Question 1

Without an increase in the supplies of factors of production,how can a nation achieve economic growth?

Accepted Answer

A)  by producing more high-value goods and less of low-value goods 
B)  through technological advancement which enables more output with the same quantity of resources 
C)  by lowering the prices of factors of production 
D)  by increasing the prices of factors of production 
A)  by producing more high-value goods and less of low-value goods 
B)  through technological advancement which enables more output with the same quantity of resources 
C)  by lowering the prices of factors of production 
D)  by increasing the prices of factors of production

Question 2

The payment received by suppliers of entrepreneurial skills is called interest.

Accepted Answer

A) True 
 B)False

Question 3

Table 2-4

Table 2-4 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea.
-Refer to Table 2-4.China has a comparative advantage in the production of

Accepted Answer

A)  wheat. 
B)  digital cameras. 
C)  both products. 
D)  neither product. 
A)  wheat. 
B)  digital cameras. 
C)  both products. 
D)  neither product.

Question 4

A decrease in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point outside the frontier.

Accepted Answer

A) True 
 B)False

Question 5

The term "property rights" refers to

Accepted Answer

A)  the physical possession of a house or any other property which the owner legally purchased. 
B)  the ability to exercise control over one's own resources within the confines of the law. 
C)  the government's right to appropriate land from wealthy land owners to redistribute to peasants. 
D)  the right of a business not to have its assets confiscated by the government in the event that the business is accused of committing fraud. 
A)  the physical possession of a house or any other property which the owner legally purchased. 
B)  the ability to exercise control over one's own resources within the confines of the law. 
C)  the government's right to appropriate land from wealthy land owners to redistribute to peasants. 
D)  the right of a business not to have its assets confiscated by the government in the event that the business is accused of committing fraud.

Question 6

Figure 2-4

Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
-Refer to Figure 2-4.A movement from Y to Z

Accepted Answer

A)  represents an increase in the demand for plastic products. 
B)  could occur because of general technological advancements. 
C)  is the result of advancements in food production technology. 
D)  is the result of advancements in plastic production technology. 
A)  represents an increase in the demand for plastic products. 
B)  could occur because of general technological advancements. 
C)  is the result of advancements in food production technology. 
D)  is the result of advancements in plastic production technology.

Question 7

What is meant by the term "free market"?

Accepted Answer

A free market is a market with

Question 8

Which of the following is an example of spending on goods and services in the circular flow model?

Accepted Answer

A)  Belinda purchases a new computer for her tax-preparation business. 
B)  Javier buys 800 square feet of wood flooring for his vacation home. 
C)  Celeste buys fresh herbs at the farmers' market to use in her restaurant. 
D)  Timmy purchases a new examination table for use in his veterinary clinic. 
A)  Belinda purchases a new computer for her tax-preparation business. 
B)  Javier buys 800 square feet of wood flooring for his vacation home. 
C)  Celeste buys fresh herbs at the farmers' market to use in her restaurant. 
D)  Timmy purchases a new examination table for use in his veterinary clinic.

Question 9

The slope of a production possibilities frontier

Accepted Answer

A)  has no economic relevance or meaning. 
B)  is always constant. 
C)  is always varying. 
D)  measures the opportunity cost of producing one more unit of a good. 
A)  has no economic relevance or meaning. 
B)  is always constant. 
C)  is always varying. 
D)  measures the opportunity cost of producing one more unit of a good.

Question 10

Figure 2-4

Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
-Refer to Figure 2-4.Consider the following events: a.an increase in the unemployment rate
b.a decrease in a nation's money supply
c.a war that kills a significant portion of a nation's population
Which of the events listed above could cause a movement from Y to W ?

Accepted Answer

A)  a, b and c 
B)  a and b only 
C)  a and c only 
D)  a only 
E)  c only 
A)  a, b and c 
B)  a and b only 
C)  a and c only 
D)  a only 
E)  c only

Question 11

Figure 2-4

Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
-Refer to Figure 2-4.Consider the following events: 
a.a decrease in the unemployment rate
b.general technological advancement
c.an increase in consumer wealth
Which of the events listed above could cause a movement from V to W ?

Accepted Answer

A)  a only 
B)  a and b only 
C)  b and c only 
D)  a, b, and c 
A)  a only 
B)  a and b only 
C)  b and c only 
D)  a, b, and c

Question 12

The basis for trade is comparative advantage,not absolute advantage.

