Question 1

The law of increasing opportunity cost is based on the idea that

Accepted Answer

A)  wages tend to increase with the level of employment 
B)  interest rates tend to rise with increasing inflation 
C)  labor costs for a typical firm are a large and growing proportion of total cost 
D)  most resources are better suited to producing some goods than others 
E)  the less of something we produce,the greater is the opportunity cost of producing still more 
A)  wages tend to increase with the level of employment 
B)  interest rates tend to rise with increasing inflation 
C)  labor costs for a typical firm are a large and growing proportion of total cost 
D)  most resources are better suited to producing some goods than others 
E)  the less of something we produce,the greater is the opportunity cost of producing still more

Question 2

When all resources used in production are not perfectly substitutable,

Accepted Answer

A)  specialization does not lead to greater production 
B)  the economy or firm is producing at a point outside of its production possibilities frontier 
C)  there will be constant opportunity costs 
D)  the production possibilities frontier will be concave (bowed outward) 
E)  the economy or firm will only produce one good in equilibrium 
A)  specialization does not lead to greater production 
B)  the economy or firm is producing at a point outside of its production possibilities frontier 
C)  there will be constant opportunity costs 
D)  the production possibilities frontier will be concave (bowed outward) 
E)  the economy or firm will only produce one good in equilibrium

Question 3

If Mary has an absolute advantage over Bill in performing each of two tasks,then

Accepted Answer

A)  Mary must have a comparative advantage in both tasks 
B)  Mary cannot benefit by specializing in one and trading with Bill for the other 
C)  Mary should specialize in both tasks 
D)  Mary cannot have a comparative advantage in either task 
E)  Mary should specialize in the one in which she has a comparative advantage 
A)  Mary must have a comparative advantage in both tasks 
B)  Mary cannot benefit by specializing in one and trading with Bill for the other 
C)  Mary should specialize in both tasks 
D)  Mary cannot have a comparative advantage in either task 
E)  Mary should specialize in the one in which she has a comparative advantage

Question 4

Traditional economies tend to be

Accepted Answer

A)  unstable and unpredictable 
B)  stable,predictable,and growing 
C)  unstable,unpredictable,and stagnant 
D)  unstable and unpredictable,but growing 
E)  stable and predictable,but stagnant 
A)  unstable and unpredictable 
B)  stable,predictable,and growing 
C)  unstable,unpredictable,and stagnant 
D)  unstable and unpredictable,but growing 
E)  stable and predictable,but stagnant

Question 5

-Figure 2-5 shows five different combinations of rockets and cruise ships that a country could manufacture.Suppose it decided to produce 18 rockets and 12 cruise ships.Which of the following would be true?

Accepted Answer

A)  This combination could not be produced. 
B)  The country will be at point B. 
C)  The country will be at point C. 
D)  The country will not be fully utilizing its resources. 
E)  The country will be at the midpoint of points B and D. 
A)  This combination could not be produced. 
B)  The country will be at point B. 
C)  The country will be at point C. 
D)  The country will not be fully utilizing its resources. 
E)  The country will be at the midpoint of points B and D.

Question 6

In a market system,resources are allocated by

Accepted Answer

A)  the orders of authority 
B)  traditional practices 
C)  prices 
D)  absolute advantage 
E)  production possibilities frontiers 
A)  the orders of authority 
B)  traditional practices 
C)  prices 
D)  absolute advantage 
E)  production possibilities frontiers

Question 7

Under market capitalism,resources are allocated primarily through

Accepted Answer

A)  government decree 
B)  voter consensus 
C)  tradition 
D)  lottery 
E)  prices 
A)  government decree 
B)  voter consensus 
C)  tradition 
D)  lottery 
E)  prices

Question 8

A country currently is using all its land to produce wheat and grapes.However,the land most suited to growing grapes is being used to produce wheat,and the land most suited to growing wheat is being used to produce grapes.Which of the following statements is true?

