law of comparative advantage suggests that

Accepted Answer

A)  Sean can gain only at Matt's expense. 
B)  Matt can gain only at Sean's expense. 
C)  both can gain if Sean specializes in assembling swing sets and Matt in building sandboxes. 
D)  both can gain if Sean specializes in building sandboxes and Matt in assembling swing sets. 
A)  Sean can gain only at Matt's expense. 
B)  Matt can gain only at Sean's expense. 
C)  both can gain if Sean specializes in assembling swing sets and Matt in building sandboxes. 
D)  both can gain if Sean specializes in building sandboxes and Matt in assembling swing sets.

Question 6

The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is

Accepted Answer

A)  an expansion in investment resulting from a reallocation of resources away from consumption. 
B)  a larger output resulting from a more efficient use of resources. 
C)  greater equality of income resulting from an increase in the number of workers. 
D)  an increase in the profitability of business enterprises resulting from an increase in investment. 
A)  an expansion in investment resulting from a reallocation of resources away from consumption. 
B)  a larger output resulting from a more efficient use of resources. 
C)  greater equality of income resulting from an increase in the number of workers. 
D)  an increase in the profitability of business enterprises resulting from an increase in investment.

Question 7

A nation with cheap, efficient communications is likely to be

Accepted Answer

A)  richer, ceteris paribus , because transaction costs will be lower and trade greater. 
B)  richer only if production of goods is cheaper, too, since trade itself cannot create value. 
C)  poorer since it spends so much on communication instead of true productivity. 
D)  spending too much on communications, which adds nothing to the value of output. 
A)  richer, ceteris paribus , because transaction costs will be lower and trade greater. 
B)  richer only if production of goods is cheaper, too, since trade itself cannot create value. 
C)  poorer since it spends so much on communication instead of true productivity. 
D)  spending too much on communications, which adds nothing to the value of output.

Question 8

Private property rights exist when property rights are

Accepted Answer

A)  exclusively controlled by the owner or owners. 
B)  transferable to others. 
C)  protected by legal enforcement. 
D)  all of the above. 
A)  exclusively controlled by the owner or owners. 
B)  transferable to others. 
C)  protected by legal enforcement. 
D)  all of the above.

Question 9

In Zimbabwe and Botswana, elephants can be owned by local tribes and trade in ivory is legal, while in countries such as Kenya, it is illegal to trade in ivory and elephants cannot be privately owned but are protected by the government. Which of the following is true regarding the change in the elephant populations since 1979 in these countries?

Accepted Answer

A)  In Zimbabwe and Botswana, elephants are near the verge of extinction, while in Kenya, the population of elephants is growing rapidly. 
B)  There has been a similar decline in the population of elephants in all of these countries. 
C)  There has been a similar increase in the population of elephants in all of these countries. 
D)  In Zimbabwe and Botswana, elephant populations have more than doubled, while in Kenya, the population of elephants has fallen to less than one-third of its previous level. 
A)  In Zimbabwe and Botswana, elephants are near the verge of extinction, while in Kenya, the population of elephants is growing rapidly. 
B)  There has been a similar decline in the population of elephants in all of these countries. 
C)  There has been a similar increase in the population of elephants in all of these countries. 
D)  In Zimbabwe and Botswana, elephant populations have more than doubled, while in Kenya, the population of elephants has fallen to less than one-third of its previous level.

Question 10

Explain the idea of capital investment by using the story of Robinson Crusoe. What is sacrificed, and what is gained?

Accepted Answer

For Robinson Crusoe, engaging in capital

Question 11

"If I didn't have a date tonight, I would save $10 and spend the evening playing tennis." The opportunity cost of the date is

Accepted Answer

A)  the other things that could be purchased with the $10. 
B)  the other things that could be purchased with the $10 plus the forgone value of a night of tennis. 
C)  dependent upon how pleasant a time one has on the date. 
D)  the forgone value of a night of tennis. 
A)  the other things that could be purchased with the $10. 
B)  the other things that could be purchased with the $10 plus the forgone value of a night of tennis. 
C)  dependent upon how pleasant a time one has on the date. 
D)  the forgone value of a night of tennis.

Question 12

Use the production possibilities data below for Avokia and Baldonia to answer the following question(s).
Table 2-2
   
Refer to Table 2-2. According to the law of comparative advantage, both Avokia and Baldonia could gain if

Accepted Answer

A)  Avokia produced all of the apples and oranges and Baldonia did not produce anything. 
B)  Avokia specialized in producing apples, Baldonia specialized in producing oranges, and they traded. 
C)  Avokia specialized in producing oranges, Baldonia specialized in producing apples, and they traded. 
D)  Baldonia and Avokia were both were self-sufficient and did not trade. 
A)  Avokia produced all of the apples and oranges and Baldonia did not produce anything. 
B)  Avokia specialized in producing apples, Baldonia specialized in producing oranges, and they traded. 
C)  Avokia specialized in producing oranges, Baldonia specialized in producing apples, and they traded. 
D)  Baldonia and Avokia were both were self-sufficient and did not trade.