Accepted Answer

A) True 
 B)False

Question 13

In a production possibilities frontier model,a point ________ the frontier is productively inefficient.

Accepted Answer

A)  along 
B)  inside 
C)  outside 
D)  at either intercept of 
A)  along 
B)  inside 
C)  outside 
D)  at either intercept of

Question 14

The production possibilities frontier model shows that

Accepted Answer

A)  if consumers decide to buy more of a product its price will increase. 
B)  a market economy is more efficient in producing goods and services than is a centrally planned economy. 
C)  economic growth can only be achieved by free market economies. 
D)  if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. 
A)  if consumers decide to buy more of a product its price will increase. 
B)  a market economy is more efficient in producing goods and services than is a centrally planned economy. 
C)  economic growth can only be achieved by free market economies. 
D)  if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

Question 15

Adam Smith's behavioral assumption about humans was that people

Accepted Answer

A)  typically act irrationally. 
B)  usually act in a rational, self-interested way. 
C)  are consistently greedy. 
D)  typically act randomly. 
A)  typically act irrationally. 
B)  usually act in a rational, self-interested way. 
C)  are consistently greedy. 
D)  typically act randomly.

Question 16

On a diagram of a production possibility frontier,opportunity cost is represented by the production possibility frontier shifting outward.

Accepted Answer

A) True 
 B)False

Question 17

Crude oil is not an example of a factor of production,but when crude oil is processed into gasoline,it is a factor of production.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is true?

Accepted Answer

A)  Individuals who have never been the best at doing anything cannot have a comparative advantage in producing any product. 
B)  Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product. 
C)  Individuals who have never been the best at doing anything perform all tasks at a higher opportunity cost than others. 
D)  Individuals who have never been the best at doing anything must have an absolute advantage in at least ones task. 
A)  Individuals who have never been the best at doing anything cannot have a comparative advantage in producing any product. 
B)  Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product. 
C)  Individuals who have never been the best at doing anything perform all tasks at a higher opportunity cost than others. 
D)  Individuals who have never been the best at doing anything must have an absolute advantage in at least ones task.

Question 19

Table 2-3

Table 2-3 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces.
-Refer to Table 2-3.Which of the following statements is true?

Accepted Answer

A)  Haley has an absolute advantage in making both products. 
B)  Serena has an absolute advantage in making both products. 
C)  Haley has an absolute advantage in making bracelets and Serena in making necklaces. 
D)  Haley has an absolute advantage in making necklaces and Serena in making bracelets. 
A)  Haley has an absolute advantage in making both products. 
B)  Serena has an absolute advantage in making both products. 
C)  Haley has an absolute advantage in making bracelets and Serena in making necklaces. 
D)  Haley has an absolute advantage in making necklaces and Serena in making bracelets.

Question 20

A successful market economy requires

Accepted Answer

A)  a government-controlled banking system and government price controls. 
B)  well-defined property rights and an independent court system to adjudicate disputes based on the law. 
C)  generous unemployment benefits and paid medical leave for everyone in the labor force. 
D)  an equitable distribution of income and limits on immigration. 
A)  a government-controlled banking system and government price controls. 
B)  well-defined property rights and an independent court system to adjudicate disputes based on the law. 
C)  generous unemployment benefits and paid medical leave for everyone in the labor force. 
D)  an equitable distribution of income and limits on immigration.

Exam 2: Trade-Offs, comparative Advantage, and the Market System

Without an increase in the supplies of factors of production,how can a nation achieve economic growth?

The payment received by suppliers of entrepreneurial skills is called interest.

Table 2-4 Table 2-4 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea. -Refer to Table 2-4.China has a comparative advantage in the production of

A decrease in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point outside the frontier.

The term "property rights" refers to

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. -Refer to Figure 2-4.A movement from Y to Z

What is meant by the term "free market"?

Which of the following is an example of spending on goods and services in the circular flow model?

The slope of a production possibilities frontier

The basis for trade is comparative advantage,not absolute advantage.

In a production possibilities frontier model,a point ________ the frontier is productively inefficient.

The production possibilities frontier model shows that

Adam Smith's behavioral assumption about humans was that people

On a diagram of a production possibility frontier,opportunity cost is represented by the production possibility frontier shifting outward.

Crude oil is not an example of a factor of production,but when crude oil is processed into gasoline,it is a factor of production.

Which of the following statements is true?

Table 2-3 Table 2-3 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. -Refer to Table 2-3.Which of the following statements is true?

A successful market economy requires

Economics: Foundations and Models

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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