Question 1

Opportunity cost is defined as

Accepted Answer

A)  the value of the next-best alternative that must be sacrificed to attain a want. 
B)  the least-costly means to produce output. 
C)  the value of the output currently received by an individual or a corporation. 
D)  the return from a given unit of labor. 
A)  the value of the next-best alternative that must be sacrificed to attain a want. 
B)  the least-costly means to produce output. 
C)  the value of the output currently received by an individual or a corporation. 
D)  the return from a given unit of labor.

Question 2

As an economy moves from point to point along its production possibilities curve, which one of the following variables changes?

Accepted Answer

A)  the total amount of resources employed 
B)  the level of technology 
C)  the time frame under consideration 
D)  the amount of each good or service produced 
A)  the total amount of resources employed 
B)  the level of technology 
C)  the time frame under consideration 
D)  the amount of each good or service produced

Question 3

-Refer to the above figure. If the farmer is producing 4,000 bushels of beans and 38,000 bushels of wheat, then we know the farmer

Accepted Answer

A)  is using resources efficiently. 
B)  is producing too much wheat. 
C)  is inefficient because point a is the most efficient point on the curve. 
D)  must be using more resources than were assumed available in constructing the graph. 
A)  is using resources efficiently. 
B)  is producing too much wheat. 
C)  is inefficient because point a is the most efficient point on the curve. 
D)  must be using more resources than were assumed available in constructing the graph.

Question 4

The production possibilities curve (PPC) illustrates economic growth by a(n)

Accepted Answer

A)  bowed-out shape of the PPC. 
B)  outward shift of the PPC. 
C)  inward shift of the PPC. 
D)  movement along the PPC. 
A)  bowed-out shape of the PPC. 
B)  outward shift of the PPC. 
C)  inward shift of the PPC. 
D)  movement along the PPC.

Question 5

-In the above figure, points u, v, y, and z show

Accepted Answer

A)  an inefficient allocation of society's scarce resources. 
B)  possible combinations of televisions and personal computers. 
C)  a constant trade-off between televisions and personal computers. 
D)  that society prefers more televisions than computers. 
A)  an inefficient allocation of society's scarce resources. 
B)  possible combinations of televisions and personal computers. 
C)  a constant trade-off between televisions and personal computers. 
D)  that society prefers more televisions than computers.

Question 6

Which of the following statements is FALSE about opportunity cost?

Accepted Answer

A)  Cost is always foregone opportunity. 
B)  Opportunity cost is the next best alternative. 
C)  John wants a burger and fries. The concept of opportunity cost applies even though he has enough funds to buy both. 
D)  Opportunity cost exists only for goods with monetary values. 
A)  Cost is always foregone opportunity. 
B)  Opportunity cost is the next best alternative. 
C)  John wants a burger and fries. The concept of opportunity cost applies even though he has enough funds to buy both. 
D)  Opportunity cost exists only for goods with monetary values.

Question 7

An example of an entrepreneur would be

Accepted Answer

A)  the owner of a new Indian food restaurant. 
B)  the cafeteria employee who won the employee of the month award. 
C)  a Greyhound bus driver. 
D)  the cashier at your local supermarket. 
A)  the owner of a new Indian food restaurant. 
B)  the cafeteria employee who won the employee of the month award. 
C)  a Greyhound bus driver. 
D)  the cashier at your local supermarket.

Question 8

Why do most people specialize in their work?

Accepted Answer

Most people specialize because

Question 9

Juanita has just opened a new business selling pet supplies through the Internet.

Accepted Answer

A)  Juanita is an entrepreneur. 
B)  Juanita is not providing economic goods since people purchase the goods. 
C)  Juanita is not providing economic goods since pet supplies are not being sold in a store. 
D)  Juanita is not an entrepreneur since there are other businesses that sell pet supplies. 
A)  Juanita is an entrepreneur. 
B)  Juanita is not providing economic goods since people purchase the goods. 
C)  Juanita is not providing economic goods since pet supplies are not being sold in a store. 
D)  Juanita is not an entrepreneur since there are other businesses that sell pet supplies.

Question 10

The reason the production possibilities curve is bowed outward (concave) is

Accepted Answer

A)  the law of increasing additional cost. 
B)  that technology is constantly changing. 
C)  that the number of resources is increasing. 
D)  that the economy has more capital goods than entrepreneurial effort. 
A)  the law of increasing additional cost. 
B)  that technology is constantly changing. 
C)  that the number of resources is increasing. 
D)  that the economy has more capital goods than entrepreneurial effort.

Question 11

"Because resources are scarce, the production of more capital goods means that fewer resources are available to produce consumption goods, so there is less current consumption." Do you agree or disagree? Explain.

Accepted Answer

Agree. Capital goods are goods that are

Question 12

Specialization occurs because

Accepted Answer

A)  society trades current consumption for future consumption. 
B)  the production possibilities curve tends to be linear. 
C)  people have different skills. 
D)  society produces made the production possibilities curve. 
A)  society trades current consumption for future consumption. 
B)  the production possibilities curve tends to be linear. 
C)  people have different skills. 
D)  society produces made the production possibilities curve.

Question 13

-Refer to the above figure. The shape of the production possibility curve indicates that production of

Accepted Answer

A)  wheat is characterized by increasing costs while the production of beans is characterized by decreasing costs. 
B)  wheat is characterized by decreasing costs while the production of beans is characterized by increasing costs. 
C)  both goods are characterized by increasing costs. 
D)  both goods are characterized by decreasing costs. 
A)  wheat is characterized by increasing costs while the production of beans is characterized by decreasing costs. 
B)  wheat is characterized by decreasing costs while the production of beans is characterized by increasing costs. 
C)  both goods are characterized by increasing costs. 
D)  both goods are characterized by decreasing costs.

