Question 1

Which of the following activities describes the opportunity cost of attending an economics class?

Accepted Answer

A) the value of the time it takes to get to campus every day 
B) the cost of the gasoline needed to drive a car to campus 
C) the value of the highest valued alternative that must be forgone because of attending the class 
D) transportation costs plus the cost of tuition and textbooks for the course 
A) the value of the time it takes to get to campus every day 
B) the cost of the gasoline needed to drive a car to campus 
C) the value of the highest valued alternative that must be forgone because of attending the class 
D) transportation costs plus the cost of tuition and textbooks for the course

Question 2

Table 2-1

-Refer to Table 2-1. Which of the following would be a mutually agreeable rate of exchange?

Accepted Answer

A) 1F = 1C 
B) 1F = 2C 
C) 1F = 3C 
D) No exchange rate would be mutually agreeable. 
A) 1F = 1C 
B) 1F = 2C 
C) 1F = 3C 
D) No exchange rate would be mutually agreeable.

Question 3

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

Accepted Answer

A) an increase in the labor force 
B) an increase in unemployment 
C) development of an improved technological method of production 
D) a decrease in the stock of physical capital 
A) an increase in the labor force 
B) an increase in unemployment 
C) development of an improved technological method of production 
D) a decrease in the stock of physical capital

Question 4

If Kim can wash 10 cars or wax 2 cars during a day, and Susan can wash 8 cars or wax 2 cars during a day, then according to the law of comparative advantage,

Accepted Answer

A) Susan's opportunity cost of waxing a car is greater than Kim's. 
B) their total output can be expanded if Susan specializes in waxing and Kim in washing. 
C) their total output can be expanded if Susan specializes in washing and Kim in waxing. 
D) it is impossible to expand total output through specialization and mutual exchange in this case. 
A) Susan's opportunity cost of waxing a car is greater than Kim's. 
B) their total output can be expanded if Susan specializes in waxing and Kim in washing. 
C) their total output can be expanded if Susan specializes in washing and Kim in waxing. 
D) it is impossible to expand total output through specialization and mutual exchange in this case.

Question 5

"If I didn't have a date tonight, I could save $40 and spend this evening out with my friends." The opportunity cost of the date is

Accepted Answer

A) $40. 
B) $40 plus the cost of forgoing a night out with friends. 
C) dependent on how pleasant a time one has on the date. 
D) the cost of forgoing a night with friends. 
A) $40. 
B) $40 plus the cost of forgoing a night out with friends. 
C) dependent on how pleasant a time one has on the date. 
D) the cost of forgoing a night with friends.

Question 6

Trade creates value by

Accepted Answer

A) moving goods from people who value the goods less to people who value the goods more. 
B) permitting trading partners to expand output through specialization in areas where they each have a comparative advantage. 
C) permitting trading partners to expand output through the adoption of mass production methods. 
D) all of the above. 
A) moving goods from people who value the goods less to people who value the goods more. 
B) permitting trading partners to expand output through specialization in areas where they each have a comparative advantage. 
C) permitting trading partners to expand output through the adoption of mass production methods. 
D) all of the above.

Question 7

A nation that protects its workers from unemployment by limiting the use (by employers) of technological improvements will

Accepted Answer

A) grow more rapidly because the rate of unemployment will be lower. 
B) grow more rapidly because investors prefer a stable business environment rather than the uncertainties that accompany technological change. 
C) grow less rapidly because technological change is an important factor contributing to the growth of output. 
D) grow just as much as nations that adopt more rapidly technological improvements. 
A) grow more rapidly because the rate of unemployment will be lower. 
B) grow more rapidly because investors prefer a stable business environment rather than the uncertainties that accompany technological change. 
C) grow less rapidly because technological change is an important factor contributing to the growth of output. 
D) grow just as much as nations that adopt more rapidly technological improvements.

Question 8

Specialization in production is beneficial because

Accepted Answer

A) it allows everyone to have a job that they like. 
B) it permits people to expand production and achieve rates of output that would otherwise be unattainable. 
C) it allows everyone to be self-sufficient. 
D) it eliminates the need for the division of labor. 
A) it allows everyone to have a job that they like. 
B) it permits people to expand production and achieve rates of output that would otherwise be unattainable. 
C) it allows everyone to be self-sufficient. 
D) it eliminates the need for the division of labor.

Question 9

Creative destruction refers to the process where

Accepted Answer

A) new products and methods of production are continuously replacing old ones 
B) producing more of one good causes you to produce less of another 
C) everybody involved is made worse off 
D) new ways to destroy buildings are employed 
A) new products and methods of production are continuously replacing old ones 
B) producing more of one good causes you to produce less of another 
C) everybody involved is made worse off 
D) new ways to destroy buildings are employed

Question 10

Which of the following is true regarding value, transaction costs, and exchange?

Accepted Answer

A) Middlemen can be viewed as agents who create value by reducing transaction costs and, thereby, facilitating gains from exchange. 
B) Middlemen fail to create value since they do not expand the supply of physical goods. 
C) A good or service has a given value regardless of who uses it or how it is used. 
D) Voluntary exchange reduces value by channeling goods into the hands of people who value them least. 
A) Middlemen can be viewed as agents who create value by reducing transaction costs and, thereby, facilitating gains from exchange. 
B) Middlemen fail to create value since they do not expand the supply of physical goods. 
C) A good or service has a given value regardless of who uses it or how it is used. 
D) Voluntary exchange reduces value by channeling goods into the hands of people who value them least.

Question 11

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

Question 12

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 13

Which of the following sayings best reflects the concept of opportunity cost?

Accepted Answer

A) "You can't teach an old dog new tricks." 
B) "Time is money." 
C) "I have a baker's dozen." 
D) "There's no business like show business." 
A) "You can't teach an old dog new tricks." 
B) "Time is money." 
C) "I have a baker's dozen." 
D) "There's no business like show business."

Question 14

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 15

Table 2-2

-Use the table below to choose the correct answer. The table outlines the production possibilities of Robinson Crusoe and Joe Friday.  
If Crusoe and Friday want to maximize their consumption possibilities,

Accepted Answer

A) Crusoe should specialize in producing good X and Friday in producing good Y, but no trade should be allowed. 
B) Crusoe should specialize in producing good X and Friday in producing good Y; trade should occur to maximize joint consumption. 
C) Crusoe should specialize in producing good Y and Friday in producing good X; trade should occur to maximize joint consumption. 
D) Not enough information is provided to conclusively answer this question. 
A) Crusoe should specialize in producing good X and Friday in producing good Y, but no trade should be allowed. 
B) Crusoe should specialize in producing good X and Friday in producing good Y; trade should occur to maximize joint consumption. 
C) Crusoe should specialize in producing good Y and Friday in producing good X; trade should occur to maximize joint consumption. 
D) Not enough information is provided to conclusively answer this question.

Question 16

Mr. Peters can drive or fly from Tallahassee, Florida to Savannah, Georgia, for a one-day business trip. If he drives, he will be able to work three hours once he arrives in Savannah, whereas traveling by plane will enable him to work eight hours. His expected income from each hour of work in Savannah is $30. If Mr. Peters is a rational decision maker, he will fly if and only if the price differential (air cost minus driving cost) is less than

Accepted Answer

A) $30. 
B) $90. 
C) $150. 
D) $240. 
A) $30. 
B) $90. 
C) $150. 
D) $240.

Question 17

A point on the production possibilities curve represents a combination of goods that is

Accepted Answer

A) inefficient. 
B) efficient. 
C) unattainable. 
D) attainable. 
A) inefficient. 
B) efficient. 
C) unattainable. 
D) attainable.

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

Kim has two tickets to a concert tonight. She, however, has a headache and decides not to go. Which of the following would best fit Kim's needs?

Accepted Answer

A) a ticket service that will buy the tickets from her and resell them 
B) a change in attitude because missing a concert is always irrational 
C) a general flu epidemic that causes many people to miss the concert 
D) a poor performance by the band, so Kim does not feel badly about missing the concert 
A) a ticket service that will buy the tickets from her and resell them 
B) a change in attitude because missing a concert is always irrational 
C) a general flu epidemic that causes many people to miss the concert 
D) a poor performance by the band, so Kim does not feel badly about missing the concert

Question 20

Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?

Accepted Answer

A) the dollars spent on his previously acquired education in pharmacy 
B) the revenue derived from operating the cab 
C) zero if the pharmacist received his education on a scholarship that paid his full tuition 
D) the value of the pharmacist's time in its highest valued use other than driving a cab 
A) the dollars spent on his previously acquired education in pharmacy 
B) the revenue derived from operating the cab 
C) zero if the pharmacist received his education on a scholarship that paid his full tuition 
D) the value of the pharmacist's time in its highest valued use other than driving a cab

Exam 2: A: Some Tools of the Economist

Which of the following activities describes the opportunity cost of attending an economics class?

Table 2-1 -Refer to Table 2-1. Which of the following would be a mutually agreeable rate of exchange?

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

If Kim can wash 10 cars or wax 2 cars during a day, and Susan can wash 8 cars or wax 2 cars during a day, then according to the law of comparative advantage,

"If I didn't have a date tonight, I could save $40 and spend this evening out with my friends." The opportunity cost of the date is

Trade creates value by

A nation that protects its workers from unemployment by limiting the use (by employers) of technological improvements will

Specialization in production is beneficial because

Creative destruction refers to the process where

Which of the following is true regarding value, transaction costs, and exchange?

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

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

Which of the following sayings best reflects the concept of opportunity cost?

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

Table 2-2 -Use the table below to choose the correct answer. The table outlines the production possibilities of Robinson Crusoe and Joe Friday. If Crusoe and Friday want to maximize their consumption possibilities,

A point on the production possibilities curve represents a combination of goods that is

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

Kim has two tickets to a concert tonight. She, however, has a headache and decides not to go. Which of the following would best fit Kim's needs?

Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?

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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