Question 1

When an economy is operating efficiently,the production of more of one good will result in the production of less of some other good because

Accepted Answer

A) consumers do not want more of both goods. 
B) resources are limited (scarce)and efficiency implies that all are already in use. 
C) the production possibilities curve shifts inward as more of one good is produced. 
D) technological improvement can only improve the production of a single good. 
A) consumers do not want more of both goods. 
B) resources are limited (scarce)and efficiency implies that all are already in use. 
C) the production possibilities curve shifts inward as more of one good is produced. 
D) technological improvement can only improve the production of a single good.

Question 2

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.

Question 3

An airline ticket from Seattle to Miami costs $760.A bus ticket costs $360.Traveling by plane will take 6 hours,compared with 26 hours by bus.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) $18 per hour. 
B) $20 per hour. 
C) $38 per hour. 
D) $44 per hour. 
A) $18 per hour. 
B) $20 per hour. 
C) $38 per hour. 
D) $44 per hour.

Question 4

According to the law of comparative advantage,

Accepted Answer

A) individuals and nations gain when they specialize in producing those goods they consume. 
B) individuals and nations gain when they specialize in producing goods they can produce at a high opportunity cost and can exchange for other desired goods they can produce cheaply. 
C) individuals and nations gain when they specialize in producing those items for which they are the low opportunity cost producers and exchange for other desired goods they can't produce as cheaply. 
D) all of the above are true. 
A) individuals and nations gain when they specialize in producing those goods they consume. 
B) individuals and nations gain when they specialize in producing goods they can produce at a high opportunity cost and can exchange for other desired goods they can produce cheaply. 
C) individuals and nations gain when they specialize in producing those items for which they are the low opportunity cost producers and exchange for other desired goods they can't produce as cheaply. 
D) all of the above are true.

Question 5

It can be said that,ultimately,consumers are the driving force in answering the three basic economic questions.Explain the consumer's role in providing these answers.

Accepted Answer

What will be produced is determined by b

Question 6

Which of the following is a transaction cost?

Accepted Answer

A) price of a ticket to a concert 
B) price of food eaten before a concert 
C) time spent standing in line to buy the ticket 
D) price of a T-shirt at the concert 
A) price of a ticket to a concert 
B) price of food eaten before a concert 
C) time spent standing in line to buy the ticket 
D) price of a T-shirt at the concert

Question 7

If Kim can either wash 10 cars or wax 2 cars during a day,and Vince can either wash 17 cars or wax 2 cars during a day,then according to the law of comparative advantage,

Accepted Answer

A) Vince's opportunity cost of waxing a car is less than Kim's. 
B) their total output can be expanded if Kim specializes in waxing and Vince in washing. 
C) their total output can be expanded if Kim specializes in washing and Vince in waxing. 
D) it would be impossible for Vince and Kim to increase their total output through specialization and mutual exchange. 
A) Vince's opportunity cost of waxing a car is less than Kim's. 
B) their total output can be expanded if Kim specializes in waxing and Vince in washing. 
C) their total output can be expanded if Kim specializes in washing and Vince in waxing. 
D) it would be impossible for Vince and Kim to increase their total output through specialization and mutual exchange.

Question 8

John takes 10 minutes to iron a shirt and 20 minutes to type a paper.Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper.Which of the following statements is correct?

Accepted Answer

A) Harry has a comparative advantage in ironing. 
B) Harry has a comparative advantage in typing. 
C) John has a comparative advantage in ironing. 
D) Neither can gain from specialization and exchange. 
A) Harry has a comparative advantage in ironing. 
B) Harry has a comparative advantage in typing. 
C) John has a comparative advantage in ironing. 
D) Neither can gain from specialization and exchange.

Question 9

Suppose you can type a paper in two hours or mow the lawn in four hours.It takes your friend Ann eight hours to type a paper of the same length and five hours to mow the same size of lawn.Which of the following is true?

