Question 1

Figure 2-11
  
-In Figure 2-11,which shows the production possibilities curve,

Accepted Answer

A) A is efficient. 
B) B is inefficient. 
C) C is unattainable. 
D) all of the above are true. 
A) A is efficient. 
B) B is inefficient. 
C) C is unattainable. 
D) all of the above are true.

Question 2

If a firm or a nation desires to maximize its output,each productive assignment should be carried out by those persons who

Accepted Answer

A) have the highest opportunity cost. 
B) have a comparative advantage in the productive activity. 
C) can complete the productive activity most rapidly. 
D) least enjoy performing the productive activity. 
A) have the highest opportunity cost. 
B) have a comparative advantage in the productive activity. 
C) can complete the productive activity most rapidly. 
D) least enjoy performing the productive activity.

Question 3

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 4

The most important source of gain from the division of labor is

Accepted Answer

A) the repeal of the law of comparative advantage. 
B) the reduction in work effort because incentives are adversely affected. 
C) the increase in the number of jobs since more labor is used to produce goods. 
D) the benefits that result from specialization,adoption of mass production techniques,and exchange. 
A) the repeal of the law of comparative advantage. 
B) the reduction in work effort because incentives are adversely affected. 
C) the increase in the number of jobs since more labor is used to produce goods. 
D) the benefits that result from specialization,adoption of mass production techniques,and exchange.

Question 5

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 hav

Question 6

Which of the following most accurately states the function of middlemen?

Accepted Answer

A) Middlemen add to the expense of buyers and sellers without providing any benefit. 
B) Our economy would work just as well without middlemen since they do not expand the availability of physical goods. 
C) Middlemen reduce the number of transactions since they increase the buyer's price and reduce the seller's net revenue. 
D) Middlemen create value by arranging trades and providing information to buyers and sellers. 
A) Middlemen add to the expense of buyers and sellers without providing any benefit. 
B) Our economy would work just as well without middlemen since they do not expand the availability of physical goods. 
C) Middlemen reduce the number of transactions since they increase the buyer's price and reduce the seller's net revenue. 
D) Middlemen create value by arranging trades and providing information to buyers and sellers.

Question 7

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 8

Mark and John are 10-year-old twins who do not get along.They have opened separate lemonade stands and are competing with each other,selling lemonade on their block.Their mother observes that Mark is very good at making lemonade and John is an excellent young salesman.She suggests they both could make more money if they worked together.John counters that two stands will always make more money than one.Who is right? Why?

Accepted Answer

The mother makes the point that gains fr

Question 9

In an informed and voluntary exchange,

Accepted Answer

A) both parties receive something they value more than what they gave up. 
B) both parties place an equal value on what they received and what they gave up. 
C) neither party can gain more than the other. 
D) one trader can gain only at the expense of the other. 
A) both parties receive something they value more than what they gave up. 
B) both parties place an equal value on what they received and what they gave up. 
C) neither party can gain more than the other. 
D) one trader can gain only at the expense of the other.

Question 10

Which of the following is true of a production possibilities curve?

Accepted Answer

A) It reveals the maximum amount of any two goods that can be produced from a fixed quantity of resources. 
B) It reveals the ideal level of technology for a country. 
C) It assumes that the prices of the two products are equal. 
D) For a country that could produce many different goods,it shows which two goods are most important to produce. 
A) It reveals the maximum amount of any two goods that can be produced from a fixed quantity of resources. 
B) It reveals the ideal level of technology for a country. 
C) It assumes that the prices of the two products are equal. 
D) For a country that could produce many different goods,it shows which two goods are most important to produce.

Question 11

Which of the following is true?

Accepted Answer

A) The production possibilities curve indicates that it will be impossible to expand total output with the passage of time. 
B) As long as resources are scarce,output cannot be increased. 
C) The size of the economic pie is fixed,and therefore,if one individual has more income,others must have less. 
D) Over time,the output of goods and services can be increased through human ingenuity and discovery of better ways of doing things. 
A) The production possibilities curve indicates that it will be impossible to expand total output with the passage of time. 
B) As long as resources are scarce,output cannot be increased. 
C) The size of the economic pie is fixed,and therefore,if one individual has more income,others must have less. 
D) Over time,the output of goods and services can be increased through human ingenuity and discovery of better ways of doing things.

Question 12

Opportunity costs differ among nations primarily because

Accepted Answer

A) nations employ different currencies. 
B) nations have different amounts of land,labor skills,capital,and technology. 
C) nations have different religious,political,and economic institutions. 
D) the work-leisure preferences of people vary considerably from one nation to another. 
A) nations employ different currencies. 
B) nations have different amounts of land,labor skills,capital,and technology. 
C) nations have different religious,political,and economic institutions. 
D) the work-leisure preferences of people vary considerably from one nation to another.

Question 13

Air travel from New York to Miami costs $300 and takes 6 hours.A bus ticket between the cities costs $150 and takes 56 hours.Other things constant,the minimum value of one's time that would induce a rational individual to fly rather than drive would be

Accepted Answer

A) $1 per hour. 
B) $3 per hour. 
C) $5 per hour. 
D) $50 per hour. 
A) $1 per hour. 
B) $3 per hour. 
C) $5 per hour. 
D) $50 per hour.

Question 14

Given freedom of movement for both goods and resources,if Florida producers specialize in oranges and Georgia producers specialize in peaches,it would be reasonable to conclude that

Accepted Answer

A) the opportunity cost of growing oranges is higher in Florida than in Georgia. 
B) Georgia has a comparative advantage in producing oranges. 
C) Florida has a comparative advantage in producing oranges. 
D) total output will be expanded when Georgia allocates more resources to producing oranges and Florida allocates more resources to producing peaches. 
A) the opportunity cost of growing oranges is higher in Florida than in Georgia. 
B) Georgia has a comparative advantage in producing oranges. 
C) Florida has a comparative advantage in producing oranges. 
D) total output will be expanded when Georgia allocates more resources to producing oranges and Florida allocates more resources to producing peaches.

Question 15

If a motorist is stranded in front of a pay phone and has only dollar bills,and he ends up buying a quarter from a passerby for $1,

Accepted Answer

A) the stranded motorist must not understand that four quarters are worth $1. 
B) economic theory is unable to explain this transaction. 
C) both parties have gained from this exchange. 
D) the passerby was made better off and the motorist worse off. 
A) the stranded motorist must not understand that four quarters are worth $1. 
B) economic theory is unable to explain this transaction. 
C) both parties have gained from this exchange. 
D) the passerby was made better off and the motorist worse off.

Question 16

The following question(s)relate(s)to the material in the addendum to Chapter 2.Use the production possibilities data for Lebos and Slavia below to answer the question(s).
Table 2-4
  
-Refer to Table 2-4.Which of the following is correct?

Accepted Answer

A) Lebos has the comparative advantage in both goods. 
B) Slavia has the comparative advantage in food. 
C) Lebos has the comparative advantage in food. 
D) Lebos has the comparative advantage in clothing. 
A) Lebos has the comparative advantage in both goods. 
B) Slavia has the comparative advantage in food. 
C) Lebos has the comparative advantage in food. 
D) Lebos has the comparative advantage in clothing.

Question 17

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 18

Use the production possibilities data below for Avokia and Baldonia to answer the following question(s).
Table 2-2

-Refer to Table 2-2.Which of the following would be a mutually agreeable rate of exchange?

Accepted Answer

A) Baldonia trades one orange to Avokia for every one apple. 
B) Baldonia trades one orange to Avokia for every two apples. 
C) Baldonia trades one orange to Avokia for every three apples. 
D) Baldonia trades one orange to Avokia for every four apples. 
A) Baldonia trades one orange to Avokia for every one apple. 
B) Baldonia trades one orange to Avokia for every two apples. 
C) Baldonia trades one orange to Avokia for every three apples. 
D) Baldonia trades one orange to Avokia for every four apples.

Question 19

With voluntary exchange,

Accepted Answer

A) both the buyer and seller will be made better off. 
B) the buyer will be made better off,while the seller will be made worse off. 
C) the seller will be made better off,while the buyer will be made worse off. 
D) both the buyer and the seller will be made worse off. 
A) both the buyer and seller will be made better off. 
B) the buyer will be made better off,while the seller will be made worse off. 
C) the seller will be made better off,while the buyer will be made worse off. 
D) both the buyer and the seller will be made worse off.

Question 20

Statistical data provided by the U.S.Department of Transportation shows that the median income of individuals traveling on the nation's bus systems is $18,000 compared to $65,000 for those who normally travel by air.This finding is best explained by which of the following statements?

Accepted Answer

A) Persons with high income are more likely to fly because the opportunity cost of their time is generally higher than those with lesser income. 
B) Traditionally,lower income groups prefer slower methods of transportation. 
C) Wealthy individuals own stock in the airlines and,therefore,receive preferential treatment. 
D) Low-income groups are generally located near bus stations;wealthy groups congregate around airports. 
A) Persons with high income are more likely to fly because the opportunity cost of their time is generally higher than those with lesser income. 
B) Traditionally,lower income groups prefer slower methods of transportation. 
C) Wealthy individuals own stock in the airlines and,therefore,receive preferential treatment. 
D) Low-income groups are generally located near bus stations;wealthy groups congregate around airports.

Exam 2: Asome Tools of the Economist

Figure 2-11 -In Figure 2-11,which shows the production possibilities curve,

If a firm or a nation desires to maximize its output,each productive assignment should be carried out by those persons who

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

The most important source of gain from the division of labor is

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?

Which of the following most accurately states the function of middlemen?

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

In an informed and voluntary exchange,

Which of the following is true of a production possibilities curve?

Which of the following is true?

Opportunity costs differ among nations primarily because

Air travel from New York to Miami costs $300 and takes 6 hours.A bus ticket between the cities costs $150 and takes 56 hours.Other things constant,the minimum value of one's time that would induce a rational individual to fly rather than drive would be

Given freedom of movement for both goods and resources,if Florida producers specialize in oranges and Georgia producers specialize in peaches,it would be reasonable to conclude that

If a motorist is stranded in front of a pay phone and has only dollar bills,and he ends up buying a quarter from a passerby for $1,

The following question(s)relate(s)to the material in the addendum to Chapter 2.Use the production possibilities data for Lebos and Slavia below to answer the question(s). Table 2-4 -Refer to Table 2-4.Which of the following is correct?

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

Use the production possibilities data below for Avokia and Baldonia to answer the following question(s). Table 2-2 -Refer to Table 2-2.Which of the following would be a mutually agreeable rate of exchange?

With voluntary exchange,

Statistical data provided by the U.S.Department of Transportation shows that the median income of individuals traveling on the nation's bus systems is $18,000 compared to $65,000 for those who normally travel by air.This finding is best explained by which of the following statements?

The Economic Approach

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Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

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

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney 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

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

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Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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