Question 1

All points inside the production possibilities curve indicate

Accepted Answer

A)  a lack of sufficient supply. 
B)  inefficiency in production. 
C)  the law of increasing relative cost. 
D)  the law of decreasing relative cost. 
A)  a lack of sufficient supply. 
B)  inefficiency in production. 
C)  the law of increasing relative cost. 
D)  the law of decreasing relative cost. B

Question 2

Refer to the above figure. Production at Point E

Accepted Answer

A)  would indicate that this economy is producing beyond its capabilities. 
B)  would indicate production at a level below that which is attainable. 
C)  is not attainable with given resources and technology. 
D)  would demonstrate a total lack of technical expertise. 
A)  would indicate that this economy is producing beyond its capabilities. 
B)  would indicate production at a level below that which is attainable. 
C)  is not attainable with given resources and technology. 
D)  would demonstrate a total lack of technical expertise. B

Question 3

David has just ordered a smartphone only to be told that she will have to wait one month for it to be delivered. Which of the following statements is TRUE?

Accepted Answer

A)  The smartphone is not a scarce good. 
B)  The smartphone is an economic good. 
C)  The smartphone is human capital. 
D)  The smartphone is an intangible good. 
A)  The smartphone is not a scarce good. 
B)  The smartphone is an economic good. 
C)  The smartphone is human capital. 
D)  The smartphone is an intangible good. B

Question 4

The law of increasing additional cost exists because

Accepted Answer

A)  resources are not perfectly adaptable to both production processes. 
B)  the demand for the product increases. 
C)  the cost of resources of the products increase. 
D)  the cost of resources of the products decrease. 
A)  resources are not perfectly adaptable to both production processes. 
B)  the demand for the product increases. 
C)  the cost of resources of the products increase. 
D)  the cost of resources of the products decrease.

Question 5

Which type of resource will improve through more education and training by workers?

Accepted Answer

A)  money 
B)  physical capital 
C)  natural resources 
D)  human capital 
A)  money 
B)  physical capital 
C)  natural resources 
D)  human capital

Question 6

A production possibilities curve will shift outward or to the right for all of the following reasons EXCEPT

Accepted Answer

A)  an increase in the unemployment rate. 
B)  an increase in the quality of the labor force. 
C)  an improvement in production technology. 
D)  a discovery of a new source of renewable energy. 
A)  an increase in the unemployment rate. 
B)  an increase in the quality of the labor force. 
C)  an improvement in production technology. 
D)  a discovery of a new source of renewable energy.

Question 7

Technology

Accepted Answer

A)  is constantly changing at every point along a production possibilities curve. 
B)  is the recipe for combining land, labor, physical capital, and entrepreneurship to produce a good. 
C)  does not have an effect on the amount of a good a society can produce with its given resources. 
D)  only changes if resources change. 
A)  is constantly changing at every point along a production possibilities curve. 
B)  is the recipe for combining land, labor, physical capital, and entrepreneurship to produce a good. 
C)  does not have an effect on the amount of a good a society can produce with its given resources. 
D)  only changes if resources change.

Question 8

The production possibilities curve for two products is bowed out because

Accepted Answer

A)  as the production of a good increases, opportunity cost increases. 
B)  as the production of a good increases, opportunity cost is unchanged. 
C)  the qualities of the resources are not identical. 
D)  there are unemployed resources. 
A)  as the production of a good increases, opportunity cost increases. 
B)  as the production of a good increases, opportunity cost is unchanged. 
C)  the qualities of the resources are not identical. 
D)  there are unemployed resources.

Question 9

Refer to the above figure. A farmer has 50 acres of land on which to grow wheat or beans. An acre of land yields 400 bushels of beans or 800 bushels of wheat. Which of the following is a possible combination of beans and wheat that can be grown, assuming the land is farmed efficiently?