Question 14

Bill Bonecrusher graduates from college with a choice of playing professional football at $2 million a year or coaching for $50,000 a year. He decides to play football, but eight years later he quits football to make movies for $3 million a year. His opportunity cost at graduation was ________ and eight years later was ________.

Accepted Answer

A)  $50,000; $2 million 
B)  $2 million; $2 million 
C)  $2 million; $3 million 
D)  $50,000; $50,000 
A)  $50,000; $2 million 
B)  $2 million; $2 million 
C)  $2 million; $3 million 
D)  $50,000; $50,000

Question 15

Stephanie has decided to eat lunch between classes. She has ranked her choices, from highest to lowest as, (1) turkey sandwich, (2) tuna sandwich, (3) slice of cheese pizza, (4) cheeseburger. The opportunity cost of the eating turkey sandwich is

Accepted Answer

A)  the combined value of the tuna sandwich, slice of cheese pizza and cheeseburger. 
B)  the value of tuna sandwich, the next best choice. 
C)  the value of the cheeseburger. 
D)  zero since she has satisfied a want. 
A)  the combined value of the tuna sandwich, slice of cheese pizza and cheeseburger. 
B)  the value of tuna sandwich, the next best choice. 
C)  the value of the cheeseburger. 
D)  zero since she has satisfied a want.

Question 16

A friend says, "I really, really need a new car." As an economist, you're thinking

Accepted Answer

A)  Right! Everyone needs a new car. 
B)  This is an example of how objectively undefinable needs are. Many would argue that this friend could get along just fine with a reliable used car. 
C)  If this friend says she needs a new car, then we must all agree that a new car is a need and not just a want. 
D)  that a new car can only be considered a need if at least 51% of the public agrees. 
A)  Right! Everyone needs a new car. 
B)  This is an example of how objectively undefinable needs are. Many would argue that this friend could get along just fine with a reliable used car. 
C)  If this friend says she needs a new car, then we must all agree that a new car is a need and not just a want. 
D)  that a new car can only be considered a need if at least 51% of the public agrees.

Question 17

An improvement in technology will shift the production possibilities curve

Accepted Answer

A)  to the left. 
B)  along the curve. 
C)  inward. 
D)  to the right. 
A)  to the left. 
B)  along the curve. 
C)  inward. 
D)  to the right.

Question 18

Are all goods economic goods? Are all economic goods also goods? Explain.

Accepted Answer

Not all goods are economic goods. Econom

Question 19

Carlos is an executive of a major corporation. Boris is a baker. Carlos earns a salary ten times as large as the salary Boris earns, and Carlos has a much larger oven for baking break. Carlos can make a loaf of bread that tastes better than Boris's bread but Boris can bake faster.

Accepted Answer

A)  Carlos has an absolute and comparative advantage over Boris in making bread. 
B)  Carlos has an absolute but not comparative advantage over Boris in making bread. 
C)  Carlos had a comparative but not absolute advantage over Boris in making bread. 
D)  Carlos does not have an absolute or comparative advantage over Boris in making bread. 
A)  Carlos has an absolute and comparative advantage over Boris in making bread. 
B)  Carlos has an absolute but not comparative advantage over Boris in making bread. 
C)  Carlos had a comparative but not absolute advantage over Boris in making bread. 
D)  Carlos does not have an absolute or comparative advantage over Boris in making bread.

Question 20

In economics, physical capital includes

Accepted Answer

A)  money. 
B)  bank accounts. 
C)  machinery. 
D)  shares of stock. 
A)  money. 
B)  bank accounts. 
C)  machinery. 
D)  shares of stock.

Exam 2: Scarcity and the World of Trade-Offs

Opportunity cost is defined as

As an economy moves from point to point along its production possibilities curve, which one of the following variables changes?

-Refer to the above figure. If the farmer is producing 4,000 bushels of beans and 38,000 bushels of wheat, then we know the farmer

The production possibilities curve (PPC) illustrates economic growth by a(n)

-In the above figure, points u, v, y, and z show

Which of the following statements is FALSE about opportunity cost?

An example of an entrepreneur would be

Why do most people specialize in their work?

Juanita has just opened a new business selling pet supplies through the Internet.

The reason the production possibilities curve is bowed outward (concave) is

"Because resources are scarce, the production of more capital goods means that fewer resources are available to produce consumption goods, so there is less current consumption." Do you agree or disagree? Explain.

Specialization occurs because

-Refer to the above figure. The shape of the production possibility curve indicates that production of

Stephanie has decided to eat lunch between classes. She has ranked her choices, from highest to lowest as, (1) turkey sandwich, (2) tuna sandwich, (3) slice of cheese pizza, (4) cheeseburger. The opportunity cost of the eating turkey sandwich is

A friend says, "I really, really need a new car." As an economist, you're thinking

An improvement in technology will shift the production possibilities curve

Are all goods economic goods? Are all economic goods also goods? Explain.

Carlos is an executive of a major corporation. Boris is a baker. Carlos earns a salary ten times as large as the salary Boris earns, and Carlos has a much larger oven for baking break. Carlos can make a loaf of bread that tastes better than Boris's bread but Boris can bake faster.

In economics, physical capital includes

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

Measuring the Economys Performance

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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