Question 1

In Africa, which of the following policies has been most successful at increasing elephant populations?

Accepted Answer

A)  Banning the ivory trade by making the buying and selling of ivory illegal. 
B)  Making elephants the common property of the people of the country through government ownership and control and making the killing of elephants illegal 
C)  Allowing private ownership of elephants and making the ivory trade legal 
D)  When used together, the policies in a and b have been more successful than the policy in c. 
A)  Banning the ivory trade by making the buying and selling of ivory illegal. 
B)  Making elephants the common property of the people of the country through government ownership and control and making the killing of elephants illegal 
C)  Allowing private ownership of elephants and making the ivory trade legal 
D)  When used together, the policies in a and b have been more successful than the policy in c.

Question 2

Figure 2-10   Refer to Figure 2-10. If the economy moves from point C to point B, then which of the following statements is correct?

Accepted Answer

A)  The economy benefited from a technological advance in the production of baseballs. 
B)  The opportunity cost of each additional baseball is 2 bananas. 
C)  The opportunity cost of each additional banana is 2 baseballs. 
D)  The move involves no opportunity cost; it simply reflects the desires of the economy's citizens. 
A)  The economy benefited from a technological advance in the production of baseballs. 
B)  The opportunity cost of each additional baseball is 2 bananas. 
C)  The opportunity cost of each additional banana is 2 baseballs. 
D)  The move involves no opportunity cost; it simply reflects the desires of the economy's citizens.

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

A department store buys a wool coat for $120 and sets its retail price at $300. The coat costs $85 to produce. When the coat doesn't sell, the store marks the price down to $200, then $100, and finally $70. At $70, Amy buys the coat. What was the coat's true value? Why?

Accepted Answer

Since the coat sold for $70, we would ha

Question 5

Other things constant, which of the following would you expect to increase the output growth rate of a country?

Accepted Answer

A)  an increase in the rate of taxation on personal income 
B)  an increase in the rate of investment as a share of total output 
C)  passage of regulations restricting international trade 
D)  passage of regulations restricting domestic trade 
A)  an increase in the rate of taxation on personal income 
B)  an increase in the rate of investment as a share of total output 
C)  passage of regulations restricting international trade 
D)  passage of regulations restricting domestic trade

Question 6

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are being used efficiently. If an economy operates at a point inside its production possibilities curve,

Accepted Answer

A)  it lacks the resources necessary to produce at full employment. 
B)  it is utilizing some resources inefficiently. 
C)  it does not confront the problem of scarce goods relative to unlimited wants. 
D)  it does not exist in the real world since it is impossible for an economy to operate inside its production possibilities curve. 
A)  it lacks the resources necessary to produce at full employment. 
B)  it is utilizing some resources inefficiently. 
C)  it does not confront the problem of scarce goods relative to unlimited wants. 
D)  it does not exist in the real world since it is impossible for an economy to operate inside its production possibilities curve.

Question 7

Suppose an airline ticket from Charlotte to Dallas 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 8

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

Accepted Answer

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

Question 9

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 10

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 11

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 12

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.

Question 13

The number of cattle slaughtered every year for meat far exceeds the number of elephants slaughtered every year for their ivory. Despite this, cows can be found everywhere while elephants are on the verge of extinction in some countries. Which of the following best explains this difference?

Accepted Answer

A)  Cows can be privately owned while in many countries elephants can not. 
B)  The demand for ivory far exceeds the demand for beef. 
C)  Animals slaughtered for their meat are generally better conserved by humans than animals slaughtered for nonfood uses. 
D)  People tend to protest more every year to prevent cow extinction than they do for elephant extinction. 
A)  Cows can be privately owned while in many countries elephants can not. 
B)  The demand for ivory far exceeds the demand for beef. 
C)  Animals slaughtered for their meat are generally better conserved by humans than animals slaughtered for nonfood uses. 
D)  People tend to protest more every year to prevent cow extinction than they do for elephant extinction.

Question 14

The production possibilities curve illustrates the basic principle that

Accepted Answer

A)  an economy's capacity to produce is unrelated to its population. 
B)  if all the resources of an economy are being used efficiently, more of one good can be produced only if more of another good is produced. 
C)  an economy will automatically move toward a point at which all of its resources are being used inefficiently. 
D)  if all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. 
A)  an economy's capacity to produce is unrelated to its population. 
B)  if all the resources of an economy are being used efficiently, more of one good can be produced only if more of another good is produced. 
C)  an economy will automatically move toward a point at which all of its resources are being used inefficiently. 
D)  if all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.

