Question 1

If Shawn can produce more donuts in one day than Sue can produce in one day,then

Accepted Answer

A) Shawn has a comparative advantage in the production of donuts. 
B) Sue has a comparative advantage in the production of donuts. 
C) Shawn has an absolute advantage in the production of donuts. 
D) Shawn should produce donuts and Sue should spend her time on a different activity. 
A) Shawn has a comparative advantage in the production of donuts. 
B) Sue has a comparative advantage in the production of donuts. 
C) Shawn has an absolute advantage in the production of donuts. 
D) Shawn should produce donuts and Sue should spend her time on a different activity.

Question 2

Which of the following is not a basic question that each economy must answer?

Accepted Answer

A) Which resources are scarce? 
B) For whom shall the goods be produced? 
C) How shall goods be produced? 
D) What goods shall be produced? 
A) Which resources are scarce? 
B) For whom shall the goods be produced? 
C) How shall goods be produced? 
D) What goods shall be produced?

Question 3

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 4

Because of a late night out with friends,Libby decided to sleep in rather than attend her 8a.m.economics class.According to economic analysis,her choice was

Accepted Answer

A) irrational,because economic analysis suggests you should always attend classes that you have already paid for. 
B) irrational,because oversleeping is not in Libby's self-interest. 
C) rational only if Libby has not missed any other classes. 
D) rational if Libby values sleep more highly than the benefit she expects to receive from attending the class. 
A) irrational,because economic analysis suggests you should always attend classes that you have already paid for. 
B) irrational,because oversleeping is not in Libby's self-interest. 
C) rational only if Libby has not missed any other classes. 
D) rational if Libby values sleep more highly than the benefit she expects to receive from attending the class.

Question 5

Senator Smart,who understands economic principles,is trying to convince workers in her district that trade with other countries is beneficial.Senator Smart should argue that trade can be beneficial

Accepted Answer

A) only if it allows us to obtain things that we couldn't make for ourselves. 
B) because it allows specialization,which increases total output. 
C) to us if we can gain and the others involved in the trade lose. 
D) in only a limited number of circumstances because others are typically self-interested. 
A) only if it allows us to obtain things that we couldn't make for ourselves. 
B) because it allows specialization,which increases total output. 
C) to us if we can gain and the others involved in the trade lose. 
D) in only a limited number of circumstances because others are typically self-interested.

Question 6

Figure 2-7
  
-If an economy operates at point A on the production possibilities curve shown in Figure 2-7,

Accepted Answer

A) to produce more food,it would have to reduce its production of clothing. 
B) to produce more clothing,it would have to reduce the production of food. 
C) it is operating efficiently. 
D) all of the above would be correct. 
A) to produce more food,it would have to reduce its production of clothing. 
B) to produce more clothing,it would have to reduce the production of food. 
C) it is operating efficiently. 
D) all of the above would be correct.

Question 7

In economics,transaction costs refer to the

Accepted Answer

A) time,effort,and other resources needed to search out and negotiate an exchange. 
B) dollar cost or price of the item traded. 
C) cost an economy suffers when it allows specialization according to comparative advantage. 
D) amount by which the price of an item increases due to the presence of a middleman. 
A) time,effort,and other resources needed to search out and negotiate an exchange. 
B) dollar cost or price of the item traded. 
C) cost an economy suffers when it allows specialization according to comparative advantage. 
D) amount by which the price of an item increases due to the presence of a middleman.

Question 8

The production possibilities curve illustrates the basic principle that

Accepted Answer

A) an economy's capacity to produce is unrelated to its population. 
B) if all the resources of an economy are being used efficiently,more of one good can be produced only if more of another good is produced. 
C) an economy will automatically move toward a point at which all of its resources are being used inefficiently. 
D) 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. 
A) an economy's capacity to produce is unrelated to its population. 
B) if all the resources of an economy are being used efficiently,more of one good can be produced only if more of another good is produced. 
C) an economy will automatically move toward a point at which all of its resources are being used inefficiently. 
D) 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.

Question 9

Figure 2-5
  
-In Figure 2-5,which of the following is true?

Accepted Answer

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

Question 10

Figure 2-1
  
-In Figure 2-1,point A is

Accepted Answer

A) unattainable. 
B) inefficient. 
C) efficient. 
D) preferable to point B. 
A) unattainable. 
B) inefficient. 
C) efficient. 
D) preferable to point B.

Question 11

If an economy operates at a point within its production possibilities curve,

Accepted Answer

A) it lacks the resources necessary to reach the curve. 
B) it is utilizing all of its resources efficiently. 
C) it does not confront the problem of scarce goods relative to unlimited wants. 
D) it is not efficiently using all of its resources. 
A) it lacks the resources necessary to reach the curve. 
B) it is utilizing all of its resources efficiently. 
C) it does not confront the problem of scarce goods relative to unlimited wants. 
D) it is not efficiently using all of its resources.

Question 12

Which of the following would be most likely to increase your opportunity cost of attending college?

Accepted Answer

A) a recession in the economy that made finding a job more difficult 
B) receiving a very attractive offer to start a job today that would permit you to earn about 50 percent more than you expected to make after graduation 
C) the retirement of your favorite professor under whom you hoped to study during the next semester 
D) information indicating that salaries were declining and that there were very few openings for college graduates in your field 
A) a recession in the economy that made finding a job more difficult 
B) receiving a very attractive offer to start a job today that would permit you to earn about 50 percent more than you expected to make after graduation 
C) the retirement of your favorite professor under whom you hoped to study during the next semester 
D) information indicating that salaries were declining and that there were very few openings for college graduates in your field

Question 13

Richer economies often have more middlemen.Economic thinking indicates that such economies

Accepted Answer

A) suffer losses from these activities. 
B) gain since the opportunity costs of arranging trades would be higher without middlemen. 
C) become progressively more wasteful,and middlemen are one sign of the waste. 
D) are unable to employ middlemen in any other way. 
A) suffer losses from these activities. 
B) gain since the opportunity costs of arranging trades would be higher without middlemen. 
C) become progressively more wasteful,and middlemen are one sign of the waste. 
D) are unable to employ middlemen in any other way.

