Question 1

An example of physical capital is:

Accepted Answer

A)  a $100 bill. 
B)  a stock certificate. 
C)  a chainsaw. 
D)  a cheeseburger. 
A)  a $100 bill. 
B)  a stock certificate. 
C)  a chainsaw. 
D)  a cheeseburger.

Question 2

A country has a comparative advantage in the production of DVD players if it can produce DVD players at a lower opportunity cost than others.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is part of the economic way of thinking?

Accepted Answer

A)  When an option becomes less beneficial, individuals will become more likely to choose it. 
B)  Costs are incurred whenever scarce resources are used to produce goods or services. 
C)  The value of a good is determined by its cost of production. 
D)  Both a. and b. are part of the economic way of thinking. 
A)  When an option becomes less beneficial, individuals will become more likely to choose it. 
B)  Costs are incurred whenever scarce resources are used to produce goods or services. 
C)  The value of a good is determined by its cost of production. 
D)  Both a. and b. are part of the economic way of thinking.

Question 4

If airfares to Europe were to increase,an economist would predict that:

Accepted Answer

A)  most people will not change their travel and vacation plans. 
B)  more individuals will choose to fly to Europe because now it is a more valuable experience. 
C)  some individuals will substitute toward other travel destinations. 
D)  airlines will make significantly greater profits. 
A)  most people will not change their travel and vacation plans. 
B)  more individuals will choose to fly to Europe because now it is a more valuable experience. 
C)  some individuals will substitute toward other travel destinations. 
D)  airlines will make significantly greater profits.

Question 5

The rule of rational choice suggests that you will engage in more of an activity if:

Accepted Answer

A)  the total benefit from that activity exceeds the total cost of the activity. 
B)  the total cost from that activity exceeds the total benefit of the activity. 
C)  the additional cost incurred as a result of the activity exceeds the additional benefit received. 
D)  the additional benefit received as a result of the activity exceeds the additional cost incurred. 
A)  the total benefit from that activity exceeds the total cost of the activity. 
B)  the total cost from that activity exceeds the total benefit of the activity. 
C)  the additional cost incurred as a result of the activity exceeds the additional benefit received. 
D)  the additional benefit received as a result of the activity exceeds the additional cost incurred.

Question 6

Jamie and Danny both attend the same college and incur the same expenses for tuition,books,and school supplies.Jamie gave up a lucrative modeling job in Paris to attend school full-time and Danny gave up a part-time job as a sales clerk in a department store.It follows that:

Accepted Answer

A)  the opportunity cost of attending college is the same for both since they are enrolled at the same academic institution. 
B)  the opportunity cost of attending college is likely greater for Jamie than for Danny. 
C)  the opportunity cost of attending college is likely greater for Danny than for Jamie. 
D)  the opportunity cost is minimal for both since college graduates are paid much higher than high school graduates on average. 
A)  the opportunity cost of attending college is the same for both since they are enrolled at the same academic institution. 
B)  the opportunity cost of attending college is likely greater for Jamie than for Danny. 
C)  the opportunity cost of attending college is likely greater for Danny than for Jamie. 
D)  the opportunity cost is minimal for both since college graduates are paid much higher than high school graduates on average.

Question 7

Pollution damages the environment we live in.An economist would advise that we reduce air pollution:

Accepted Answer

A)  as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction. 
B)  until the total benefit from air pollution reduction just equals the total cost of pollution reduction. 
C)  until air pollution levels reach near-zero levels. 
D)  to the levels experienced in the 1950s when air was much cleaner near big cities. 
A)  as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction. 
B)  until the total benefit from air pollution reduction just equals the total cost of pollution reduction. 
C)  until air pollution levels reach near-zero levels. 
D)  to the levels experienced in the 1950s when air was much cleaner near big cities.

Question 8

Which of the following would be an example of market failure?

Accepted Answer

A)  second hand cigarette smoke 
B)  lack of funding for education 
C)  underproduction of a good by a monopoly 
D)  all of the above 
A)  second hand cigarette smoke 
B)  lack of funding for education 
C)  underproduction of a good by a monopoly 
D)  all of the above

Question 9

Inflation is an increase in the overall price level in the economy.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following serve as the language of the market system?

Accepted Answer

A)  Monetary and fiscal policies 
B)  Volatility 
C)  Market prices 
D)  Governments 
A)  Monetary and fiscal policies 
B)  Volatility 
C)  Market prices 
D)  Governments

Question 11

Economic choices or tradeoffs are the result of:

Accepted Answer

A)  basic human greed. 
B)  scarcity. 
C)  poverty. 
D)  private ownership of resources. 
A)  basic human greed. 
B)  scarcity. 
C)  poverty. 
D)  private ownership of resources.