Accepted Answer

A) Ann is the high-opportunity cost producer of both typing and mowing. 
B) Since you can type papers and mow lawns faster than Ann,you and Ann cannot benefit from specialization and trade. 
C) You and Ann could expand output and gain from trade if she specialized in mowing lawns and you specialized in typing papers. 
D) You and Ann could expand output and gain from trade if she specialized in typing papers and you specialized in mowing lawns. 
A) Ann is the high-opportunity cost producer of both typing and mowing. 
B) Since you can type papers and mow lawns faster than Ann,you and Ann cannot benefit from specialization and trade. 
C) You and Ann could expand output and gain from trade if she specialized in mowing lawns and you specialized in typing papers. 
D) You and Ann could expand output and gain from trade if she specialized in typing papers and you specialized in mowing lawns.

Question 10

Which of the following is true of exchange?

Accepted Answer

A) Exchange is a zero sum activity;if one party to an exchange gains,the other must lose an equal amount. 
B) The exchange value of a good is determined by the cost of the resources required to produce the good. 
C) The total output trading partners are able to produce is not influenced by whether the partners trade with each other. 
D) Exchange permits trading partners to expand their total output of goods and services as the result of greater specialization in areas where each has a comparative advantage. 
A) Exchange is a zero sum activity;if one party to an exchange gains,the other must lose an equal amount. 
B) The exchange value of a good is determined by the cost of the resources required to produce the good. 
C) The total output trading partners are able to produce is not influenced by whether the partners trade with each other. 
D) Exchange permits trading partners to expand their total output of goods and services as the result of greater specialization in areas where each has a comparative advantage.

Question 11

Given freedom of movement for both goods and resources,if Florida producers specialize in oranges and Georgia producers specialize in peaches,then 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 peaches. 
C) Florida has a comparative advantage in producing peaches. 
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 peaches. 
C) Florida has a comparative advantage in producing peaches. 
D) total output will be expanded when Georgia allocates more resources to producing oranges and Florida allocates more resources to producing peaches.

Question 12

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 13

Which of the following appropriately applies the law of comparative advantage?

Accepted Answer

A) Countries with small amounts of labor relative to capital should specialize in producing labor-intensive commodities. 
B) Since Mexican labor is cheaper than American labor,trade between the countries results in exploitation of American workers. 
C) Since workers in countries such as the United States utilize larger amounts of capital than workers in less developed nations,trade between capital-rich and capital-poor nations results in the exploitation of labor in the less developed countries. 
D) Countries that are low cost producers of agricultural products should trade those products for goods they can produce only at a high opportunity cost. 
A) Countries with small amounts of labor relative to capital should specialize in producing labor-intensive commodities. 
B) Since Mexican labor is cheaper than American labor,trade between the countries results in exploitation of American workers. 
C) Since workers in countries such as the United States utilize larger amounts of capital than workers in less developed nations,trade between capital-rich and capital-poor nations results in the exploitation of labor in the less developed countries. 
D) Countries that are low cost producers of agricultural products should trade those products for goods they can produce only at a high opportunity cost.

Question 14

Which of the following statements about exchange is false?

Accepted Answer

A) The expectation of gain motivates people to engage in trade. 
B) If a party to a potential exchange does not believe that it will lead to personal gain,he or she can chose not to engage in the trade. 
C) Voluntary exchange is generally mutually beneficial to the trading partners. 
D) If one trading partner gains,the other must lose. 
A) The expectation of gain motivates people to engage in trade. 
B) If a party to a potential exchange does not believe that it will lead to personal gain,he or she can chose not to engage in the trade. 
C) Voluntary exchange is generally mutually beneficial to the trading partners. 
D) If one trading partner gains,the other must lose.

Question 15

If an economy uses its resources inefficiently,this situation would be illustrated on a production possibilities diagram as

Accepted Answer

A) an inward shift of the production possibilities curve. 
B) an outward shift of the production possibilities curve. 
C) operating at a point outside the production possibilities curve. 
D) operating at a point inside the production possibilities curve. 
A) an inward shift of the production possibilities curve. 
B) an outward shift of the production possibilities curve. 
C) operating at a point outside the production possibilities curve. 
D) operating at a point inside the production possibilities curve.

