Question 1

Explain briefly what will likely happen to society if it chooses to produce more capital goods and fewer consumption goods.

Accepted Answer

Because capital goods enable society to

Question 2

In the above figure, the opportunity cost of moving from producing 50 guitars and 50 ukuleles to producing 25 guitars and 75 ukuleles is

Accepted Answer

A)  25 guitars. 
B)  75 ukuleles. 
C)  25 ukuleles. 
D)  50 guitars. 
A)  25 guitars. 
B)  75 ukuleles. 
C)  25 ukuleles. 
D)  50 guitars.

Question 3

Human capital is

Accepted Answer

A)  what people get from physical capital. 
B)  the accumulation of skills, training and education of workers. 
C)  the value of funds that entrepreneurs obtained from other people. 
D)  the human resources that perform the function of raising capital. 
A)  what people get from physical capital. 
B)  the accumulation of skills, training and education of workers. 
C)  the value of funds that entrepreneurs obtained from other people. 
D)  the human resources that perform the function of raising capital.

Question 4

A person has a comparative advantage in an activity whenever she

Accepted Answer

A)  has an absolute advantage in the activity. 
B)  can perform the activity at a lower opportunity cost than another person can. 
C)  can do the activity in less time than anyone else. 
D)  can do everything better than anyone else. 
A)  has an absolute advantage in the activity. 
B)  can perform the activity at a lower opportunity cost than another person can. 
C)  can do the activity in less time than anyone else. 
D)  can do everything better than anyone else.

Question 5

A point outside a production possibilities curve indicates

Accepted Answer

A)  that resources are not being used efficiently. 
B)  that resources are being used very efficiently. 
C)  opportunity costs are constant. 
D)  an output combination that is unobtainable with the current resource and technology levels. 
A)  that resources are not being used efficiently. 
B)  that resources are being used very efficiently. 
C)  opportunity costs are constant. 
D)  an output combination that is unobtainable with the current resource and technology levels.

Question 6

Which of the following statements is TRUE about scarcity?

Accepted Answer

A)  Both rich and poor people face the problem of scarcity. 
B)  Scarcity exists only when supply is insufficient to meet demand. 
C)  Scarcity exists only when a shortage exists. 
D)  Scarcity can be eliminated when a country becomes richer. 
A)  Both rich and poor people face the problem of scarcity. 
B)  Scarcity exists only when supply is insufficient to meet demand. 
C)  Scarcity exists only when a shortage exists. 
D)  Scarcity can be eliminated when a country becomes richer.

Question 7

Assuming a CEO has to sacrifice more than his assistant in order to engage in full-time typing, we would say that his assistant has a(n) ________ advantage in typing versus the CEO.

Accepted Answer

A)  absolute 
B)  comparative 
C)  pecuniary 
D)  overwhelming 
A)  absolute 
B)  comparative 
C)  pecuniary 
D)  overwhelming

Question 8

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 9

In constructing a production possibilities curve, all of the following are assumed EXCEPT

Accepted Answer

A)  resources are fully employed. 
B)  the quantity and quality of resources being used is fixed. 
C)  the state of technology is improving. 
D)  the time period involved is fixed. 
A)  resources are fully employed. 
B)  the quantity and quality of resources being used is fixed. 
C)  the state of technology is improving. 
D)  the time period involved is fixed.

Question 10

Education and training of workers would best be categorized as

Accepted Answer

A)  land. 
B)  labor. 
C)  physical capital. 
D)  human capital. 
A)  land. 
B)  labor. 
C)  physical capital. 
D)  human capital.

Question 11

Generally, if a nation produces more consumer goods than capital goods

Accepted Answer

A)  more of all goods may be produced in the future. 
B)  less of all goods may be produced in the future. 
C)  about the same amount of capital goods may be produced in the future as are being produced today. 
D)  society will have to forego future consumption of capital goods. 
A)  more of all goods may be produced in the future. 
B)  less of all goods may be produced in the future. 
C)  about the same amount of capital goods may be produced in the future as are being produced today. 
D)  society will have to forego future consumption of capital goods.

Question 12

Which of the following is NOT considered to be an economic resource?

