Question 1

Steve values his boat at $4,000, and Jennifer values it at $9,000. If Jennifer buys it from Steve for $7,000, which of the following is true?

Accepted Answer

A) Steve gains $3,000 of value, and Jennifer gains $2,000 of value. 
B) Steve gains $7,000 of value, and Jennifer loses $7,000 of value. 
C) Steve gains $7,000 of value, and Jennifer gains $6,000 of value. 
D) Steve and Jennifer both gain $7,000 of value. 
A) Steve gains $3,000 of value, and Jennifer gains $2,000 of value. 
B) Steve gains $7,000 of value, and Jennifer loses $7,000 of value. 
C) Steve gains $7,000 of value, and Jennifer gains $6,000 of value. 
D) Steve and Jennifer both gain $7,000 of value.

Question 2

Which of the following is true of private ownership?

Accepted Answer

A) Private ownership links responsibility with the right of control. 
B) Private owners have little incentive to conserve natural resources for the future. 
C) Private owners have little incentive to develop and use their assets in ways others value. 
D) Private owners can do anything they want with the things they own regardless of the damage it does to the property of others. 
A) Private ownership links responsibility with the right of control. 
B) Private owners have little incentive to conserve natural resources for the future. 
C) Private owners have little incentive to develop and use their assets in ways others value. 
D) Private owners can do anything they want with the things they own regardless of the damage it does to the property of others.

Question 3

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 4

When resources are being used wastefully or inefficiently, the

Accepted Answer

A) production possibilities curve shifts inward. 
B) production possibilities curve shifts outward. 
C) economy is operating at a point inside its production possibilities constraint. 
D) economy is operating at a point outside its production possibilities constraint. 
A) production possibilities curve shifts inward. 
B) production possibilities curve shifts outward. 
C) economy is operating at a point inside its production possibilities constraint. 
D) economy is operating at a point outside its production possibilities constraint.

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

An improvement in a country's legal system that enhanced the ability of citizens to protect their property rights and enforce contracts would result in which of the following changes to the country's production possibilities curve?

Accepted Answer

A) a movement from a point on the curve to a point outside the curve 
B) a movement from one point to another point along the curve 
C) an outward shift of the curve 
D) a movement from a point on the curve to a point inside the curve 
A) a movement from a point on the curve to a point outside the curve 
B) a movement from one point to another point along the curve 
C) an outward shift of the curve 
D) a movement from a point on the curve to a point inside the curve

Question 7

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 8

In economics, the term for a person who reduces transaction costs by arranging trades for buyers and sellers is

Accepted Answer

A) an exchange broker. 
B) a middleman. 
C) a transactions specialist. 
D) an opportunity finder. 
A) an exchange broker. 
B) a middleman. 
C) a transactions specialist. 
D) an opportunity finder.

Question 9

Recent legislation provides parents with a substantial reduction in their personal income tax liability for each child that they have. The economic way of thinking indicates that legislation of this type will

Accepted Answer

A) make it more costly for parents to provide for their children. 
B) reduce the value of children to their parents and, therefore, lead to a reduction in the birth rate. 
C) reduce the after-tax cost of raising children and, therefore, increase the birth rate. 
D) exert no impact on either the cost of raising children or the birth rate since having children is a not an economic activity. 
A) make it more costly for parents to provide for their children. 
B) reduce the value of children to their parents and, therefore, lead to a reduction in the birth rate. 
C) reduce the after-tax cost of raising children and, therefore, increase the birth rate. 
D) exert no impact on either the cost of raising children or the birth rate since having children is a not an economic activity.

Question 10

With time, which one of the following strategies will most likely result in an outward shift in an economy's production possibilities curve?

Accepted Answer

A) passage of legislation reducing the workweek to 30 hours 
B) institution of a tax policy encouraging research that advances technology 
C) institution of a tax policy encouraging consumption at the expense of investment 
D) passage of a law requiring the minimum wage to increase every year 
A) passage of legislation reducing the workweek to 30 hours 
B) institution of a tax policy encouraging research that advances technology 
C) institution of a tax policy encouraging consumption at the expense of investment 
D) passage of a law requiring the minimum wage to increase every year

Question 11

Which of the following is true regarding private ownership?

