Question 1

The law of comparative advantage implies that a nation,individual,or region should produce those economic goods for which it

Accepted Answer

A) has an absolute advantage. 
B) is a low opportunity cost producer. 
C) is a high opportunity cost producer. 
D) pays the highest wage rate. 
A) has an absolute advantage. 
B) is a low opportunity cost producer. 
C) is a high opportunity cost producer. 
D) pays the highest wage rate.

Question 2

Which of the following activities describes the opportunity cost of watching a play in a theater?

Accepted Answer

A) the value of the time it takes to get to the play by car 
B) the cost of the ticket to the play 
C) the value of the highest valued alternative that must be forgone because of the time and money required to watch the play 
D) the cost of gasoline used in driving to the play 
A) the value of the time it takes to get to the play by car 
B) the cost of the ticket to the play 
C) the value of the highest valued alternative that must be forgone because of the time and money required to watch the play 
D) the cost of gasoline used in driving to the play

Question 3

Use the table below to choose the correct answer.The table outlines the production possibilities of Robinson Crusoe and Joe Friday.
 
If Crusoe and Friday want to maximize their consumption possibilities,

Accepted Answer

A) Crusoe should specialize in producing good X and Friday in producing good Y,but no trade should be allowed. 
B) Crusoe should specialize in producing good X and Friday in producing good Y;trade should occur to maximize joint consumption. 
C) Crusoe should specialize in producing good Y and Friday in producing good X;trade should occur to maximize joint consumption. 
D) Not enough information is provided to conclusively answer this question. 
A) Crusoe should specialize in producing good X and Friday in producing good Y,but no trade should be allowed. 
B) Crusoe should specialize in producing good X and Friday in producing good Y;trade should occur to maximize joint consumption. 
C) Crusoe should specialize in producing good Y and Friday in producing good X;trade should occur to maximize joint consumption. 
D) Not enough information is provided to conclusively answer this question.

Question 4

"Henry Ford made millions of dollars producing and marketing automobiles.Many workers and consumers must have suffered in order for Ford to amass such enormous wealth." The person who made this observation

Accepted Answer

A) has failed to understand the principle of opportunity cost. 
B) has failed to comprehend the fallacy of composition. 
C) has failed to understand that specialization and exchange generally result in mutual economic gain. 
D) has utilized the economic way of thinking by thinking the gains of producers are made primarily at the expense of consumers and workers. 
A) has failed to understand the principle of opportunity cost. 
B) has failed to comprehend the fallacy of composition. 
C) has failed to understand that specialization and exchange generally result in mutual economic gain. 
D) has utilized the economic way of thinking by thinking the gains of producers are made primarily at the expense of consumers and workers.

Question 5

Figure 2-9
  
-Refer to Figure 2-9.Suppose the economy is producing at point B.Which of the following statements would best explain this situation?

Accepted Answer

A) The economy lacks the resources to produce at a more desirable point. 
B) The economy's available technology prevents it from producing at a more desirable point. 
C) There is widespread unemployment in the economy. 
D) Any of the above statements would be a legitimate explanation for this situation. 
A) The economy lacks the resources to produce at a more desirable point. 
B) The economy's available technology prevents it from producing at a more desirable point. 
C) There is widespread unemployment in the economy. 
D) Any of the above statements would be a legitimate explanation for this situation.

Question 6

If Harry Bartolini's Ford dealership sells Rosa Brown a new automobile for $30,000,economic analysis indicates that

Accepted Answer

A) both parties to the transaction will gain. 
B) Mr.Bartolini will gain from the transaction,while Rosa Brown will lose. 
C) Rosa Brown will gain from the transaction,while Mr.Bartolini will lose. 
D) the well-being of both parties will be unchanged. 
A) both parties to the transaction will gain. 
B) Mr.Bartolini will gain from the transaction,while Rosa Brown will lose. 
C) Rosa Brown will gain from the transaction,while Mr.Bartolini will lose. 
D) the well-being of both parties will be unchanged.

Question 7

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

Accepted Answer

A) 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. 
B) If all the resources of an economy are being used efficiently,it is generally possible to produce more of one good without having to sacrifice the production of other goods. 
C) Over time,it is generally impossible for a country to expand its production of goods. 
D) An economy will automatically move toward a point that lies outside of the production possibilities curve unless proper government policy constrains production. 
A) 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. 
B) If all the resources of an economy are being used efficiently,it is generally possible to produce more of one good without having to sacrifice the production of other goods. 
C) Over time,it is generally impossible for a country to expand its production of goods. 
D) An economy will automatically move toward a point that lies outside of the production possibilities curve unless proper government policy constrains production.