Accepted Answer

A)  The country is operating outside of its production possibilities frontier. 
B)  The country is operating along its production possibilities frontier. 
C)  Wheat production must be sacrificed if the country increases grape production. 
D)  Grape production must be sacrificed if the country increases wheat production. 
E)  The country is operating inside its production possibilities frontier. 
A)  The country is operating outside of its production possibilities frontier. 
B)  The country is operating along its production possibilities frontier. 
C)  Wheat production must be sacrificed if the country increases grape production. 
D)  Grape production must be sacrificed if the country increases wheat production. 
E)  The country is operating inside its production possibilities frontier.

Question 9

A person has an absolute advantage in producing a good if he can

Accepted Answer

A)  produce it using fewer resources than another person 
B)  produce it while sacrificing less than another person in terms of foregone output 
C)  corner the market 
D)  use other peoples' money to produce it 
E)  work out some long term payment plan for financing the good 
A)  produce it using fewer resources than another person 
B)  produce it while sacrificing less than another person in terms of foregone output 
C)  corner the market 
D)  use other peoples' money to produce it 
E)  work out some long term payment plan for financing the good

Question 10

Molly needs 30 minutes to wash the car and 45 minutes to mow the lawn.Renee needs 1 hour to wash the car and 2 hours to mow the lawn.Which of the following statements is correct?

Accepted Answer

A)  Molly has an absolute advantage in washing the car;Renee has an absolute advantage in mowing the lawn. 
B)  Molly has an absolute advantage in mowing the lawn;Renee has an absolute advantage in washing the car. 
C)  Molly has an absolute advantage in both tasks. 
D)  Renee has an absolute advantage in both tasks. 
E)  Neither woman has an absolute advantage in washing the car. 
A)  Molly has an absolute advantage in washing the car;Renee has an absolute advantage in mowing the lawn. 
B)  Molly has an absolute advantage in mowing the lawn;Renee has an absolute advantage in washing the car. 
C)  Molly has an absolute advantage in both tasks. 
D)  Renee has an absolute advantage in both tasks. 
E)  Neither woman has an absolute advantage in washing the car.

Question 11

The production possibilities frontier can be used to illustrate all of the following concepts,except one.Which is the exception?

Accepted Answer

A)  productive inefficiency 
B)  opportunity cost 
C)  the law of demand 
D)  scarcity 
E)  the law of increasing opportunity costs 
A)  productive inefficiency 
B)  opportunity cost 
C)  the law of demand 
D)  scarcity 
E)  the law of increasing opportunity costs

Question 12

Production possibilities frontiers are typically concave (bowed out)from the origin because

Accepted Answer

A)  of the law of supply 
B)  there is usually a one-for-one trade-off in resources used in production 
C)  economies of scale enable firms to reduce the average costs of production as output rises 
D)  the opportunity cost of a good rises as the quantity of the good produced increases 
E)  resources are often left idle in the firm 
A)  of the law of supply 
B)  there is usually a one-for-one trade-off in resources used in production 
C)  economies of scale enable firms to reduce the average costs of production as output rises 
D)  the opportunity cost of a good rises as the quantity of the good produced increases 
E)  resources are often left idle in the firm

Question 13

Suppose that the United States has an absolute advantage over Mexico in producing both agricultural and manufactured goods.In the U.S. ,the opportunity cost of 1 unit of agricultural output is 2 units of manufactured goods.In Mexico,the opportunity cost of 1 unit of agricultural output is 1.5 units of manufactured goods.Total production in the U.S.and Mexico will be maximized if

Accepted Answer

A)  the U.S.specializes in both types of output 
B)  Mexico specializes in both types of output 
C)  the U.S.specializes in agricultural goods and Mexico specializes in manufactured goods 
D)  the U.S.specializes in manufactured goods and Mexico specializes in agricultural goods 
E)  each country achieves self-sufficiency 
A)  the U.S.specializes in both types of output 
B)  Mexico specializes in both types of output 
C)  the U.S.specializes in agricultural goods and Mexico specializes in manufactured goods 
D)  the U.S.specializes in manufactured goods and Mexico specializes in agricultural goods 
E)  each country achieves self-sufficiency

Question 14

Molly needs 30 minutes to wash the car and 45 minutes to mow the lawn.Renee needs 1 hour to wash the car and 2 hours to mow the lawn.Which of the following statements is correct?

