Question 1

Education increases the stock of which factor of production?

Accepted Answer

A) physical capital 
B) human capital 
C) land 
D) entrepreneurship 
A) physical capital 
B) human capital 
C) land 
D) entrepreneurship B

Question 2

Labor, human capital, and entrepreneurship are resources related to human beings. Distinguish among the three resources.

Accepted Answer

Labor is the work done by human beings. Human capital refers to the worker education and training that makes human beings more productive. Whenever a worker's skills increase, there has been an improvement of human capital. Entrepreneurship refers to the use of human beings in organizing, managing, and assembling the other factors of production to make business ventures.

Question 3

Bonnie volunteers to help make floral arrangements at a flower shop. She is an example of

Accepted Answer

A) entrepreneurial ability. 
B) labor. 
C) physical capital. 
D) human capital. 
A) entrepreneurial ability. 
B) labor. 
C) physical capital. 
D) human capital. B

Question 4

When nations specialize in their areas of comparative advantage and then trade with the rest of the world, the result is that

Accepted Answer

A) the average standard of living in the world will go down. 
B) the average standard of living in the world will go up. 
C) the world will move from a point on the production possibilities curve to a point inside the curve. 
D) worldwide economic efficiency will decrease. 
A) the average standard of living in the world will go down. 
B) the average standard of living in the world will go up. 
C) the world will move from a point on the production possibilities curve to a point inside the curve. 
D) worldwide economic efficiency will decrease.

Question 5

Opportunity cost

Accepted Answer

A) can only be measured as a paid cost. 
B) is always the value of the next best forgone opportunity. 
C) does not exist since there are no receipts. 
D) is always the lowest valued alternative. 
A) can only be measured as a paid cost. 
B) is always the value of the next best forgone opportunity. 
C) does not exist since there are no receipts. 
D) is always the lowest valued alternative.

Question 6

The accumulated training and education that you have is

Accepted Answer

A) physical capital. 
B) entrepreneurship. 
C) economic goods. 
D) human capital. 
A) physical capital. 
B) entrepreneurship. 
C) economic goods. 
D) human capital.

Question 7

A waitress brings a free glass of wine when you sit down in a restaurant. This glass of wine is

Accepted Answer

A) a service because the waitress carried it instead of making it. 
B) a good, but not an economic good because there is no price charged for the wine. 
C) a nongood because there is no price charged for the wine. 
D) an economic good because wine is produced with scarce resources, even if it is free to you. 
A) a service because the waitress carried it instead of making it. 
B) a good, but not an economic good because there is no price charged for the wine. 
C) a nongood because there is no price charged for the wine. 
D) an economic good because wine is produced with scarce resources, even if it is free to you.

Question 8

How does an economy represented by a straight-line production possibilities curve differ from one represented by a traditional production possibilities curve with a bowed shape?

Accepted Answer

A) In the economy represented by a straight-line production possibilities curve, there is no opportunity cost. 
B) In the economy represented by a straight-line production possibilities curve, neither good is scarce. 
C) In the economy represented by a straight-line production possibilities curve, the law of increasing relative cost does not apply. 
D) In the economy represented by a straight-line production possibilities curve, changing the amount of resources devoted to the production of each good will not alter the amount of each good actually produced. 
A) In the economy represented by a straight-line production possibilities curve, there is no opportunity cost. 
B) In the economy represented by a straight-line production possibilities curve, neither good is scarce. 
C) In the economy represented by a straight-line production possibilities curve, the law of increasing relative cost does not apply. 
D) In the economy represented by a straight-line production possibilities curve, changing the amount of resources devoted to the production of each good will not alter the amount of each good actually produced.

Question 9

The opportunity cost of a decision is the

Accepted Answer

A) value of the best alternative not chosen. 
B) value of all the alternatives not chosen. 
C) cost of making the wrong choice. 
D) cost incurred by others who are unhappy with your decision. 
A) value of the best alternative not chosen. 
B) value of all the alternatives not chosen. 
C) cost of making the wrong choice. 
D) cost incurred by others who are unhappy with your decision.

Question 10

-Refer to the above figure. How do you describe what is happening as the economy moves from point C to point B?

Accepted Answer

A) Previously unemployed resources are now being devoted to the production of wool. 
B) Previously unemployed resources are now being devoted to the production of bread. 
C) The economy has increased its wool production by 30 bales at an opportunity cost of 250 loaves of bread. 
D) The economy has acquired new resources for making bread. 
A) Previously unemployed resources are now being devoted to the production of wool. 
B) Previously unemployed resources are now being devoted to the production of bread. 
C) The economy has increased its wool production by 30 bales at an opportunity cost of 250 loaves of bread. 
D) The economy has acquired new resources for making bread.

Question 11

You should specialize in the production of a good if you have

Accepted Answer

A) an absolute advantage. 
B) more capital resources than your trading partner. 
C) more human resources than your trading partner. 
D) a comparative advantage. 
A) an absolute advantage. 
B) more capital resources than your trading partner. 
C) more human resources than your trading partner. 
D) a comparative advantage.

Question 12

Division of labor means that

Accepted Answer

A) the labor market in the United States is geographically segmented. 
B) some employees join labor unions and others do not. 
C) management and labor are always in conflict. 
D) the production process is divided into smaller tasks. 
A) the labor market in the United States is geographically segmented. 
B) some employees join labor unions and others do not. 
C) management and labor are always in conflict. 
D) the production process is divided into smaller tasks.

Question 13

You like to sleep until 11:00 am during the semester. What is the opportunity cost of attending an 8:00 am class?