Question 13

According to the law of comparative advantage, both individuals and nations will be able to produce a larger joint output if each productive activity is undertaken by

Accepted Answer

A)  the high opportunity cost producer. 
B)  the low opportunity cost producer. 
C)  the producer who is able to hire workers at the lowest wage. 
D)  the party that can complete the productive activity most rapidly. 
A)  the high opportunity cost producer. 
B)  the low opportunity cost producer. 
C)  the producer who is able to hire workers at the lowest wage. 
D)  the party that can complete the productive activity most rapidly.

Question 14

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 15

Figure 2-10  
Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?

Accepted Answer

A)  50 baseballs 
B)  100 baseballs 
C)  100 bananas 
D)  300 bananas 
A)  50 baseballs 
B)  100 baseballs 
C)  100 bananas 
D)  300 bananas

Question 16

If Shawn can produce donuts at a lower opportunity cost than Sue, 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 should not produce donuts. 
D)  Shawn is capable of producing more donuts than Sue in a given amount of time. 
A)  Shawn has a comparative advantage in the production of donuts. 
B)  Sue has a comparative advantage in the production of donuts. 
C)  Shawn should not produce donuts. 
D)  Shawn is capable of producing more donuts than Sue in a given amount of time.

Question 17

High transaction costs will tend to

Accepted Answer

A)  reduce the number of mutually beneficial exchanges that occur. 
B)  allow easier specialization according to the law of comparative advantage. 
C)  increase the value created by exchanges in an economy. 
D)  increase the number of mutually beneficial exchanges that occur. 
A)  reduce the number of mutually beneficial exchanges that occur. 
B)  allow easier specialization according to the law of comparative advantage. 
C)  increase the value created by exchanges in an economy. 
D)  increase the number of mutually beneficial exchanges that occur.

Question 18

Entrepreneurs have a strong incentive to

Accepted Answer

A)  discover new production techniques that reduce costs. 
B)  introduce new products that are highly valued relative to their cost. 
C)  produce goods that are valued more highly than the resources required for their production. 
D)  do all of the above. 
A)  discover new production techniques that reduce costs. 
B)  introduce new products that are highly valued relative to their cost. 
C)  produce goods that are valued more highly than the resources required for their production. 
D)  do all of the above.

Question 19

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

Accepted Answer

A)  Resource owners will fail to conserve vital resources, even if they expect their supply to be highly limited in the future. 
B)  Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned. 
C)  Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources. 
D)  Resource owners will gain by discovering and employing their resources in ways that are highly valued by others. 
A)  Resource owners will fail to conserve vital resources, even if they expect their supply to be highly limited in the future. 
B)  Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned. 
C)  Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources. 
D)  Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.

Question 20

The price of an airline ticket from Denver to Washington, D.C. costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than

Accepted Answer

A)  $6 per hour. 
B)  $8 per hour. 
C)  $10 per hour. 
D)  $15 per hour. 
A)  $6 per hour. 
B)  $8 per hour. 
C)  $10 per hour. 
D)  $15 per hour.

If the resources of an economy are being used inefficiently, it would be

Which of the following is true of the production possibilities curve?

When private ownership rights are well-defined and enforced, owners of physical assets and resources

According to the law of comparative advantage,

Sean can build sandboxes twice as fast as Matt. Sean can assemble swing sets three times as fast as Matt. The law of comparative advantage suggests that

The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is

A nation with cheap, efficient communications is likely to be

Private property rights exist when property rights are

Explain the idea of capital investment by using the story of Robinson Crusoe. What is sacrificed, and what is gained?

"If I didn't have a date tonight, I would save $10 and spend the evening playing tennis." The opportunity cost of the date is

Use the production possibilities data below for Avokia and Baldonia to answer the following question(s). Table 2-2 Refer to Table 2-2. According to the law of comparative advantage, both Avokia and Baldonia could gain if

According to the law of comparative advantage, both individuals and nations will be able to produce a larger joint output if each productive activity is undertaken by

The opportunity cost of an action is

Figure 2-10 Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?

If Shawn can produce donuts at a lower opportunity cost than Sue, then

High transaction costs will tend to

Entrepreneurs have a strong incentive to

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

The price of an airline ticket from Denver to Washington, D.C. costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than

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

If the resources of an economy are being used inefficiently, it would be

Which of the following is true of the production possibilities curve?

When private ownership rights are well-defined and enforced, owners of physical assets and resources

According to the law of comparative advantage,

Sean can build sandboxes twice as fast as Matt. Sean can assemble swing sets three times as fast as Matt. The law of comparative advantage suggests that

The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is

A nation with cheap, efficient communications is likely to be

Private property rights exist when property rights are

Explain the idea of capital investment by using the story of Robinson Crusoe. What is sacrificed, and what is gained?

"If I didn't have a date tonight, I would save $10 and spend the evening playing tennis." The opportunity cost of the date is

Use the production possibilities data below for Avokia and Baldonia to answer the following question(s). Table 2-2 Refer to Table 2-2. According to the law of comparative advantage, both Avokia and Baldonia could gain if

According to the law of comparative advantage, both individuals and nations will be able to produce a larger joint output if each productive activity is undertaken by

The opportunity cost of an action is

Figure 2-10 Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?

If Shawn can produce donuts at a lower opportunity cost than Sue, then

High transaction costs will tend to

Entrepreneurs have a strong incentive to

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

The price of an airline ticket from Denver to Washington, D.C. costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than

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