Question 16

Even countries that depend primarily on market forces to resolve the basic economic questions will usually rely on the collective decision-making process to

Accepted Answer

A) determine the prices of goods and resources. 
B) allocate goods that are essential to life. 
C) determine the distribution of income among citizens. 
D) define and enforce private-property rights and designate the acceptable forms of competitive economic behavior. 
A) determine the prices of goods and resources. 
B) allocate goods that are essential to life. 
C) determine the distribution of income among citizens. 
D) define and enforce private-property rights and designate the acceptable forms of competitive economic behavior.

Question 17

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,

Accepted Answer

A) decentralized decision making is inevitable. 
B) central planning and political bargaining will replace market forces. 
C) individual preferences are of no importance. 
D) economic equality will result. 
A) decentralized decision making is inevitable. 
B) central planning and political bargaining will replace market forces. 
C) individual preferences are of no importance. 
D) economic equality will result.

Question 18

Savannah is an attorney and also an excellent typist.She can type 120 words per minute,but charges attorney fees at $80 per hour.Matt would like some typing work but can only type 60 words per minute.The economic efficiency criterion indicates

Accepted Answer

A) Savannah should do the typing. 
B) Matt should do the typing,provided he is willing to do so for less than $80 per hour. 
C) Matt should do the typing,provided he is willing to do so for less than $40 per hour. 
D) Matt should do the typing,provided he is paid more than $40 per hour. 
A) Savannah should do the typing. 
B) Matt should do the typing,provided he is willing to do so for less than $80 per hour. 
C) Matt should do the typing,provided he is willing to do so for less than $40 per hour. 
D) Matt should do the typing,provided he is paid more than $40 per hour.

Question 19

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 20

Kelly is an architect and she is trying to decide whether to hire Mike,a draftsman,to assist with her work.Kelly could hire Mike at $20 per hour but it would take him three times as long to complete a task as it takes Kelly.Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle.Which of the following is true?

Accepted Answer

A) Kelly should not hire Mike because it would be faster for her to do the work herself. 
B) Kelly should do the drafting work herself because she has the lower opportunity cost. 
C) Mike should be hired at the $20 per hour wage rate. 
D) Mike should be hired,but only if he is paid more than $30 per hour. 
A) Kelly should not hire Mike because it would be faster for her to do the work herself. 
B) Kelly should do the drafting work herself because she has the lower opportunity cost. 
C) Mike should be hired at the $20 per hour wage rate. 
D) Mike should be hired,but only if he is paid more than $30 per hour.

Exam 2: Asome Tools of the Economist

When an economy is operating efficiently,the production of more of one good will result in the production of less of some other good because

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

An airline ticket from Seattle to Miami costs $760.A bus ticket costs $360.Traveling by plane will take 6 hours,compared with 26 hours by bus.Other things constant,the minimum value of one's time that would induce a rational individual to fly rather than drive would be

According to the law of comparative advantage,

It can be said that,ultimately,consumers are the driving force in answering the three basic economic questions.Explain the consumer's role in providing these answers.

Which of the following is a transaction cost?

If Kim can either wash 10 cars or wax 2 cars during a day,and Vince can either wash 17 cars or wax 2 cars during a day,then according to the law of comparative advantage,

John takes 10 minutes to iron a shirt and 20 minutes to type a paper.Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper.Which of the following statements is correct?

Suppose you can type a paper in two hours or mow the lawn in four hours.It takes your friend Ann eight hours to type a paper of the same length and five hours to mow the same size of lawn.Which of the following is true?

Which of the following is true of exchange?

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

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

Which of the following appropriately applies the law of comparative advantage?

Which of the following statements about exchange is false?

If an economy uses its resources inefficiently,this situation would be illustrated on a production possibilities diagram as

Even countries that depend primarily on market forces to resolve the basic economic questions will usually rely on the collective decision-making process to

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,

Savannah is an attorney and also an excellent typist.She can type 120 words per minute,but charges attorney fees at $80 per hour.Matt would like some typing work but can only type 60 words per minute.The economic efficiency criterion indicates

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

The Economic Approach

Asupply,demand,and the Market Process

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

Earnings, productivity, and the Job Market

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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