Accepted Answer

A) Relative to common ownership, private ownership generally leads to less conservation of resources. 
B) With private ownership, owners are held accountable for using their resources in a manner that harms the resources of others. 
C) Private ownership generally gives the owner little incentive to find ways to use the resource wisely. 
D) With private ownership, resource owners have little incentive to consider the preferences of others when deciding how to employ a resource. 
A) Relative to common ownership, private ownership generally leads to less conservation of resources. 
B) With private ownership, owners are held accountable for using their resources in a manner that harms the resources of others. 
C) Private ownership generally gives the owner little incentive to find ways to use the resource wisely. 
D) With private ownership, resource owners have little incentive to consider the preferences of others when deciding how to employ a resource.

Question 12

If the citizens of a country were to work harder and take less leisure time, it would

Accepted Answer

A) shift the production possibilities curve outward. 
B) cause an economy to operate inside its production possibilities curve. 
C) shift the production possibilities curve inward. 
D) cause an economy to move from one point on the production possibilities curve to another point on the curve. 
A) shift the production possibilities curve outward. 
B) cause an economy to operate inside its production possibilities curve. 
C) shift the production possibilities curve inward. 
D) cause an economy to move from one point on the production possibilities curve to another point on the curve.

Question 13

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 14

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 15

Which of the following is true regarding value and exchange?

Accepted Answer

A) Middlemen fail to create value since they do not expand the supply of physical goods. 
B) A good or service has a given value regardless of who uses it or how it is used. 
C) If it were not for middlemen, transaction costs would be zero. 
D) Voluntary exchange creates value by channeling goods into the hands of people who value them most. 
A) Middlemen fail to create value since they do not expand the supply of physical goods. 
B) A good or service has a given value regardless of who uses it or how it is used. 
C) If it were not for middlemen, transaction costs would be zero. 
D) Voluntary exchange creates value by channeling goods into the hands of people who value them most.

Question 16

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 17

A ticket to a concert costs $45. You have a ticket and can resell it for $75. Your opportunity cost of actually attending the concert is

Accepted Answer

A) $30. 
B) $45. 
C) $75. 
D) $120. 
A) $30. 
B) $45. 
C) $75. 
D) $120.

Question 18

The reason that the production possibilities curve is usually a bow-shaped curve instead of a straight line is that

Accepted Answer

A) it makes it easier to illustrate the concepts of scarcity and prices with a bow-shaped curve than it is with a straight line 
B) early economists began drawing them in this way and the convention has continued throughout the years 
C) output eventually reaches a maximum and then declines 
D) resources are not perfectly adaptable to the production of all goods 
A) it makes it easier to illustrate the concepts of scarcity and prices with a bow-shaped curve than it is with a straight line 
B) early economists began drawing them in this way and the convention has continued throughout the years 
C) output eventually reaches a maximum and then declines 
D) resources are not perfectly adaptable to the production of all goods

Question 19

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 20

A nation with cheap, efficient communications is likely to be

Accepted Answer

A) richer, ceteris paribus, because transaction costs will be lower and trade greater. 
B) richer only if production of goods is cheaper, too, since trade itself cannot create value. 
C) poorer since it spends so much on communication instead of true productivity. 
D) spending too much on communications, which adds nothing to the value of output. 
A) richer, ceteris paribus, because transaction costs will be lower and trade greater. 
B) richer only if production of goods is cheaper, too, since trade itself cannot create value. 
C) poorer since it spends so much on communication instead of true productivity. 
D) spending too much on communications, which adds nothing to the value of output.

Exam 2: A: Some Tools of the Economist

Steve values his boat at $4,000, and Jennifer values it at $9,000. If Jennifer buys it from Steve for $7,000, which of the following is true?

Which of the following is true of private ownership?

Which of the following is true of exchange?

When resources are being used wastefully or inefficiently, the

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

An improvement in a country's legal system that enhanced the ability of citizens to protect their property rights and enforce contracts would result in which of the following changes to the country's production possibilities curve?

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

In economics, the term for a person who reduces transaction costs by arranging trades for buyers and sellers is

Recent legislation provides parents with a substantial reduction in their personal income tax liability for each child that they have. The economic way of thinking indicates that legislation of this type will

With time, which one of the following strategies will most likely result in an outward shift in an economy's production possibilities curve?

Which of the following is true regarding private ownership?

If the citizens of a country were to work harder and take less leisure time, it would

Entrepreneurs have a strong incentive to

In economics, transaction costs refer to the

Which of the following is true regarding value and exchange?

In an informed and voluntary exchange,

A ticket to a concert costs $45. You have a ticket and can resell it for $75. Your opportunity cost of actually attending the concert is

The reason that the production possibilities curve is usually a bow-shaped curve instead of a straight line is that

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?

A nation with cheap, efficient communications is likely to be

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

Filters