Accepted Answer

A)  Molly should specialize in both tasks. 
B)  Renee should specialize in both tasks. 
C)  Each woman should specialize in the task in which she has the absolute advantage. 
D)  Absolute advantage is not an appropriate guide for determining specialization. 
E)  Neither woman should specialize. 
A)  Molly should specialize in both tasks. 
B)  Renee should specialize in both tasks. 
C)  Each woman should specialize in the task in which she has the absolute advantage. 
D)  Absolute advantage is not an appropriate guide for determining specialization. 
E)  Neither woman should specialize.

Question 15

A country currently is using all its land to produce wheat and grapes.However,the land most suited to growing grapes is being used to produce wheat,and the land most suited to growing wheat is being used to produce grapes.Which of the following statements is true?

Accepted Answer

A)  Production of both wheat and grapes can be increased by shifting tracts of land to their best uses. 
B)  Production of both wheat and grapes can be increased only if more land becomes available. 
C)  production of wheat can increase only if production of grapes decreases. 
D)  Production of grapes can increase only if more labor and machinery become available. 
E)  Production of neither wheat nor grapes is possible without more land becoming available. 
A)  Production of both wheat and grapes can be increased by shifting tracts of land to their best uses. 
B)  Production of both wheat and grapes can be increased only if more land becomes available. 
C)  production of wheat can increase only if production of grapes decreases. 
D)  Production of grapes can increase only if more labor and machinery become available. 
E)  Production of neither wheat nor grapes is possible without more land becoming available.

Question 16

According to the law of increasing opportunity cost,

Accepted Answer

A)  production points outside the production possibility frontier are unattainable 
B)  the production possibility frontier becomes flatter as production increases along the horizontal axis 
C)  the opportunity cost of producing a good rises as production of that good falls 
D)  production points inside the production possibility frontier are unattainable 
E)  the opportunity cost of producing a good rises as production of that good rises 
A)  production points outside the production possibility frontier are unattainable 
B)  the production possibility frontier becomes flatter as production increases along the horizontal axis 
C)  the opportunity cost of producing a good rises as production of that good falls 
D)  production points inside the production possibility frontier are unattainable 
E)  the opportunity cost of producing a good rises as production of that good rises

Question 17

A person has a comparative advantage if

Accepted Answer

A)  she can produce everything more cheaply than her co-worker can 
B)  she can produce everything at a faster rate than her co-worker can 
C)  she can produce a good with a smaller opportunity cost than her co-worker can 
D)  she sees through corporate and government manipulation 
E)  she gets rich through inheritance 
A)  she can produce everything more cheaply than her co-worker can 
B)  she can produce everything at a faster rate than her co-worker can 
C)  she can produce a good with a smaller opportunity cost than her co-worker can 
D)  she sees through corporate and government manipulation 
E)  she gets rich through inheritance

Question 18

The role of prices in a market economy is to

Accepted Answer

A)  make producers rich at the expense of consumers 
B)  replicate what society produced in the past 
C)  determine the allocation of resources 
D)  enforce what the government chooses 
E)  force consumers to pay for business profits 
A)  make producers rich at the expense of consumers 
B)  replicate what society produced in the past 
C)  determine the allocation of resources 
D)  enforce what the government chooses 
E)  force consumers to pay for business profits

Question 19

When opportunity costs rise as more of a good is consumed,the production possibilities frontier will be concave (bowed out)with respect to the origin.