Question 8

Jim values his car at $2,000,and Kelly values it at $5,000.Can value be created in this situation? How? Suppose Jim refuses to sell for less than $6,000.Is value destroyed? Why or why not?

Accepted Answer

Value can be created in this situation.J

Question 9

Based on the idea of opportunity cost,which of the following students would be most likely to drop out of college before completing their degree?

Accepted Answer

A) a senior mathematics major with a solid B average 
B) a junior physical therapy student who has just read about the fantastic job offers available to students with degrees in her area 
C) a star college football player in his junior year that just received a $5 million offer from a professional team 
D) a junior economics major who wants to attend graduate school 
A) a senior mathematics major with a solid B average 
B) a junior physical therapy student who has just read about the fantastic job offers available to students with degrees in her area 
C) a star college football player in his junior year that just received a $5 million offer from a professional team 
D) a junior economics major who wants to attend graduate school

Question 10

Which of the following is true?

Accepted Answer

A) Trade does not produce anything new;therefore,it cannot create value. 
B) The value of a good is determined by the cost of the material resources required for its production. 
C) The value of a good generally depends on who uses it and circumstances such as when and where it is used. 
D) All of the above are true. 
A) Trade does not produce anything new;therefore,it cannot create value. 
B) The value of a good is determined by the cost of the material resources required for its production. 
C) The value of a good generally depends on who uses it and circumstances such as when and where it is used. 
D) All of the above are true.

Question 11

An airline ticket from Baltimore to Miami 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 12

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.

Question 13

Why is trade an important source of economic progress?

Accepted Answer

A) It allows the trading partners to produce a larger joint output through specialization in the areas where they have a comparative advantage. 
B) It allows the trading partners to produce a larger joint output as the result of greater realization of cost reductions that accompany the adoption of mass production methods. 
C) It makes it possible to realize gains from the discovery and dissemination of innovative products and production processes. 
D) All of the above are correct. 
A) It allows the trading partners to produce a larger joint output through specialization in the areas where they have a comparative advantage. 
B) It allows the trading partners to produce a larger joint output as the result of greater realization of cost reductions that accompany the adoption of mass production methods. 
C) It makes it possible to realize gains from the discovery and dissemination of innovative products and production processes. 
D) All of the above are correct.

Question 14

As a general rule,technological progress

Accepted Answer

A) shifts the production possibilities curve outward,away from the origin. 
B) reduces the slope of the production possibilities curve,making it flatter. 
C) increases the slope of the production possibilities curve,making it steeper. 
D) shifts the production possibilities curve inward,toward the origin. 
A) shifts the production possibilities curve outward,away from the origin. 
B) reduces the slope of the production possibilities curve,making it flatter. 
C) increases the slope of the production possibilities curve,making it steeper. 
D) shifts the production possibilities curve inward,toward the origin.

Question 15

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 16

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 17

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

Question 18

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 19

The wages of house painters will tend to rise when

Accepted Answer

A) more people recognize that house painters have very low incomes. 
B) the alternative earning opportunities of house painters improve. 
C) house painters can no longer find good paying alternatives for their labor. 
D) unemployment in the economy is high and there are few alternative jobs available for house painters. 
A) more people recognize that house painters have very low incomes. 
B) the alternative earning opportunities of house painters improve. 
C) house painters can no longer find good paying alternatives for their labor. 
D) unemployment in the economy is high and there are few alternative jobs available for house painters.

Question 20

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.

Exam 2: Asome Tools of the Economist

The law of comparative advantage implies that a nation,individual,or region should produce those economic goods for which it

Which of the following activities describes the opportunity cost of watching a play in a theater?

Use the table below to choose the correct answer.The table outlines the production possibilities of Robinson Crusoe and Joe Friday. If Crusoe and Friday want to maximize their consumption possibilities,

"Henry Ford made millions of dollars producing and marketing automobiles.Many workers and consumers must have suffered in order for Ford to amass such enormous wealth." The person who made this observation

Figure 2-9 -Refer to Figure 2-9.Suppose the economy is producing at point B.Which of the following statements would best explain this situation?

If Harry Bartolini's Ford dealership sells Rosa Brown a new automobile for $30,000,economic analysis indicates that

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

Jim values his car at $2,000,and Kelly values it at $5,000.Can value be created in this situation? How? Suppose Jim refuses to sell for less than $6,000.Is value destroyed? Why or why not?

Based on the idea of opportunity cost,which of the following students would be most likely to drop out of college before completing their degree?

Which of the following is true?

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

Why is trade an important source of economic progress?

As a general rule,technological progress

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

Entrepreneurs have a strong incentive to

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

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?

The wages of house painters will tend to rise when

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

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Great Debates in Economics: Keynes Versus Hayek

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