Question 15

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 16

Trade creates value by

Accepted Answer

A)  moving goods from people who value the goods less to people who value the goods more. 
B)  permitting trading partners to expand output through specialization in areas where they each have a comparative advantage. 
C)  permitting trading partners to expand output through the adoption of mass production methods. 
D)  all of the above. 
A)  moving goods from people who value the goods less to people who value the goods more. 
B)  permitting trading partners to expand output through specialization in areas where they each have a comparative advantage. 
C)  permitting trading partners to expand output through the adoption of mass production methods. 
D)  all of the above.

Question 17

Which of the following attributes of trade explain why it is important for economic prosperity?

Accepted Answer

A)  Trade moves goods from people who value them less to people who value them more. 
B)  Trade makes it possible to produce a larger output as a result of lower per unit costs that often accompany large-scale production. 
C)  Trade makes it possible to produce a larger output as a result of gains from division of labor and specialization. 
D)  All of the above. 
A)  Trade moves goods from people who value them less to people who value them more. 
B)  Trade makes it possible to produce a larger output as a result of lower per unit costs that often accompany large-scale production. 
C)  Trade makes it possible to produce a larger output as a result of gains from division of labor and specialization. 
D)  All of the above.

Question 18

Use the production possibilities data below to answer the following question(s). Table 2-3
  Refer to Table 2-3. The opportunity cost of 1 pound of meat for the rancher is

Accepted Answer

A)  4 hours of labor. 
B)  5 hours of labor. 
C)  4/5 pounds of potatoes. 
D)  5/4 pounds of potatoes. 
A)  4 hours of labor. 
B)  5 hours of labor. 
C)  4/5 pounds of potatoes. 
D)  5/4 pounds of potatoes.

Question 19

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

Accepted Answer

A)  an increase in the labor force 
B)  an increase in unemployment 
C)  development of an improved technological method of production 
D)  a decrease in the stock of physical capital 
A)  an increase in the labor force 
B)  an increase in unemployment 
C)  development of an improved technological method of production 
D)  a decrease in the stock of physical capital

Question 20

Maurice can drive or fly from Jacksonville, Florida to Atlanda, Georgia, for a one-day business trip. If he drives, he will be able to work three hours once he arrives in Atlanta, whereas traveling by plane will enable him to work eight hours. His expected income from each hour of work in Atlanta is $30. If Maurice is a rational decision maker, he will fly if and only if the price differential (air cost minus driving cost) is less than

Accepted Answer

A)  $30. 
B)  $90. 
C)  $150. 
D)  $240. 
A)  $30. 
B)  $90. 
C)  $150. 
D)  $240.

In Africa, which of the following policies has been most successful at increasing elephant populations?

Figure 2-10 Refer to Figure 2-10. If the economy moves from point C to point B, then which of the following statements is correct?

Which of the following appropriately applies the law of comparative advantage?

A department store buys a wool coat for $120 and sets its retail price at $300. The coat costs $85 to produce. When the coat doesn't sell, the store marks the price down to $200, then $100, and finally $70. At $70, Amy buys the coat. What was the coat's true value? Why?

Other things constant, which of the following would you expect to increase the output growth rate of a country?

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are being used efficiently. If an economy operates at a point inside its production possibilities curve,

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

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

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

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

The number of cattle slaughtered every year for meat far exceeds the number of elephants slaughtered every year for their ivory. Despite this, cows can be found everywhere while elephants are on the verge of extinction in some countries. Which of the following best explains this difference?

The production possibilities curve illustrates the basic principle that

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

Trade creates value by

Which of the following attributes of trade explain why it is important for economic prosperity?

Use the production possibilities data below to answer the following question(s). Table 2-3 Refer to Table 2-3. The opportunity cost of 1 pound of meat for the rancher is

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

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

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters

Exam 2: Some Tools of the Economist

In Africa, which of the following policies has been most successful at increasing elephant populations?

Figure 2-10 Refer to Figure 2-10. If the economy moves from point C to point B, then which of the following statements is correct?

Which of the following appropriately applies the law of comparative advantage?

A department store buys a wool coat for $120 and sets its retail price at $300. The coat costs $85 to produce. When the coat doesn't sell, the store marks the price down to $200, then $100, and finally $70. At $70, Amy buys the coat. What was the coat's true value? Why?

Other things constant, which of the following would you expect to increase the output growth rate of a country?

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are being used efficiently. If an economy operates at a point inside its production possibilities curve,

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

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

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

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

The number of cattle slaughtered every year for meat far exceeds the number of elephants slaughtered every year for their ivory. Despite this, cows can be found everywhere while elephants are on the verge of extinction in some countries. Which of the following best explains this difference?

The production possibilities curve illustrates the basic principle that

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

Trade creates value by

Which of the following attributes of trade explain why it is important for economic prosperity?

Use the production possibilities data below to answer the following question(s). Table 2-3 Refer to Table 2-3. The opportunity cost of 1 pound of meat for the rancher is

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

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

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad--As Model

Fiscal Policy: The Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy: Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Special Topics

Filters