Question 14

Private property rights involve

Accepted Answer

A) the right to exclusive use of the property. 
B) legal protection against those who would seek to use or abuse the property without the owner's permission. 
C) the right to transfer,sell,exchange,or mortgage the property. 
D) all of the above. 
A) the right to exclusive use of the property. 
B) legal protection against those who would seek to use or abuse the property without the owner's permission. 
C) the right to transfer,sell,exchange,or mortgage the property. 
D) all of the above.

Question 15

Middlemen,such as grocers,stockbrokers,and realtors

Accepted Answer

A) specialize in reducing transactions costs. 
B) provide nothing of value to either the buyer or the seller. 
C) have no effect on economic output in society. 
D) do not exist in capitalist economies. 
A) specialize in reducing transactions costs. 
B) provide nothing of value to either the buyer or the seller. 
C) have no effect on economic output in society. 
D) do not exist in capitalist economies.

Question 16

The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is

Accepted Answer

A) an expansion in investment resulting from a reallocation of resources away from consumption. 
B) a larger output resulting from a more efficient use of resources. 
C) greater equality of income resulting from an increase in the number of workers. 
D) an increase in the profitability of business enterprises resulting from an increase in investment. 
A) an expansion in investment resulting from a reallocation of resources away from consumption. 
B) a larger output resulting from a more efficient use of resources. 
C) greater equality of income resulting from an increase in the number of workers. 
D) an increase in the profitability of business enterprises resulting from an increase in investment.

Question 17

Which of the following will most likely cause an outward shift in the production possibilities curve?

Accepted Answer

A) a reduction in the man-made productive resources available to the economy as the result of a decline in investment 
B) an increase in government payments to farmers for taking land out of production 
C) an increase from 40 to 50 hours in the average number of hours worked per week 
D) None of the above would cause an outward shift in the production possibilities curve. 
A) a reduction in the man-made productive resources available to the economy as the result of a decline in investment 
B) an increase in government payments to farmers for taking land out of production 
C) an increase from 40 to 50 hours in the average number of hours worked per week 
D) None of the above would cause an outward shift in the production possibilities curve.

Question 18

When private ownership of a resource is clearly defined and enforced,the private owner

Accepted Answer

A) has little incentive to consider the wishes of others when deciding how to use the resource. 
B) has little incentive to take care of the resource. 
C) has a strong incentive to use the resource wisely and to consider seriously the wishes of others when deciding how to employ the resource. 
D) has a strong incentive to consume the resource during the period rather than conserving it for future use. 
A) has little incentive to consider the wishes of others when deciding how to use the resource. 
B) has little incentive to take care of the resource. 
C) has a strong incentive to use the resource wisely and to consider seriously the wishes of others when deciding how to employ the resource. 
D) has a strong incentive to consume the resource during the period rather than conserving it for future use.

Question 19

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 20

Use the production possibilities data below for Lebos and Slavia to answer the following question(s).
Table 2-1

-Refer to Table 2-1.According to the law of comparative advantage,both Lebos and Slavia could gain if

Accepted Answer

A) Lebos produced all of the food and clothing and Slavia did not produce anything. 
B) Lebos specialized in producing clothing,Slavia specialized in producing food,and they traded. 
C) Lebos specialized in producing food,Slavia specialized in producing clothing,and they traded. 
D) Slavia and Lebos were both were self-sufficient and did not trade. 
A) Lebos produced all of the food and clothing and Slavia did not produce anything. 
B) Lebos specialized in producing clothing,Slavia specialized in producing food,and they traded. 
C) Lebos specialized in producing food,Slavia specialized in producing clothing,and they traded. 
D) Slavia and Lebos were both were self-sufficient and did not trade.

Exam 2: Asome Tools of the Economist

If Shawn can produce more donuts in one day than Sue can produce in one day,then

Which of the following is not a basic question that each economy must answer?

Because of a late night out with friends,Libby decided to sleep in rather than attend her 8a.m.economics class.According to economic analysis,her choice was

Senator Smart,who understands economic principles,is trying to convince workers in her district that trade with other countries is beneficial.Senator Smart should argue that trade can be beneficial

Figure 2-7 -If an economy operates at point A on the production possibilities curve shown in Figure 2-7,

In economics,transaction costs refer to the

The production possibilities curve illustrates the basic principle that

Figure 2-5 -In Figure 2-5,which of the following is true?

Figure 2-1 -In Figure 2-1,point A is

If an economy operates at a point within its production possibilities curve,

Which of the following would be most likely to increase your opportunity cost of attending college?

Richer economies often have more middlemen.Economic thinking indicates that such economies

Private property rights involve

Middlemen,such as grocers,stockbrokers,and realtors

The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is

Which of the following will most likely cause an outward shift in the production possibilities curve?

When private ownership of a resource is clearly defined and enforced,the private owner

The law of comparative advantage explains why

Use the production possibilities data below for Lebos and Slavia to answer the following question(s). Table 2-1 -Refer to Table 2-1.According to the law of comparative advantage,both Lebos and Slavia could gain if

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