Question 1

In voluntary exchange, if the seller of a product gains,

Accepted Answer

A)  the buyer will generally lose an amount greater than the gain to the seller. 
B)  the buyer must lose an amount equal to what the seller gains. 
C)  someone else must lose an equal amount. 
D)  the buyer must also gain; mutual gain provides the foundation for exchange. 
A)  the buyer will generally lose an amount greater than the gain to the seller. 
B)  the buyer must lose an amount equal to what the seller gains. 
C)  someone else must lose an equal amount. 
D)  the buyer must also gain; mutual gain provides the foundation for exchange.

Question 2

The opportunity cost of building a park in your hometown would be the

Accepted Answer

A)  money cost of constructing the park. 
B)  highest valued bundle of other goods and services that must be forgone because of the park construction. 
C)  necessary increase in tax revenues to finance the construction. 
D)  amount of time spent in leisure activities in the park once it is constructed. 
A)  money cost of constructing the park. 
B)  highest valued bundle of other goods and services that must be forgone because of the park construction. 
C)  necessary increase in tax revenues to finance the construction. 
D)  amount of time spent in leisure activities in the park once it is constructed.

Question 3

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 4

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 5

Use the production possibilities data below to answer the following question(s). Table 2-3
  Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in

Accepted Answer

A)  meat and the rancher were to specialize in potatoes. 
B)  potatoes and the rancher were to specialize in meat. 
C)  neither good and the rancher were to specialize in both goods. 
D)  none of the above; they cannot both benefit by specialization and trade. 
A)  meat and the rancher were to specialize in potatoes. 
B)  potatoes and the rancher were to specialize in meat. 
C)  neither good and the rancher were to specialize in both goods. 
D)  none of the above; they cannot both benefit by specialization and trade.

Question 6

Which of the following is true regarding value, transaction costs, and exchange?

Accepted Answer

A)  Middlemen can be viewed as agents who create value by reducing transaction costs and, thereby, facilitating gains from exchange. 
B)  Middlemen fail to create value since they do not expand the supply of physical goods. 
C)  A good or service has a given value regardless of who uses it or how it is used. 
D)  Voluntary exchange reduces value by channeling goods into the hands of people who value them least. 
A)  Middlemen can be viewed as agents who create value by reducing transaction costs and, thereby, facilitating gains from exchange. 
B)  Middlemen fail to create value since they do not expand the supply of physical goods. 
C)  A good or service has a given value regardless of who uses it or how it is used. 
D)  Voluntary exchange reduces value by channeling goods into the hands of people who value them least.

Question 7

Figure 2-3   Points A and B in Figure 2-3 indicate consumption and investment for two 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)  They can be expected to grow at the same rate. 
D)  This is uncertain since growth is not influenced by the factors indicated in this example. 
A)  economy A 
B)  economy B 
C)  They can be expected to grow at the same rate. 
D)  This is uncertain since growth is not influenced by the factors indicated in this example.

Question 8

The notion that specialization in goods that one can produce at a low opportunity cost will make it possible for trading partners to produce a larger joint output is called

Accepted Answer

A)  the law of absolute advantage. 
B)  the law of comparative advantage. 
C)  the law of production possibilities. 
D)  the exchange maximum principle. 
A)  the law of absolute advantage. 
B)  the law of comparative advantage. 
C)  the law of production possibilities. 
D)  the exchange maximum principle.

Question 9

Isabella decides to buy a dress that Olivia has for sale; they agree on a price of $20. Which of the following best describes who gains and who loses from the transaction?

Accepted Answer

A)  If the dress originally costs more than $20, Isabella gains and Olivia loses. 
B)  If the dress originally costs less than $20, Olivia gains and Isabella loses. 
C)  Both parties expect to gain from this transaction. 
D)  If Olivia gains from the transaction, Isabella must lose an equal amount. 
A)  If the dress originally costs more than $20, Isabella gains and Olivia loses. 
B)  If the dress originally costs less than $20, Olivia gains and Isabella loses. 
C)  Both parties expect to gain from this transaction. 
D)  If Olivia gains from the transaction, Isabella must lose an equal amount.

Question 10

A point inside the production possibilities curve represents a combination of goods that is

Accepted Answer

A)  inefficient. 
B)  efficient. 
C)  unattainable. 
D)  attainable. 
A)  inefficient. 
B)  efficient. 
C)  unattainable. 
D)  attainable.

Question 11

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 potatoes for the farmer is

Accepted Answer

A)  8 hours of labor. 
B)  2 hours of labor. 
C)  4 pounds of meat. 
D)  1/4 pound of meat. 
A)  8 hours of labor. 
B)  2 hours of labor. 
C)  4 pounds of meat. 
D)  1/4 pound of meat.

Question 12

Land used to grow corn could also be used to grow soybeans. Which of the following is true when the farmer plants soybeans and the market price of corn rises?

Accepted Answer

A)  The opportunity cost of producing soybeans decreases. 
B)  The opportunity cost of producing soybeans increases. 
C)  There will be no change in the opportunity cost of producing soybeans. 
D)  The opportunity cost of producing corn increases. 
A)  The opportunity cost of producing soybeans decreases. 
B)  The opportunity cost of producing soybeans increases. 
C)  There will be no change in the opportunity cost of producing soybeans. 
D)  The opportunity cost of producing corn increases.

Question 13

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 14

After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. Use the production possibilities curve to demonstrate how this might affect the production of other goods in the United States.