Accepted Answer

A)  30,000 bushels of each 
B)  15,000 bushels of beans and 10,000 bushels of wheat 
C)  25,000 bushels of beans and 25,000 bushels of wheat 
D)  20,000 bushels of beans and 40,000 bushels of wheat 
A)  30,000 bushels of each 
B)  15,000 bushels of beans and 10,000 bushels of wheat 
C)  25,000 bushels of beans and 25,000 bushels of wheat 
D)  20,000 bushels of beans and 40,000 bushels of wheat

Question 10

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 11

Opportunity cost is

Accepted Answer

A)  the cost of producing all goods and services in the United States. 
B)  the value of the next-best alternative that must be sacrificed to satisfy a want. 
C)  the fixed cost of production. 
D)  the value of the most useful alternative that must be sacrificed to obtain something or satisfy a want. 
A)  the cost of producing all goods and services in the United States. 
B)  the value of the next-best alternative that must be sacrificed to satisfy a want. 
C)  the fixed cost of production. 
D)  the value of the most useful alternative that must be sacrificed to obtain something or satisfy a want.

Question 12

Economic bads are items

Accepted Answer

A)  for which the produced quantity is less than the amount desired at a positive price. 
B)  for which the desired quantity is less than what nature provides at a zero price. 
C)  that individuals desire but which receive social disapproval. 
D)  that receive social approval but which governments dislike. 
A)  for which the produced quantity is less than the amount desired at a positive price. 
B)  for which the desired quantity is less than what nature provides at a zero price. 
C)  that individuals desire but which receive social disapproval. 
D)  that receive social approval but which governments dislike.

Question 13

Amy goes to college to become a nurse. This is an example of an

Accepted Answer

A)  investment in physical capital. 
B)  investment in human capital. 
C)  increase in entrepreneurship. 
D)  increase in labor. 
A)  investment in physical capital. 
B)  investment in human capital. 
C)  increase in entrepreneurship. 
D)  increase in labor.

Question 14

An example of an entrepreneur would be

Accepted Answer

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

Question 15

If Maggie can make $80,000 as an accountant, $50,000 as a cashier, $20,000 as a cook, and nothing as an opera singer, she has a comparative advantage in

Accepted Answer

A)  accounting. 
B)  being a cashier. 
C)  being a cook. 
D)  opera singing. 
A)  accounting. 
B)  being a cashier. 
C)  being a cook. 
D)  opera singing.

Question 16

Which of the following statements is FALSE?

Accepted Answer

A)  Economic goods are available in desired quantities at a zero price. 
B)  A good is anything that gives satisfaction or happiness to individuals. 
C)  Services are intangible goods such as dry cleaning, hospital care, and restaurant meal preparation. 
D)  Wants are unlimited and include all material and nonmaterial desires. 
A)  Economic goods are available in desired quantities at a zero price. 
B)  A good is anything that gives satisfaction or happiness to individuals. 
C)  Services are intangible goods such as dry cleaning, hospital care, and restaurant meal preparation. 
D)  Wants are unlimited and include all material and nonmaterial desires.

Question 17

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 18

Specialization can occur because

Accepted Answer

A)  governments pass laws that require it. 
B)  varying skills differentiate workers. 
C)  absolute advantage creates specialization among laborers. 
D)  managers and laborers share job tasks. 
A)  governments pass laws that require it. 
B)  varying skills differentiate workers. 
C)  absolute advantage creates specialization among laborers. 
D)  managers and laborers share job tasks.

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

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.

Exam 2: Scarcity and the World of Trade-Offs

All points inside the production possibilities curve indicate

Refer to the above figure. Production at Point E

David has just ordered a smartphone only to be told that she will have to wait one month for it to be delivered. Which of the following statements is TRUE?

The law of increasing additional cost exists because

Which type of resource will improve through more education and training by workers?

A production possibilities curve will shift outward or to the right for all of the following reasons EXCEPT

Technology

The production possibilities curve for two products is bowed out because

Refer to the above figure. A farmer has 50 acres of land on which to grow wheat or beans. An acre of land yields 400 bushels of beans or 800 bushels of wheat. Which of the following is a possible combination of beans and wheat that can be grown, assuming the land is farmed efficiently?

Opportunity cost exists because of

Opportunity cost is

Economic bads are items

Amy goes to college to become a nurse. This is an example of an

An example of an entrepreneur would be

If Maggie can make $80,000 as an accountant, $50,000 as a cashier, $20,000 as a cook, and nothing as an opera singer, she has a comparative advantage in

Which of the following statements is FALSE?

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

Specialization can occur because

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.

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

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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