Accepted Answer

A) nothing, since you can go back to bed later 
B) sleep 
C) obtaining the notes from the 8:00 am class 
D) the money you spend on coffee to stay awake 
A) nothing, since you can go back to bed later 
B) sleep 
C) obtaining the notes from the 8:00 am class 
D) the money you spend on coffee to stay awake

Question 14

The production possibilities curve represents

Accepted Answer

A) the total amount of stocks and bonds that exist in the economy. 
B) the trade-off between human capital and physical capital that exists. 
C) all possible combinations of total output that can be produced. 
D) society's needs. 
A) the total amount of stocks and bonds that exist in the economy. 
B) the trade-off between human capital and physical capital that exists. 
C) all possible combinations of total output that can be produced. 
D) society's needs.

Question 15

Opportunity cost exists because of

Accepted Answer

A) poverty. 
B) scarcity. 
C) greed. 
D) self-interest. 
A) poverty. 
B) scarcity. 
C) greed. 
D) self-interest.

Question 16

Suppose an acre of land yields 100 bushels of corn and that one bushel of corn provides enough seed for one-quarter of an acre of land. The opportunity cost of consuming another 100 bushels of corn today is

Accepted Answer

A) 100 bushels of corn next year. 
B) 25 bushels of corn next year. 
C) 10 bushels of corn next year. 
D) 2.5 bushels of corn next year. 
A) 100 bushels of corn next year. 
B) 25 bushels of corn next year. 
C) 10 bushels of corn next year. 
D) 2.5 bushels of corn next year.

Question 17

A production possibilities curve with quantities of clothing and food on the axes shows which of the following?
I. A society cannot have an unlimited amount of each good.
II. For an efficient society, an increase in clothing production will necessitate a decrease in food production.
III. A society will always produce the maximum amount of both clothing and food.

Accepted Answer

A) I only 
B) II only 
C) III only 
D) Both I and II 
A) I only 
B) II only 
C) III only 
D) Both I and II

Question 18

The idea of comparative advantage is related to

Accepted Answer

A) the idea of opportunity cost. 
B) the idea of absolute advantage. 
C) using the worker with the most diverse sets of skills. 
D) engineering efficiency. 
A) the idea of opportunity cost. 
B) the idea of absolute advantage. 
C) using the worker with the most diverse sets of skills. 
D) engineering efficiency.

Question 19

Other things being equal, you can make $20,000 a year teaching, $25,000 a year typing, $30,000 a year driving a cab, and $40,000 a year as a chef. You have a comparative advantage in

Accepted Answer

A) teaching. 
B) driving a cab. 
C) being a chef. 
D) one of them but we need more information to know which. 
A) teaching. 
B) driving a cab. 
C) being a chef. 
D) one of them but we need more information to know which.

Question 20

Why specialize?

Accepted Answer

A) because assigning each worker a variety of tasks makes her more productive 
B) It usually increases productivity. 
C) to decrease our dependence on each other 
D) There is no economic rationale for specialization. 
A) because assigning each worker a variety of tasks makes her more productive 
B) It usually increases productivity. 
C) to decrease our dependence on each other 
D) There is no economic rationale for specialization.

Education increases the stock of which factor of production?

Labor, human capital, and entrepreneurship are resources related to human beings. Distinguish among the three resources.

Bonnie volunteers to help make floral arrangements at a flower shop. She is an example of

When nations specialize in their areas of comparative advantage and then trade with the rest of the world, the result is that

Opportunity cost

The accumulated training and education that you have is

A waitress brings a free glass of wine when you sit down in a restaurant. This glass of wine is

How does an economy represented by a straight-line production possibilities curve differ from one represented by a traditional production possibilities curve with a bowed shape?

The opportunity cost of a decision is the

-Refer to the above figure. How do you describe what is happening as the economy moves from point C to point B?

You should specialize in the production of a good if you have

Division of labor means that

You like to sleep until 11:00 am during the semester. What is the opportunity cost of attending an 8:00 am class?

The production possibilities curve represents

Opportunity cost exists because of

Suppose an acre of land yields 100 bushels of corn and that one bushel of corn provides enough seed for one-quarter of an acre of land. The opportunity cost of consuming another 100 bushels of corn today is

The idea of comparative advantage is related to

Other things being equal, you can make $20,000 a year teaching, $25,000 a year typing, $30,000 a year driving a cab, and $40,000 a year as a chef. You have a comparative advantage in

Why specialize?

The Nature of Economics

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 2: Scarcity and the World of Trade-Offs

Education increases the stock of which factor of production?

Labor, human capital, and entrepreneurship are resources related to human beings. Distinguish among the three resources.

Bonnie volunteers to help make floral arrangements at a flower shop. She is an example of

When nations specialize in their areas of comparative advantage and then trade with the rest of the world, the result is that

Opportunity cost

The accumulated training and education that you have is

A waitress brings a free glass of wine when you sit down in a restaurant. This glass of wine is

How does an economy represented by a straight-line production possibilities curve differ from one represented by a traditional production possibilities curve with a bowed shape?

The opportunity cost of a decision is the

-Refer to the above figure. How do you describe what is happening as the economy moves from point C to point B?

You should specialize in the production of a good if you have

Division of labor means that

You like to sleep until 11:00 am during the semester. What is the opportunity cost of attending an 8:00 am class?

The production possibilities curve represents

Opportunity cost exists because of

Suppose an acre of land yields 100 bushels of corn and that one bushel of corn provides enough seed for one-quarter of an acre of land. The opportunity cost of consuming another 100 bushels of corn today is

The idea of comparative advantage is related to

Other things being equal, you can make $20,000 a year teaching, $25,000 a year typing, $30,000 a year driving a cab, and $40,000 a year as a chef. You have a comparative advantage in

Why specialize?

The Nature of Economics

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters