Question 1

A middleman is a person who

Accepted Answer

A) specializes in arranging trades and selling, guaranteeing, and servicing items traded. 
B) acts as a middle person between the top management of a business firm and the hourly employees who actually produce the goods and services. 
C) adds to the seller's expense and the buyer's buying price without providing a service to either. 
D) levies a tax on private sector activity and uses the funds to support government activities. 
A) specializes in arranging trades and selling, guaranteeing, and servicing items traded. 
B) acts as a middle person between the top management of a business firm and the hourly employees who actually produce the goods and services. 
C) adds to the seller's expense and the buyer's buying price without providing a service to either. 
D) levies a tax on private sector activity and uses the funds to support government activities.

Question 2

Retired persons travel by bus and automobile more frequently than do business executives, who more commonly use air travel. An economic explanation for this would be that

Accepted Answer

A) business executives have more time to travel. 
B) it is more important for retired persons to save time. 
C) business executives value their time more highly. 
D) retired persons have more money than do business executives. 
A) business executives have more time to travel. 
B) it is more important for retired persons to save time. 
C) business executives value their time more highly. 
D) retired persons have more money than do business executives.

Question 3

When collective decision making (the political process) is used to resolve economic questions regarding the allocation of resources,

Accepted Answer

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

Question 4

The law of comparative advantage suggests that

Accepted Answer

A) individuals, states, and nations can all benefit if they trade with others. 
B) free trade among nations is harmful to an economy. 
C) each economy should strive to be self-sufficient. 
D) each country should attempt to produce roughly equal amounts of all goods. 
A) individuals, states, and nations can all benefit if they trade with others. 
B) free trade among nations is harmful to an economy. 
C) each economy should strive to be self-sufficient. 
D) each country should attempt to produce roughly equal amounts of all goods.

Question 5

What are the three basic questions faced by every economy?

Accepted Answer

A) What, how, and for whom will goods be produced? 
B) When, where, and how much will be produced? 
C) Why, where, and when will goods be produced? 
D) How, how much, and why will goods be produced? 
A) What, how, and for whom will goods be produced? 
B) When, where, and how much will be produced? 
C) Why, where, and when will goods be produced? 
D) How, how much, and why will goods be produced?

Question 6

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.

Question 7

When private ownership rights are well-defined and enforced, owners of physical assets and resources

Accepted Answer

A) have no incentive to consider the desires of others. 
B) incur the opportunity cost of ignoring the wishes of others. 
C) are not responsible if the use of their assets impose harm on others. 
D) have little incentive to take care of their assets. 
A) have no incentive to consider the desires of others. 
B) incur the opportunity cost of ignoring the wishes of others. 
C) are not responsible if the use of their assets impose harm on others. 
D) have little incentive to take care of their assets.

Question 8

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 9

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 10

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

Accepted Answer

A) 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. 
B) If all the resources of an economy are being used efficiently, it is generally possible to produce more of one good without having to sacrifice the production of other goods. 
C) Over time, it is generally impossible for a country to expand its production of goods. 
D) An economy will automatically move toward a point that lies outside of the production possibilities curve unless proper government policy constrains production. 
A) 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. 
B) If all the resources of an economy are being used efficiently, it is generally possible to produce more of one good without having to sacrifice the production of other goods. 
C) Over time, it is generally impossible for a country to expand its production of goods. 
D) An economy will automatically move toward a point that lies outside of the production possibilities curve unless proper government policy constrains production.

Question 11

Which of the following most accurately states the economic significance of exchange?

Accepted Answer

A) Physical goods have value because they exist; exchange can neither increase nor decrease their value. 
B) Production of physical goods creates value; exchange merely redistributes this value. 
C) Exchange creates value by moving goods from parties who value them less to parties who value them more. 
D) Exchange reduces value since it consumes resources without adding to the physical supply of goods. 
A) Physical goods have value because they exist; exchange can neither increase nor decrease their value. 
B) Production of physical goods creates value; exchange merely redistributes this value. 
C) Exchange creates value by moving goods from parties who value them less to parties who value them more. 
D) Exchange reduces value since it consumes resources without adding to the physical supply of goods.

Question 12

The price of an airline ticket from Denver to Washington, D.C. costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than

Accepted Answer

A) $6 per hour. 
B) $8 per hour. 
C) $10 per hour. 
D) $15 per hour. 
A) $6 per hour. 
B) $8 per hour. 
C) $10 per hour. 
D) $15 per hour.

Question 13

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 14

Figure 2-4
  
-Which of the following is true of Figure 2-4?

Accepted Answer

A) If the economy operates at point A, it is impossible to produce more of both food and clothing. 
B) If the economy operates at point B, it is impossible to increase the output of clothing without giving up food production. 
C) If the economy operates at point A, resources are being used efficiently. 
D) If the economy operates at point B, resources are being used inefficiently. 
A) If the economy operates at point A, it is impossible to produce more of both food and clothing. 
B) If the economy operates at point B, it is impossible to increase the output of clothing without giving up food production. 
C) If the economy operates at point A, resources are being used efficiently. 
D) If the economy operates at point B, resources are being used inefficiently.

Question 15

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 16

The law of comparative advantage implies that a nation, individual, or region should produce those economic goods for which it

Accepted Answer

A) has an absolute advantage. 
B) is a low opportunity cost producer. 
C) is a high opportunity cost producer. 
D) pays the highest wage rate. 
A) has an absolute advantage. 
B) is a low opportunity cost producer. 
C) is a high opportunity cost producer. 
D) pays the highest wage rate.

Question 17

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 18

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

Accepted Answer

A) Resource owners will fail to conserve vital resources, even if they expect their supply to be highly limited in the future. 
B) Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned. 
C) Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources. 
D) Resource owners will gain by discovering and employing their resources in ways that are highly valued by others. 
A) Resource owners will fail to conserve vital resources, even if they expect their supply to be highly limited in the future. 
B) Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned. 
C) Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources. 
D) Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.

Question 19

Middlemen are individuals who

Accepted Answer

A) add to the buyer's expense without performing a useful function. 
B) add to the seller's cost without performing a useful function. 
C) provide services that reduce the cost of transactions and help achieve additional gains from trade. 
D) act as a middle person between the top management of a business firm and the hourly employees who actually produce the goods and services. 
A) add to the buyer's expense without performing a useful function. 
B) add to the seller's cost without performing a useful function. 
C) provide services that reduce the cost of transactions and help achieve additional gains from trade. 
D) act as a middle person between the top management of a business firm and the hourly employees who actually produce the goods and services.

Question 20

Table 2-3
  
-Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in

Accepted Answer

A) meat and the rancher were to specialize in potatoes. 
B) potatoes and the rancher were to specialize in meat. 
C) neither good and the rancher were to specialize in both goods. 
D) none of the above; they cannot both benefit by specialization and trade. 
A) meat and the rancher were to specialize in potatoes. 
B) potatoes and the rancher were to specialize in meat. 
C) neither good and the rancher were to specialize in both goods. 
D) none of the above; they cannot both benefit by specialization and trade.

Exam 2: A: Some Tools of the Economist

A middleman is a person who

Retired persons travel by bus and automobile more frequently than do business executives, who more commonly use air travel. An economic explanation for this would be that

When collective decision making (the political process) is used to resolve economic questions regarding the allocation of resources,

The law of comparative advantage suggests that

What are the three basic questions faced by every economy?

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

When private ownership rights are well-defined and enforced, owners of physical assets and resources

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

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?

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

Which of the following most accurately states the economic significance of exchange?

The price of an airline ticket from Denver to Washington, D.C. costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than

Middlemen, such as grocers, stockbrokers, and Realtors,

Figure 2-4 -Which of the following is true of Figure 2-4?

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

The law of comparative advantage implies that a nation, individual, or region should produce those economic goods for which it

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

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

Middlemen are individuals who

Table 2-3 -Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in

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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