Accepted Answer

A) True 
 B)False

Question 20

Under a capitalist economic system,

Accepted Answer

A)  the state owns all or most of the resources 
B)  people are forced to work for a living 
C)  resources are privately owned 
D)  the government determines the allocation of resources 
E)  prices eventually become unnecessary 
A)  the state owns all or most of the resources 
B)  people are forced to work for a living 
C)  resources are privately owned 
D)  the government determines the allocation of resources 
E)  prices eventually become unnecessary

The law of increasing opportunity cost is based on the idea that

When all resources used in production are not perfectly substitutable,

If Mary has an absolute advantage over Bill in performing each of two tasks,then

Traditional economies tend to be

-Figure 2-5 shows five different combinations of rockets and cruise ships that a country could manufacture.Suppose it decided to produce 18 rockets and 12 cruise ships.Which of the following would be true?

In a market system,resources are allocated by

Under market capitalism,resources are allocated primarily through

A country currently is using all its land to produce wheat and grapes.However,the land most suited to growing grapes is being used to produce wheat,and the land most suited to growing wheat is being used to produce grapes.Which of the following statements is true?

A person has an absolute advantage in producing a good if he can

Molly needs 30 minutes to wash the car and 45 minutes to mow the lawn.Renee needs 1 hour to wash the car and 2 hours to mow the lawn.Which of the following statements is correct?

The production possibilities frontier can be used to illustrate all of the following concepts,except one.Which is the exception?

Production possibilities frontiers are typically concave (bowed out)from the origin because

Molly needs 30 minutes to wash the car and 45 minutes to mow the lawn.Renee needs 1 hour to wash the car and 2 hours to mow the lawn.Which of the following statements is correct?

A country currently is using all its land to produce wheat and grapes.However,the land most suited to growing grapes is being used to produce wheat,and the land most suited to growing wheat is being used to produce grapes.Which of the following statements is true?

According to the law of increasing opportunity cost,

A person has a comparative advantage if

The role of prices in a market economy is to

When opportunity costs rise as more of a good is consumed,the production possibilities frontier will be concave (bowed out)with respect to the origin.

Under a capitalist economic system,

What is Economics?

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 2: Scarcity, Choice, and Economic Systems

The law of increasing opportunity cost is based on the idea that

When all resources used in production are not perfectly substitutable,

If Mary has an absolute advantage over Bill in performing each of two tasks,then

Traditional economies tend to be

-Figure 2-5 shows five different combinations of rockets and cruise ships that a country could manufacture.Suppose it decided to produce 18 rockets and 12 cruise ships.Which of the following would be true?

In a market system,resources are allocated by

Under market capitalism,resources are allocated primarily through

A country currently is using all its land to produce wheat and grapes.However,the land most suited to growing grapes is being used to produce wheat,and the land most suited to growing wheat is being used to produce grapes.Which of the following statements is true?

A person has an absolute advantage in producing a good if he can

Molly needs 30 minutes to wash the car and 45 minutes to mow the lawn.Renee needs 1 hour to wash the car and 2 hours to mow the lawn.Which of the following statements is correct?

The production possibilities frontier can be used to illustrate all of the following concepts,except one.Which is the exception?

Production possibilities frontiers are typically concave (bowed out)from the origin because

Molly needs 30 minutes to wash the car and 45 minutes to mow the lawn.Renee needs 1 hour to wash the car and 2 hours to mow the lawn.Which of the following statements is correct?

A country currently is using all its land to produce wheat and grapes.However,the land most suited to growing grapes is being used to produce wheat,and the land most suited to growing wheat is being used to produce grapes.Which of the following statements is true?

According to the law of increasing opportunity cost,

A person has a comparative advantage if

The role of prices in a market economy is to

When opportunity costs rise as more of a good is consumed,the production possibilities frontier will be concave (bowed out)with respect to the origin.

Under a capitalist economic system,

What is Economics?

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters