Question 1

The flows in the market economy that go from firms to households are ________. The flows in the market economy that go from households to firms are ________.

Accepted Answer

A) all flowing through goods markets; all flowing through factor markets 
B) the real flows of goods and services and the income flows of wages, rent, interest and profits; the real flows of labour, land, capital and entrepreneurship and the flow of expenditure on goods and services 
C) the income flows of wages, rent, interest, and profits and the flow of expenditure on goods and services; the real flows of goods and services and the real flows of labour, land, capital and entrepreneurship 
D) the real flows of goods and services and the real flows of labour, land, capital and entrepreneurship; the income flows of wages, rent, interest, and profits and the flow of expenditure on goods and services 
E) all flowing through factor markets; all flowing through goods markets 
A) all flowing through goods markets; all flowing through factor markets 
B) the real flows of goods and services and the income flows of wages, rent, interest and profits; the real flows of labour, land, capital and entrepreneurship and the flow of expenditure on goods and services 
C) the income flows of wages, rent, interest, and profits and the flow of expenditure on goods and services; the real flows of goods and services and the real flows of labour, land, capital and entrepreneurship 
D) the real flows of goods and services and the real flows of labour, land, capital and entrepreneurship; the income flows of wages, rent, interest, and profits and the flow of expenditure on goods and services 
E) all flowing through factor markets; all flowing through goods markets B

Question 2

Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
 
-The economy illustrated by the data in Table 2.1.1 exhibits

Accepted Answer

A) decreasing opportunity cost. 
B) constant opportunity cost in the production of X. 
C) constant opportunity cost in the production of Y. 
D) increasing opportunity cost. 
E) initially increasing, then decreasing opportunity cost. 
A) decreasing opportunity cost. 
B) constant opportunity cost in the production of X. 
C) constant opportunity cost in the production of Y. 
D) increasing opportunity cost. 
E) initially increasing, then decreasing opportunity cost. D

Question 3

Use the information below to answer the following questions.
Fact 2.4.1
In an eight-hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight-hour day, Rolfe can produce either 8 loaves of bread or 8 kilograms of butter.
-Given Fact 2.4.1, the opportunity cost of producing 1 loaf of bread is

Accepted Answer

A) 20 minutes (1/3 hour)for Andy and 1 hour for Rolfe. 
B) 1/3 kilogram of butter for Andy and 1 kilogram of butter for Rolfe. 
C) 3 kilograms of butter for Andy and 1 kilogram of butter for Rolfe. 
D) 8 kilograms of butter for both Andy and Rolfe. 
E) not calculable from the given information. 
A) 20 minutes (1/3 hour)for Andy and 1 hour for Rolfe. 
B) 1/3 kilogram of butter for Andy and 1 kilogram of butter for Rolfe. 
C) 3 kilograms of butter for Andy and 1 kilogram of butter for Rolfe. 
D) 8 kilograms of butter for both Andy and Rolfe. 
E) not calculable from the given information. B

Question 4

The quantity of shoes produced is measured along the x-axis of a bowed-outward production possibilities frontier and the quantity of shirts produced is measured along the y-axis. As you move down towards the right along the production possibilities frontier, the marginal cost of

Accepted Answer

A) a pair of shoes decreases. 
B) a pair of shoes increases. 
C) a shirt remains constant. 
D) a shirt increases or decreases but we don't know for sure. 
E) a pair of shoes and a shirt is equal at the midpoint between the x-axis and the y-axis. 
A) a pair of shoes decreases. 
B) a pair of shoes increases. 
C) a shirt remains constant. 
D) a shirt increases or decreases but we don't know for sure. 
E) a pair of shoes and a shirt is equal at the midpoint between the x-axis and the y-axis.

Question 5

Use the information below to answer the following questions.
Fact 2.4.1
In an eight-hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight-hour day, Rolfe can produce either 8 loaves of bread or 8 kilograms of butter.
-Refer to Fact 2.4.1. Which one of the following statements is true?

Accepted Answer

A) Andy has an absolute advantage in butter production. 
B) Rolfe has an absolute advantage in butter production. 
C) Andy has a comparative advantage in bread production. 
D) Andy has a comparative advantage in butter production. 
E) Rolfe has a comparative advantage in bread production. 
A) Andy has an absolute advantage in butter production. 
B) Rolfe has an absolute advantage in butter production. 
C) Andy has a comparative advantage in bread production. 
D) Andy has a comparative advantage in butter production. 
E) Rolfe has a comparative advantage in bread production.

Question 6

Use the figure below to answer the following questions.
   
Figure 2.1.1
-Complete the following sentence. In Figure 2.1.1,

Accepted Answer

A) movement from A to B would require a technological advance. 
B) point B is a point of production efficiency. 
C) some resources must be unused at point C. 
D) the concept of decreasing opportunity cost is illustrated. 
E) movement from C to B would require a technological improvement. 
A) movement from A to B would require a technological advance. 
B) point B is a point of production efficiency. 
C) some resources must be unused at point C. 
D) the concept of decreasing opportunity cost is illustrated. 
E) movement from C to B would require a technological improvement.

Question 7

The most anyone is willing to pay for another purse is $30. Currently the price of a purse is $40, and the cost of producing another purse is $50. The marginal benefit from a purse is

Accepted Answer

A) $40. 
B) $50. 
C) $10. 
D) $20. 
E) $30. 
A) $40. 
B) $50. 
C) $10. 
D) $20. 
E) $30.

Question 8

Allocative efficiency refers to a situation where

Accepted Answer

A) opportunity costs are equal. 
B) we cannot produce more of any one good without giving up some other good. 
C) goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit. 
D) opportunity cost is zero. 
E) marginal benefit is maximized. 
A) opportunity costs are equal. 
B) we cannot produce more of any one good without giving up some other good. 
C) goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit. 
D) opportunity cost is zero. 
E) marginal benefit is maximized.

Question 9

There are two goods, X and Y. If the opportunity cost of producing good X is lower for Pam than for Gino, then

Accepted Answer

A) Pam has an absolute advantage in the production of X. 
B) Gino has an absolute advantage in the production of Y. 
C) Pam has a comparative advantage in the production of X. 
D) Gino has a comparative advantage in the production of Y. 
E) C and D 
A) Pam has an absolute advantage in the production of X. 
B) Gino has an absolute advantage in the production of Y. 
C) Pam has a comparative advantage in the production of X. 
D) Gino has a comparative advantage in the production of Y. 
E) C and D

Question 10

Markets I. enable buyers and sellers to get information.
II. are defined by economists as geographical locations where trade occurs.
III. have evolved because they facilitate trade.
Which of the above statements are correct?

Accepted Answer

A) I only 
B) III only 
C) I and III only 
D) II and III only 
E) I, II and III 
A) I only 
B) III only 
C) I and III only 
D) II and III only 
E) I, II and III

Question 11

Economic growth ________ overcome scarcity because ________.

Accepted Answer

A) does; with economic growth the PPF rotates outward and eventually becomes a horizontal line 
B) does; we will eventually reach the point where we have too much 
C) does not; we can produce more goods and services but it is still impossible to satisfy all our wants 
D) does not; economic growth requires capital accumulation and technological change 
E) does; with economic growth the PPF rotates outward and eventually becomes a vertical line 
A) does; with economic growth the PPF rotates outward and eventually becomes a horizontal line 
B) does; we will eventually reach the point where we have too much 
C) does not; we can produce more goods and services but it is still impossible to satisfy all our wants 
D) does not; economic growth requires capital accumulation and technological change 
E) does; with economic growth the PPF rotates outward and eventually becomes a vertical line

Question 12

Use the table below to answer the following questions.
Table 2.4.2
Production for one week by Sheila and Bruce
  
-Given the information in Table 2.4.2, which one of the following is true?

Accepted Answer

A) Sheila has a comparative advantage in good X. 
B) Bruce has a comparative advantage in good X. 
C) The opportunity cost to Bruce of an additional unit of X is 0.4 units of Y. 
D) A and B 
E) B and C 
A) Sheila has a comparative advantage in good X. 
B) Bruce has a comparative advantage in good X. 
C) The opportunity cost to Bruce of an additional unit of X is 0.4 units of Y. 
D) A and B 
E) B and C

Question 13

If Sam is producing at a point on his production possibilities frontier, then he

Accepted Answer

A) cannot produce any more of either good. 
B) is unaffected by costs and technology. 
C) can produce more of both goods. 
D) is not subject to scarcity. 
E) can increase the production of one good only by decreasing the production of the other. 
A) cannot produce any more of either good. 
B) is unaffected by costs and technology. 
C) can produce more of both goods. 
D) is not subject to scarcity. 
E) can increase the production of one good only by decreasing the production of the other.

Question 14

Use the figure below to answer the following questions.
Table 2.4.1
The planets of Vulcan and Romulus each produce goods X and Y.
The following table gives points on their production possibilities frontiers.
  
-Refer to Table 2.4.1. Which one of the following is true?

Accepted Answer

A) The opportunity cost of producing more of good X is the same for both planets. 
B) The opportunity cost of producing more of good Y is the same for both planets. 
C) The opportunity cost of producing more of good X is lower in Vulcan. 
D) The opportunity cost of producing more of good Y is lower in Vulcan. 
E) Vulcans are smarter than Romulans. 
A) The opportunity cost of producing more of good X is the same for both planets. 
B) The opportunity cost of producing more of good Y is the same for both planets. 
C) The opportunity cost of producing more of good X is lower in Vulcan. 
D) The opportunity cost of producing more of good Y is lower in Vulcan. 
E) Vulcans are smarter than Romulans.

Question 15

Use the figure below to answer the following question.
   
Figure 2.1.4
-Refer to the production possibilities frontier in Figure 2.1.4. Which point is unattainable?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
E) E 
A) A 
B) B 
C) C 
D) D 
E) E

Question 16

Use the figure below to answer the following questions.
   
Figure 2.1.2
-Refer to the production possibilities frontier in Figure 2.1.2. At point A, the opportunity cost of producing 3 more units of X

Accepted Answer

A) is 30 units of Y. 
B) is 3 units of X. 
C) is 20 units of Y. 
D) is 10 units of Y. 
E) cannot be determined from the diagram. 
A) is 30 units of Y. 
B) is 3 units of X. 
C) is 20 units of Y. 
D) is 10 units of Y. 
E) cannot be determined from the diagram.

Question 17

Use the figure below to answer the following questions.
Table 2.4.1
The planets of Vulcan and Romulus each produce goods X and Y.
The following table gives points on their production possibilities frontiers.
  
-Refer to Table 2.4.1. For Romulus, the opportunity cost of producing an additional unit of Y is

Accepted Answer

A) 2/3 units of X. 
B) 1/2 unit of X. 
C) 2 units of X. 
D) 3 units of X. 
E) 3/2 units of Y. 
A) 2/3 units of X. 
B) 1/2 unit of X. 
C) 2 units of X. 
D) 3 units of X. 
E) 3/2 units of Y.

Question 18

Use the figure below to answer the following questions.
   
Figure 2.1.6
-Figure 2.1.6 shows the production possibilities frontier for a firm that produces pet food. Point A is ________ and point B is ________.

Accepted Answer

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

Question 19

To describe preferences, economists use the concept of

Accepted Answer

A) opportunity cost. 
B) scarcity. 
C) marginal benefit. 
D) marginal cost. 
E) price. 
A) opportunity cost. 
B) scarcity. 
C) marginal benefit. 
D) marginal cost. 
E) price.

Question 20

Use the figure below to answer the following questions.
Table 2.4.1
The planets of Vulcan and Romulus each produce goods X and Y.
The following table gives points on their production possibilities frontiers.
  
-Refer to Table 2.4.1. Each country will gain from trade if

Accepted Answer

A) Romulus specializes in both goods. 
B) Vulcan specializes in both goods. 
C) they both continue to produce both goods. 
D) Vulcan specializes in good X and Romulus specializes in good Y. 
E) Romulus specializes in good X and Vulcan specializes in good Y. 
A) Romulus specializes in both goods. 
B) Vulcan specializes in both goods. 
C) they both continue to produce both goods. 
D) Vulcan specializes in good X and Romulus specializes in good Y. 
E) Romulus specializes in good X and Vulcan specializes in good Y.

Exam 2: The Economic Problem

The flows in the market economy that go from firms to households are ________. The flows in the market economy that go from households to firms are ________.

Table 2.1.1 The following table gives points on the production possibilities frontier for goods X and Y. -The economy illustrated by the data in Table 2.1.1 exhibits

The quantity of shoes produced is measured along the x-axis of a bowed-outward production possibilities frontier and the quantity of shirts produced is measured along the y-axis. As you move down towards the right along the production possibilities frontier, the marginal cost of

Use the figure below to answer the following questions. Figure 2.1.1 -Complete the following sentence. In Figure 2.1.1,

The most anyone is willing to pay for another purse is $30. Currently the price of a purse is $40, and the cost of producing another purse is $50. The marginal benefit from a purse is

Allocative efficiency refers to a situation where

There are two goods, X and Y. If the opportunity cost of producing good X is lower for Pam than for Gino, then

Markets I. enable buyers and sellers to get information. II. are defined by economists as geographical locations where trade occurs. III. have evolved because they facilitate trade. Which of the above statements are correct?

Economic growth ________ overcome scarcity because ________.

Use the table below to answer the following questions. Table 2.4.2 Production for one week by Sheila and Bruce -Given the information in Table 2.4.2, which one of the following is true?

If Sam is producing at a point on his production possibilities frontier, then he

Use the figure below to answer the following questions. Table 2.4.1 The planets of Vulcan and Romulus each produce goods X and Y. The following table gives points on their production possibilities frontiers. -Refer to Table 2.4.1. Which one of the following is true?

Use the figure below to answer the following question. Figure 2.1.4 -Refer to the production possibilities frontier in Figure 2.1.4. Which point is unattainable?

Use the figure below to answer the following questions. Figure 2.1.2 -Refer to the production possibilities frontier in Figure 2.1.2. At point A, the opportunity cost of producing 3 more units of X

Use the figure below to answer the following questions. Figure 2.1.6 -Figure 2.1.6 shows the production possibilities frontier for a firm that produces pet food. Point A is ________ and point B is ________.

To describe preferences, economists use the concept of

Use the figure below to answer the following questions. Table 2.4.1 The planets of Vulcan and Romulus each produce goods X and Y. The following table gives points on their production possibilities frontiers. -Refer to Table 2.4.1. Each country will gain from trade if

What Is Economics

Demand and Supply

Elasticity

Efficiency and Equity

Governments Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

Filters

The flows in the market economy that go from firms to households are . The flows in the market economy that go from households to firms are .

Economic growth overcome scarcity because .

Use the figure below to answer the following questions. Figure 2.1.6 -Figure 2.1.6 shows the production possibilities frontier for a firm that produces pet food. Point A is and point B is .