Question 1

-Refer to the above figure. Which one of the following statements is true with regard to the economy depicted in the graph?

Accepted Answer

A)  Starting from point A, this economy does not incur any opportunity cost in producing more bread. 
B)  Starting from point A, this economy does not incur any opportunity cost in producing more wool. 
C)  In moving from point A to point B, the economy produces 30 additional bales of wool at an opportunity cost of 250 loaves of bread. 
D)  In moving from point A to point B, the economy is experiencing economic growth. 
A)  Starting from point A, this economy does not incur any opportunity cost in producing more bread. 
B)  Starting from point A, this economy does not incur any opportunity cost in producing more wool. 
C)  In moving from point A to point B, the economy produces 30 additional bales of wool at an opportunity cost of 250 loaves of bread. 
D)  In moving from point A to point B, the economy is experiencing economic growth.

Question 2

Scarcity exists because

Accepted Answer

A)  the majority of people in the world are poor. 
B)  people are too greedy and refuse to share what they have with others. 
C)  human wants exceed what can be produced with the limited resources available. 
D)  not enough new technology is being used to eliminate scarcity. 
A)  the majority of people in the world are poor. 
B)  people are too greedy and refuse to share what they have with others. 
C)  human wants exceed what can be produced with the limited resources available. 
D)  not enough new technology is being used to eliminate scarcity.

Question 3

The problem of economic scarcity applies

Accepted Answer

A)  only in industrially developed countries, because resources are scarce in these nations. 
B)  only in underdeveloped countries, because there are no productive resources in these nations. 
C)  only in economic systems that are just beginning to develop, because specialized resources are scarce in developing nations. 
D)  to economic systems in all nations, regardless of their level of development. 
A)  only in industrially developed countries, because resources are scarce in these nations. 
B)  only in underdeveloped countries, because there are no productive resources in these nations. 
C)  only in economic systems that are just beginning to develop, because specialized resources are scarce in developing nations. 
D)  to economic systems in all nations, regardless of their level of development.

Question 4

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 5

Resources are also known as

Accepted Answer

A)  minerals. 
B)  factories. 
C)  factors of production. 
D)  stocks, bonds, and other financial instruments. 
A)  minerals. 
B)  factories. 
C)  factors of production. 
D)  stocks, bonds, and other financial instruments.

Question 6

-The shape of the production possibilities curve in the above figure indicates that

Accepted Answer

A)  production of corn is characterized by increasing costs while the production of cloth is characterized by decreasing costs. 
B)  production of both corn and cloth is characterized by increasing costs. 
C)  production of both corn and cloth is characterized by constant costs. 
D)  production of corn is characterized by constant costs and the production of cloth is characterized by increasing costs. 
A)  production of corn is characterized by increasing costs while the production of cloth is characterized by decreasing costs. 
B)  production of both corn and cloth is characterized by increasing costs. 
C)  production of both corn and cloth is characterized by constant costs. 
D)  production of corn is characterized by constant costs and the production of cloth is characterized by increasing costs.

Question 7

For every choice a person makes it can be assumed that

Accepted Answer

A)  the chooser has full knowledge of the situation. 
B)  some opportunity cost was involved. 
C)  there is a fifty-fifty chance the choice was the wrong one. 
D)  a good is involved and satisfaction is gained. 
A)  the chooser has full knowledge of the situation. 
B)  some opportunity cost was involved. 
C)  there is a fifty-fifty chance the choice was the wrong one. 
D)  a good is involved and satisfaction is gained.

Question 8

The opportunity cost of more consumption of goods today is

Accepted Answer

A)  lower consumption of goods in the future. 
B)  fewer capital goods in the future. 
C)  more capital goods today. 
D)  more unemployment both today and in the future. 
A)  lower consumption of goods in the future. 
B)  fewer capital goods in the future. 
C)  more capital goods today. 
D)  more unemployment both today and in the future.

Question 9

A bowed-outward production possibilities curve demonstrates the concept of

Accepted Answer

A)  constant opportunity costs as production shifts from the production of one good to the production of the other good. 
B)  decreasing opportunity costs as production shifts from the production of one good to the production of the other good. 
C)  increasing opportunity costs as production shifts from the production of one good to the production of the other good. 
D)  increasing opportunity costs at first but the opportunity costs steadily decrease as you move down along the curve. 
A)  constant opportunity costs as production shifts from the production of one good to the production of the other good. 
B)  decreasing opportunity costs as production shifts from the production of one good to the production of the other good. 
C)  increasing opportunity costs as production shifts from the production of one good to the production of the other good. 
D)  increasing opportunity costs at first but the opportunity costs steadily decrease as you move down along the curve.

Question 10

-In the above figure, the farmer faces a trade-off between beans and wheat equal to

Accepted Answer

A)  one-to-one. 
B)  three-to-one. 
C)  one-to-two. 
D)  one-to-four. 
A)  one-to-one. 
B)  three-to-one. 
C)  one-to-two. 
D)  one-to-four.