Accepted Answer

Increased resources devoted to

Question 15

Mateo values his camper at $4,000, and Nicole values it at $9,000. If Nicole buys it from Mateo for $7,000, which of the following is true?

Accepted Answer

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

Question 16

Suppose that in Australia, the government allows private ownership of chickens but not of cows. If the people of Australia permanently increase their desire to purchase more chicken and beef, in the long run, we would expect

Accepted Answer

A)  the population of chickens to rise and the population of cows to fall. 
B)  the population of cows to rise and the population of chickens to fall. 
C)  the populations of both chickens and cows to increase. 
D)  both chickens and cows to become extinct in Australia unless the government places the animals on the endangered species list. 
A)  the population of chickens to rise and the population of cows to fall. 
B)  the population of cows to rise and the population of chickens to fall. 
C)  the populations of both chickens and cows to increase. 
D)  both chickens and cows to become extinct in Australia unless the government places the animals on the endangered species list.

Question 17

The law of comparative advantage explains why

Accepted Answer

A)  specialization and exchange will make it possible for trading partners to expand their combined output. 
B)  there will be an inverse relationship between the price of a product and the quantity of it that will be demanded. 
C)  larger firms will have lower per unit costs than smaller firms. 
D)  an increase in the price of a good will lead to an expansion in the quantity supplied by business firms. 
A)  specialization and exchange will make it possible for trading partners to expand their combined output. 
B)  there will be an inverse relationship between the price of a product and the quantity of it that will be demanded. 
C)  larger firms will have lower per unit costs than smaller firms. 
D)  an increase in the price of a good will lead to an expansion in the quantity supplied by business firms.

Question 18

Beginning in the early 1990s, private landowners in Zimbabwe have started fencing in large areas of land that contain black rhinos, which were on the verge of extinction. These private owners charge fees for a stay at the lodges on the property (eco-tourism) and also sell hunting safaris and photo safaris. As a result,

Accepted Answer

A)  the population of black rhinos has fallen substantially. 
B)  the population of black rhinos has increased. 
C)  many black rhinos are being poached. 
D)  the incomes of residents in Zimbabwe has fallen substantially. 
A)  the population of black rhinos has fallen substantially. 
B)  the population of black rhinos has increased. 
C)  many black rhinos are being poached. 
D)  the incomes of residents in Zimbabwe has fallen substantially.

Question 19

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 20

If the Internet makes it easier for sellers to find buyers and makes it easier for buyers to learn about the products that are available for sale, we would expect that

Accepted Answer

A)  the volume of trade will decline. 
B)  transaction costs will rise. 
C)  the gains from trade will increase. 
D)  buyers and sellers will be worse off. 
A)  the volume of trade will decline. 
B)  transaction costs will rise. 
C)  the gains from trade will increase. 
D)  buyers and sellers will be worse off.

In voluntary exchange, if the seller of a product gains,

The opportunity cost of building a park in your hometown would be the

The opportunity cost of an activity

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

Use the production possibilities data below to answer the following question(s). Table 2-3 Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in

Which of the following is true regarding value, transaction costs, and exchange?

Figure 2-3 Points A and B in Figure 2-3 indicate consumption and investment for two economies. Other things constant, which of the economies is likely to grow more rapidly in the future?

The notion that specialization in goods that one can produce at a low opportunity cost will make it possible for trading partners to produce a larger joint output is called

Isabella decides to buy a dress that Olivia has for sale; they agree on a price of $20. Which of the following best describes who gains and who loses from the transaction?

A point inside the production possibilities curve represents a combination of goods that is

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 potatoes for the farmer is

Land used to grow corn could also be used to grow soybeans. Which of the following is true when the farmer plants soybeans and the market price of corn rises?

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?

Mateo values his camper at $4,000, and Nicole values it at $9,000. If Nicole buys it from Mateo for $7,000, which of the following is true?

Suppose that in Australia, the government allows private ownership of chickens but not of cows. If the people of Australia permanently increase their desire to purchase more chicken and beef, in the long run, we would expect

The law of comparative advantage explains why

The law of comparative advantage suggests that

If the Internet makes it easier for sellers to find buyers and makes it easier for buyers to learn about the products that are available for sale, we would expect that

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 voluntary exchange, if the seller of a product gains,

The opportunity cost of building a park in your hometown would be the

The opportunity cost of an activity

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

Use the production possibilities data below to answer the following question(s). Table 2-3 Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in

Which of the following is true regarding value, transaction costs, and exchange?

Figure 2-3 Points A and B in Figure 2-3 indicate consumption and investment for two economies. Other things constant, which of the economies is likely to grow more rapidly in the future?

The notion that specialization in goods that one can produce at a low opportunity cost will make it possible for trading partners to produce a larger joint output is called

Isabella decides to buy a dress that Olivia has for sale; they agree on a price of $20. Which of the following best describes who gains and who loses from the transaction?

A point inside the production possibilities curve represents a combination of goods that is

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 potatoes for the farmer is

Land used to grow corn could also be used to grow soybeans. Which of the following is true when the farmer plants soybeans and the market price of corn rises?

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?

Mateo values his camper at $4,000, and Nicole values it at $9,000. If Nicole buys it from Mateo for $7,000, which of the following is true?

Suppose that in Australia, the government allows private ownership of chickens but not of cows. If the people of Australia permanently increase their desire to purchase more chicken and beef, in the long run, we would expect

The law of comparative advantage explains why

The law of comparative advantage suggests that

If the Internet makes it easier for sellers to find buyers and makes it easier for buyers to learn about the products that are available for sale, we would expect that

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