Question 1

Production possibilities curve are usually bowed outward. This is because

Accepted Answer

A) the more resources a society uses to produce one good, the fewer resources it has available to produce another good. 
B) it reflects the fact that the opportunity cost of producing a good decreases as more and more of that good is produced. 
C) of the effects of technological change. 
D) resources are specialized, that is, some are better at producing particular goods rather than other goods. 
A) the more resources a society uses to produce one good, the fewer resources it has available to produce another good. 
B) it reflects the fact that the opportunity cost of producing a good decreases as more and more of that good is produced. 
C) of the effects of technological change. 
D) resources are specialized, that is, some are better at producing particular goods rather than other goods.

Question 2

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 3

Ms. Liebowitz has a choice of driving or flying from Morgantown, West Virginia to Washington, D.C. for a one-day business trip. If she travels by air, she will be able to work seven hours in D.C., while if she drives, she will only have time to work four hours once there. Her expected income from each hour of work in D.C. is $40. If Ms. Liebowitz is a rational decision maker, she will chose to fly if and only if the price differential (air cost minus driving cost) is less than

Accepted Answer

A) $40. 
B) $120. 
C) $160. 
D) $280. 
A) $40. 
B) $120. 
C) $160. 
D) $280.

Question 4

For most students attending state universities, the largest cost component of going to college is

Accepted Answer

A) the cost of books and supplies. 
B) the cost of room and board. 
C) tuition. 
D) the opportunity cost in terms of forgone current income from the time spent attending college. 
A) the cost of books and supplies. 
B) the cost of room and board. 
C) tuition. 
D) the opportunity cost in terms of forgone current income from the time spent attending college.

Question 5

The opportunity cost of choosing an alternative

Accepted Answer

A) is the value of the highest valued alternative forgone as the result of the choice. 
B) includes only the amount of time spent on whatever is chosen. 
C) includes only the money cost of the option. 
D) is irrelevant for most choices individuals face. 
A) is the value of the highest valued alternative forgone as the result of the choice. 
B) includes only the amount of time spent on whatever is chosen. 
C) includes only the money cost of the option. 
D) is irrelevant for most choices individuals face.

Question 6

Suppose you can type a paper in two hours or mow the lawn in four hours, while it takes your friend Ann eight hours to type a paper or two hours to mow the lawn. Which of the following is true?

Accepted Answer

A) You have a comparative advantage in typing. 
B) You have a comparative advantage in mowing the lawn. 
C) You and Ann could save time if you mowed her lawn while she typed your paper. 
D) You and Ann cannot gain from specialization and trade. 
A) You have a comparative advantage in typing. 
B) You have a comparative advantage in mowing the lawn. 
C) You and Ann could save time if you mowed her lawn while she typed your paper. 
D) You and Ann cannot gain from specialization and trade.

Question 7

A form of economic organization that relies primarily on private ownership of productive assets, freedom of exchange, and market prices to allocate goods and resources is often called

Accepted Answer

A) national socialism. 
B) the welfare state. 
C) a corporate economy. 
D) capitalism. 
A) national socialism. 
B) the welfare state. 
C) a corporate economy. 
D) capitalism.

Question 8

Figure 2-8
  
-Points A, B, and C in Figure 2-8 indicate consumption and investment for three economies. Other things constant, which of the economies is likely to grow more rapidly in the future?

Accepted Answer

A) economy A 
B) economy B 
C) economy C 
D) They would all be expected to grow at the same rate. 
A) economy A 
B) economy B 
C) economy C 
D) They would all be expected to grow at the same rate.

Question 9

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 10

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.

Question 11

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 12

Figure 2-2
  
-Which of the following would most likely cause the production possibilities curve for breadfruit and fish to shift outward from AA to BB in Figure 2-2?

Accepted Answer

A) a decrease in the labor force of the country 
B) a sudden change in consumer preferences for more fish and less breadfruit 
C) a major technological advance 
D) a decrease in the capital stock 
A) a decrease in the labor force of the country 
B) a sudden change in consumer preferences for more fish and less breadfruit 
C) a major technological advance 
D) a decrease in the capital stock

Question 13

If Shawn can produce donuts at a lower opportunity cost than Sue, 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 should not produce donuts. 
D) Shawn is capable of producing more donuts than Sue in a given amount of time. 
A) Shawn has a comparative advantage in the production of donuts. 
B) Sue has a comparative advantage in the production of donuts. 
C) Shawn should not produce donuts. 
D) Shawn is capable of producing more donuts than Sue in a given amount of time.

Question 14

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 15

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 16

Table 2-3
  
-Refer to Table 2-3. The rancher has a comparative advantage in

Accepted Answer

A) neither good, and the farmer has a comparative advantage in both goods. 
B) both goods, and the farmer has a comparative advantage in neither good. 
C) potatoes, and the farmer has a comparative advantage in meat. 
D) meat, and the farmer has a comparative advantage in potatoes. 
A) neither good, and the farmer has a comparative advantage in both goods. 
B) both goods, and the farmer has a comparative advantage in neither good. 
C) potatoes, and the farmer has a comparative advantage in meat. 
D) meat, and the farmer has a comparative advantage in potatoes.

Question 17

A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called

Accepted Answer

A) a key man. 
B) an entrepreneur. 
C) a progressor. 
D) a stakeholder. 
A) a key man. 
B) an entrepreneur. 
C) a progressor. 
D) a stakeholder.

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

Your opportunity cost of attending a football game is

Accepted Answer

A) the subjective value of the disappointment you will feel if your team loses. 
B) the monetary cost of the drinks and food you purchase at the game. 
C) the price of the ticket. 
D) the highest valued alternative forgone because of the time and money required to attend the game. 
A) the subjective value of the disappointment you will feel if your team loses. 
B) the monetary cost of the drinks and food you purchase at the game. 
C) the price of the ticket. 
D) the highest valued alternative forgone because of the time and money required to attend the game.

Question 20

Table 2-3
  
-Refer to Table 2-3. The opportunity cost of 1 pound of potatoes for the rancher is

Accepted Answer

A) 5 hours of labor. 
B) 4 hours of labor. 
C) 5/4 pounds of meat. 
D) 4/5 pound of meat. 
A) 5 hours of labor. 
B) 4 hours of labor. 
C) 5/4 pounds of meat. 
D) 4/5 pound of meat.

Exam 2: A: Some Tools of the Economist

Production possibilities curve are usually bowed outward. This is because

The law of comparative advantage explains why

For most students attending state universities, the largest cost component of going to college is

The opportunity cost of choosing an alternative

Suppose you can type a paper in two hours or mow the lawn in four hours, while it takes your friend Ann eight hours to type a paper or two hours to mow the lawn. Which of the following is true?

A form of economic organization that relies primarily on private ownership of productive assets, freedom of exchange, and market prices to allocate goods and resources is often called

Figure 2-8 -Points A, B, and C in Figure 2-8 indicate consumption and investment for three economies. Other things constant, which of the economies is likely to grow more rapidly in the future?

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

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?

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

Figure 2-2 -Which of the following would most likely cause the production possibilities curve for breadfruit and fish to shift outward from AA to BB in Figure 2-2?

If Shawn can produce donuts at a lower opportunity cost than Sue, then

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

Which of the following is true?

Table 2-3 -Refer to Table 2-3. The rancher has a comparative advantage in

A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called

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

Your opportunity cost of attending a football game is

Table 2-3 -Refer to Table 2-3. The opportunity cost of 1 pound of potatoes for the rancher is

The Economic Approach

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

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

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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