Question 12

When a person possesses a comparative advantage in the production of one good or service,it:

Accepted Answer

A)  means that the person's opportunity cost is higher than for that of other goods. 
B)  discourages specialization. 
C)  promotes greater self-sufficiency. 
D)  permits gains from trade to be realized due to a more efficient use of resources. 
A)  means that the person's opportunity cost is higher than for that of other goods. 
B)  discourages specialization. 
C)  promotes greater self-sufficiency. 
D)  permits gains from trade to be realized due to a more efficient use of resources.

Question 13

Exhibit 2-1   Refer to Exhibit 2-1.A student has only a few hours to prepare for two different exams this afternoon.The above table shows alternative possible exam scores with three alternative uses of the student's time.The opportunity cost of scoring a 94 on the economics exam rather than a 77 is:

Accepted Answer

A)  8 points on the history exam. 
B)  15 points on the history exam. 
C)  76 points on the history exam. 
D)  91 points on the history exam. 
A)  8 points on the history exam. 
B)  15 points on the history exam. 
C)  76 points on the history exam. 
D)  91 points on the history exam.

Question 14

Scarcity:

Accepted Answer

A)  exists in command economies. 
B)  exists in market economies. 
C)  exists only in economies in which there is poverty. 
D)  (a) and (b) above are correct 
A)  exists in command economies. 
B)  exists in market economies. 
C)  exists only in economies in which there is poverty. 
D)  (a) and (b) above are correct

Question 15

A nation has a comparative advantage in the production of cars over another nation if:

Accepted Answer

A)  it can produce cars with fewer resources than the other country. 
B)  it can produce cars at a lower opportunity cost than the other country. 
C)  it can produce cars at a higher opportunity cost than the other country. 
D)  it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country. 
A)  it can produce cars with fewer resources than the other country. 
B)  it can produce cars at a lower opportunity cost than the other country. 
C)  it can produce cars at a higher opportunity cost than the other country. 
D)  it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country.

Question 16

Rational choices:

Accepted Answer

A)  are based on a comparison of total benefits and total costs. 
B)  can only be made by those who are economists. 
C)  are made based on expectations of the additional benefits and additional costs involved. 
D)  measure benefits based on the past. 
A)  are based on a comparison of total benefits and total costs. 
B)  can only be made by those who are economists. 
C)  are made based on expectations of the additional benefits and additional costs involved. 
D)  measure benefits based on the past.

Question 17

Which of the following is the most critical signaling mechanism in markets?

Accepted Answer

A)  quantity 
B)  price 
C)  cost 
D)  government regulation 
A)  quantity 
B)  price 
C)  cost 
D)  government regulation

Question 18

Because of scarcity:

Accepted Answer

A)  we must sacrifice valuable alternatives to obtain more goods and services we desire. 
B)  the opportunity cost of consumption is zero. 
C)  we can obtain more of a desirable good without sacrificing other goods and services. 
D)  shortages of goods prevail at current market prices. 
A)  we must sacrifice valuable alternatives to obtain more goods and services we desire. 
B)  the opportunity cost of consumption is zero. 
C)  we can obtain more of a desirable good without sacrificing other goods and services. 
D)  shortages of goods prevail at current market prices.

Question 19

The opportunity cost of a decision is the value of all of the available alternatives that were not chosen.

Accepted Answer

A) True 
 B)False

Question 20

Every time an individual decides to try out new equipment,or finds better ways to manage money,he or she is exhibiting traits of:

Accepted Answer

A)  money management. 
B)  entrepreneurship. 
C)  strategic management. 
D)  capital management. 
A)  money management. 
B)  entrepreneurship. 
C)  strategic management. 
D)  capital management.

Exam 2: Economics: Eight Powerful Ideas

An example of physical capital is:

A country has a comparative advantage in the production of DVD players if it can produce DVD players at a lower opportunity cost than others.

Which of the following is part of the economic way of thinking?

If airfares to Europe were to increase,an economist would predict that:

The rule of rational choice suggests that you will engage in more of an activity if:

Jamie and Danny both attend the same college and incur the same expenses for tuition,books,and school supplies.Jamie gave up a lucrative modeling job in Paris to attend school full-time and Danny gave up a part-time job as a sales clerk in a department store.It follows that:

Pollution damages the environment we live in.An economist would advise that we reduce air pollution:

Which of the following would be an example of market failure?

Inflation is an increase in the overall price level in the economy.

Which of the following serve as the language of the market system?

Economic choices or tradeoffs are the result of:

When a person possesses a comparative advantage in the production of one good or service,it:

Exhibit 2-1 Refer to Exhibit 2-1.A student has only a few hours to prepare for two different exams this afternoon.The above table shows alternative possible exam scores with three alternative uses of the student's time.The opportunity cost of scoring a 94 on the economics exam rather than a 77 is:

Scarcity:

A nation has a comparative advantage in the production of cars over another nation if:

Rational choices:

Which of the following is the most critical signaling mechanism in markets?

Because of scarcity:

The opportunity cost of a decision is the value of all of the available alternatives that were not chosen.

Every time an individual decides to try out new equipment,or finds better ways to manage money,he or she is exhibiting traits of:

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

Filters