Question 11

The above table shows the daily production possibilities for a bakery.
Currently the bakery bakes 60 pizzas and 180 loaves of bread, that is-it is at alternative C.
-Using the above table but now the bakery bakes 30 pizzas and 240 loaves of bread (alternative

Accepted Answer

A)  2.5 loaves of bread 
B)  2 loaves of bread 
B) , moving from alternative B to alternative D, what is the opportunity cost of one pizza pie? 
C)  0.5 loaf of bread 
D)  150 loaves of bread 
A)  2.5 loaves of bread 
B)  2 loaves of bread 
B) , moving from alternative B to alternative D, what is the opportunity cost of one pizza pie? 
C)  0.5 loaf of bread 
D)  150 loaves of bread

Question 12

One of the benefits of specialization is

Accepted Answer

A)  greater output. 
B)  people enjoy doing one repetitive task over and over. 
C)  specialists cost less to hire. 
D)  training costs are higher. 
A)  greater output. 
B)  people enjoy doing one repetitive task over and over. 
C)  specialists cost less to hire. 
D)  training costs are higher.

Question 13

Which of the following is held constant when constructing a production possibilities curve?

Accepted Answer

A)  the price level 
B)  the income level 
C)  combination of goods produced 
D)  the amount of total resources used 
A)  the price level 
B)  the income level 
C)  combination of goods produced 
D)  the amount of total resources used

Question 14

The most basic concept of economics is

Accepted Answer

A)  self-interest. 
B)  scarcity. 
C)  demand. 
D)  rationality. 
A)  self-interest. 
B)  scarcity. 
C)  demand. 
D)  rationality.

Question 15

Oil found in Alaska is an example of

Accepted Answer

A)  physical capital. 
B)  land or natural resource. 
C)  human capital. 
D)  labor. 
A)  physical capital. 
B)  land or natural resource. 
C)  human capital. 
D)  labor.

Question 16

If Irene can make either four chairs or one table in an hour and Greg can make either three chairs or two tables in an hour, then

Accepted Answer

A)  Irene has the absolute advantage in the production of tables. 
B)  Greg has the absolute advantage in the production of chairs. 
C)  Irene has the comparative advantage in the production of chairs. 
D)  Greg has the comparative advantage in the production of chairs. 
A)  Irene has the absolute advantage in the production of tables. 
B)  Greg has the absolute advantage in the production of chairs. 
C)  Irene has the comparative advantage in the production of chairs. 
D)  Greg has the comparative advantage in the production of chairs.

Question 17

Efficiency is achieved

Accepted Answer

A)  when output is being produced at a point inside a production possibilities curve. 
B)  when producers are getting the maximum possible output from the available resources. 
C)  when consumers are able to buy everything that they want. 
D)  when prices of all goods and services go to zero. 
A)  when output is being produced at a point inside a production possibilities curve. 
B)  when producers are getting the maximum possible output from the available resources. 
C)  when consumers are able to buy everything that they want. 
D)  when prices of all goods and services go to zero.

Question 18

Which of the following is the LEAST scarce?

Accepted Answer

A)  college education 
B)  medicine 
C)  housing 
D)  air 
A)  college education 
B)  medicine 
C)  housing 
D)  air

Question 19

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 20

When an economy is operating efficiently, which is true?

Accepted Answer

A)  All resources are fully employed. 
B)  It would be possible to increase the output of 1 good without decreasing the output of the other. 
C)  Resources are not fully employed or current technology is not being fully utilized. 
D)  This economy is operating to the right of its production possibilities curve (PP
C) . 
A)  All resources are fully employed. 
B)  It would be possible to increase the output of 1 good without decreasing the output of the other. 
C)  Resources are not fully employed or current technology is not being fully utilized. 
D)  This economy is operating to the right of its production possibilities curve (PP
C) .

Exam 2: Scarcity and the World of Trade-Offs

-Refer to the above figure. Which one of the following statements is true with regard to the economy depicted in the graph?

Scarcity exists because

The problem of economic scarcity applies

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

Resources are also known as

-The shape of the production possibilities curve in the above figure indicates that

For every choice a person makes it can be assumed that

The opportunity cost of more consumption of goods today is

A bowed-outward production possibilities curve demonstrates the concept of

-In the above figure, the farmer faces a trade-off between beans and wheat equal to

The above table shows the daily production possibilities for a bakery. Currently the bakery bakes 60 pizzas and 180 loaves of bread, that is-it is at alternative C. -Using the above table but now the bakery bakes 30 pizzas and 240 loaves of bread (alternative

One of the benefits of specialization is

Which of the following is held constant when constructing a production possibilities curve?

The most basic concept of economics is

Oil found in Alaska is an example of

If Irene can make either four chairs or one table in an hour and Greg can make either three chairs or two tables in an hour, then

Efficiency is achieved

Which of the following is the LEAST scarce?

When an economy is operating efficiently, which is true?

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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