Question 1

Which of the following is NOT true of opportunity cost?

Accepted Answer

A)  Opportunity costs are subjective because they depend upon how the decision-maker values his or her options. 
B)  Opportunity costs are only the monetary costs of lost options. 
C)  Opportunity costs are the highest-valued alternative sacrificed in order to choose an option. 
D)  Only the decision-maker can determine his or her opportunity costs for any particular action. 
A)  Opportunity costs are subjective because they depend upon how the decision-maker values his or her options. 
B)  Opportunity costs are only the monetary costs of lost options. 
C)  Opportunity costs are the highest-valued alternative sacrificed in order to choose an option. 
D)  Only the decision-maker can determine his or her opportunity costs for any particular action.

Question 2

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 3

In economics, transaction costs refer to the

Accepted Answer

A)  time, effort, and other resources needed to search out and negotiate an exchange. 
B)  dollar cost or price of the item traded. 
C)  cost an economy suffers when it allows specialization according to comparative advantage. 
D)  amount by which the price of an item increases due to the presence of a middleman. 
A)  time, effort, and other resources needed to search out and negotiate an exchange. 
B)  dollar cost or price of the item traded. 
C)  cost an economy suffers when it allows specialization according to comparative advantage. 
D)  amount by which the price of an item increases due to the presence of a middleman.

Question 4

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 would be a mutually agreeable rate of exchange?

Accepted Answer

A)  1 Food = 1 Clothing 
B)  1 Food = 2 Clothing 
C)  1 Food = 3 Clothing 
D)  No exchange rate would be mutually agreeable. 
A)  1 Food = 1 Clothing 
B)  1 Food = 2 Clothing 
C)  1 Food = 3 Clothing 
D)  No exchange rate would be mutually agreeable.

Question 5

If the citizens of a country were to work harder and take less leisure time, it would

Accepted Answer

A)  shift the production possibilities curve outward. 
B)  cause an economy to operate inside its production possibilities curve. 
C)  shift the production possibilities curve inward. 
D)  cause an economy to move from one point on the production possibilities curve to another point on the curve. 
A)  shift the production possibilities curve outward. 
B)  cause an economy to operate inside its production possibilities curve. 
C)  shift the production possibilities curve inward. 
D)  cause an economy to move from one point on the production possibilities curve to another point on the curve.

Question 6

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 7

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 8

A form of economic organization that relies primarily on private ownership of productive assets, freedom of exchange, and market prices to allocate goods and resources is often called

Accepted Answer

A)  national socialism. 
B)  the welfare state. 
C)  a corporate economy. 
D)  capitalism. 
A)  national socialism. 
B)  the welfare state. 
C)  a corporate economy. 
D)  capitalism.

Question 9

Figure 2-9   Refer to Figure 2-9. If the economy moves from point A to point D, the opportunity cost is

Accepted Answer

A)  10 toasters. 
B)  20 toasters. 
C)  30 toasters. 
D)  30 toothbrushes. 
A)  10 toasters. 
B)  20 toasters. 
C)  30 toasters. 
D)  30 toothbrushes.

Question 10

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as

Accepted Answer

A)  an inward shift of 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)  an inward shift of 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 11

Which of the following most accurately states the economic significance of exchange?

Accepted Answer

A)  Physical goods have value because they exist; exchange can neither increase nor decrease their value. 
B)  Exchange creates value by permitting trading partners to expand total output as the result of specialization in areas where they have a comparative advantage. 
C)  Exchange creates value by moving goods from people who value the goods less to people who value the goods more. 
D)  Both b and c are true. 
A)  Physical goods have value because they exist; exchange can neither increase nor decrease their value. 
B)  Exchange creates value by permitting trading partners to expand total output as the result of specialization in areas where they have a comparative advantage. 
C)  Exchange creates value by moving goods from people who value the goods less to people who value the goods more. 
D)  Both b and c are true.

Question 12

Production possibilities curve are usually bowed outward. This is because

Accepted Answer

A)  the more resources a society uses to produce one good, the fewer resources it has available to produce another good. 
B)  it reflects the fact that the opportunity cost of producing a good decreases as more and more of that good is produced. 
C)  of the effects of technological change. 
D)  resources are specialized, that is, some are better at producing particular goods rather than other goods. 
A)  the more resources a society uses to produce one good, the fewer resources it has available to produce another good. 
B)  it reflects the fact that the opportunity cost of producing a good decreases as more and more of that good is produced. 
C)  of the effects of technological change. 
D)  resources are specialized, that is, some are better at producing particular goods rather than other goods.

Question 13

In economics, the term that refers to the time, effort, and other resources needed to search out, negotiate, and consummate an exchange is

Accepted Answer

A)  transaction costs. 
B)  specialization costs. 
C)  pecuniary costs. 
D)  comparative costs. 
A)  transaction costs. 
B)  specialization costs. 
C)  pecuniary costs. 
D)  comparative costs.

Question 14

A production possibilities curve indicates that when resources are being used efficiently,

Accepted Answer

A)  you can only produce more of one good only if you lower its price. 
B)  you can only produce more of one good only if you produce more of another good. 
C)  you can only produce more of one good only if you produce less of another good. 
D)  it is impossible to expand the total output of goods over time. 
A)  you can only produce more of one good only if you lower its price. 
B)  you can only produce more of one good only if you produce more of another good. 
C)  you can only produce more of one good only if you produce less of another good. 
D)  it is impossible to expand the total output of goods over time.

Question 15

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 16

A middleman is a person who

Accepted Answer

A)  specializes in arranging trades and selling, guaranteeing, and servicing items traded. 
B)  acts as a middle person between the top management of a business firm and the hourly employees who actually produce the goods and services. 
C)  adds to the seller's expense and the buyer's buying price without providing a service to either. 
D)  levies a tax on private sector activity and uses the funds to support government activities. 
A)  specializes in arranging trades and selling, guaranteeing, and servicing items traded. 
B)  acts as a middle person between the top management of a business firm and the hourly employees who actually produce the goods and services. 
C)  adds to the seller's expense and the buyer's buying price without providing a service to either. 
D)  levies a tax on private sector activity and uses the funds to support government activities.

Question 17

Suppose the price of an airline ticket from Dallas to Boston 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.

Question 18

Which of the following statements about exchange is true?

Accepted Answer

A)  If everyone starts off with the same quantities of each good, it would be impossible to realize gains from trade. 
B)  Exchange tends to move each good toward those individuals who value the good more highly. 
C)  Exchange always results in one party being made better off and the other being made worse off. 
D)  For trade to occur, everyone must start off with the same value of the good that is traded. 
A)  If everyone starts off with the same quantities of each good, it would be impossible to realize gains from trade. 
B)  Exchange tends to move each good toward those individuals who value the good more highly. 
C)  Exchange always results in one party being made better off and the other being made worse off. 
D)  For trade to occur, everyone must start off with the same value of the good that is traded.

Question 19

Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?

Accepted Answer

A)  the dollars spent on his previously acquired education in pharmacy 
B)  the revenue derived from operating the cab 
C)  zero if the pharmacist received his education on a scholarship that paid his full tuition 
D)  the value of the pharmacist's time in its highest valued use other than driving a cab 
A)  the dollars spent on his previously acquired education in pharmacy 
B)  the revenue derived from operating the cab 
C)  zero if the pharmacist received his education on a scholarship that paid his full tuition 
D)  the value of the pharmacist's time in its highest valued use other than driving a cab

Question 20

Which of the following is true with regard to value and exchange?

Accepted Answer

A)  Exchange generally moves a good from a person who values it more to a person who values it less. 
B)  Transaction costs reduce our ability to gain from potentially advantageous trades. 
C)  Middlemen increase transaction costs and, thereby, reduce the potential gains derived from trade. 
D)  Physical goods have an objective value that is unrelated to time and the person of ownership. 
A)  Exchange generally moves a good from a person who values it more to a person who values it less. 
B)  Transaction costs reduce our ability to gain from potentially advantageous trades. 
C)  Middlemen increase transaction costs and, thereby, reduce the potential gains derived from trade. 
D)  Physical goods have an objective value that is unrelated to time and the person of ownership.

Which of the following is NOT true of opportunity cost?

High transaction costs will tend to

In economics, transaction costs refer to the

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 would be a mutually agreeable rate of exchange?

If the citizens of a country were to work harder and take less leisure time, it would

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?

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

A form of economic organization that relies primarily on private ownership of productive assets, freedom of exchange, and market prices to allocate goods and resources is often called

Figure 2-9 Refer to Figure 2-9. If the economy moves from point A to point D, the opportunity cost is

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as

Which of the following most accurately states the economic significance of exchange?

Production possibilities curve are usually bowed outward. This is because

In economics, the term that refers to the time, effort, and other resources needed to search out, negotiate, and consummate an exchange is

A production possibilities curve indicates that when resources are being used efficiently,

The law of comparative advantage applies to exchange between

A middleman is a person who

Suppose the price of an airline ticket from Dallas to Boston 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

Which of the following statements about exchange is true?

Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?

Which of the following is true with regard to value and exchange?

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

Which of the following is NOT true of opportunity cost?

High transaction costs will tend to

In economics, transaction costs refer to the

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 would be a mutually agreeable rate of exchange?

If the citizens of a country were to work harder and take less leisure time, it would

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?

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

A form of economic organization that relies primarily on private ownership of productive assets, freedom of exchange, and market prices to allocate goods and resources is often called

Figure 2-9 Refer to Figure 2-9. If the economy moves from point A to point D, the opportunity cost is

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as

Which of the following most accurately states the economic significance of exchange?

Production possibilities curve are usually bowed outward. This is because

In economics, the term that refers to the time, effort, and other resources needed to search out, negotiate, and consummate an exchange is

A production possibilities curve indicates that when resources are being used efficiently,

The law of comparative advantage applies to exchange between

A middleman is a person who

Suppose the price of an airline ticket from Dallas to Boston 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

Which of the following statements about exchange is true?

Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?

Which of the following is true with regard to value and exchange?

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