Accepted Answer

A)  an engineer 
B)  a company truck 
C)  a local gas station 
D)  a view of the moon on a clear night 
A)  an engineer 
B)  a company truck 
C)  a local gas station 
D)  a view of the moon on a clear night

Question 13

In 2016, tornadoes damaged many parts of the U.S. Midwest, destroying homes, businesses, schools, and infrastructure. In strictly economic terminology, these tornadoes are said to have caused

Accepted Answer

A)  scarcity, because the damages made food and shelter scarce. 
B)  scarcity, because some goods were difficult to get. 
C)  shortages, because supplies were cut off and goods were destroyed. 
D)  tradeoffs, because some areas of the country were damaged when others were not. 
A)  scarcity, because the damages made food and shelter scarce. 
B)  scarcity, because some goods were difficult to get. 
C)  shortages, because supplies were cut off and goods were destroyed. 
D)  tradeoffs, because some areas of the country were damaged when others were not.

Question 14

A company office can be thought of as

Accepted Answer

A)  a land and labor combination. 
B)  a trade-off with land. 
C)  physical capital. 
D)  a type of entrepreneurship. 
A)  a land and labor combination. 
B)  a trade-off with land. 
C)  physical capital. 
D)  a type of entrepreneurship.

Question 15

Which of the following activities are production?

Accepted Answer

A)  combining flour, milk, and eggs to make cookies 
B)  moving crude oil from one part of Texas to an oil refinery near the Texas coast 
C)  taking ice cubes from a tray to put in a drink 
D)  All of the above are production. 
A)  combining flour, milk, and eggs to make cookies 
B)  moving crude oil from one part of Texas to an oil refinery near the Texas coast 
C)  taking ice cubes from a tray to put in a drink 
D)  All of the above are production.

Question 16

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 17

The most basic concept in economics is

Accepted Answer

A)  wealth. 
B)  income. 
C)  scarcity. 
D)  human need. 
A)  wealth. 
B)  income. 
C)  scarcity. 
D)  human need.

Question 18

Scarcity is

Accepted Answer

A)  a situation of shortage after a hurricane. 
B)  a permanent human condition relative to the nearly limitless nature of human desires. 
C)  represented by long lines at stores. 
D)  the same thing as poverty. 
A)  a situation of shortage after a hurricane. 
B)  a permanent human condition relative to the nearly limitless nature of human desires. 
C)  represented by long lines at stores. 
D)  the same thing as poverty.

Question 19

There are not enough of four goods to satisfy the wants of people. For good A, this is true when the price is $100. This is true for good B at a price of $10, for good C at a price of $1, and for good D at a price of zero. Which situation reflects scarcity rather than shortage?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 20

If individual X has comparative advantage in painting and individual Y has comparative advantage in carpentry, then

Accepted Answer

A)  individual X must use fewer hours to paint a fence than individual Y. 
B)  individual Y will specialize in painting. 
C)  there is a lower opportunity cost (expressed in units of carpentry) for individual X to paint than for individual Y to paint. 
D)  specialization will not occur, since each does not have a clear absolute advantage. 
A)  individual X must use fewer hours to paint a fence than individual Y. 
B)  individual Y will specialize in painting. 
C)  there is a lower opportunity cost (expressed in units of carpentry) for individual X to paint than for individual Y to paint. 
D)  specialization will not occur, since each does not have a clear absolute advantage.

Exam 2: Scarcity and the World of Trade-Offs

Explain briefly what will likely happen to society if it chooses to produce more capital goods and fewer consumption goods.

In the above figure, the opportunity cost of moving from producing 50 guitars and 50 ukuleles to producing 25 guitars and 75 ukuleles is

Human capital is

A person has a comparative advantage in an activity whenever she

A point outside a production possibilities curve indicates

Which of the following statements is TRUE about scarcity?

Assuming a CEO has to sacrifice more than his assistant in order to engage in full-time typing, we would say that his assistant has a(n) ________ advantage in typing versus the CEO.

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

In constructing a production possibilities curve, all of the following are assumed EXCEPT

Education and training of workers would best be categorized as

Generally, if a nation produces more consumer goods than capital goods

Which of the following is NOT considered to be an economic resource?

In 2016, tornadoes damaged many parts of the U.S. Midwest, destroying homes, businesses, schools, and infrastructure. In strictly economic terminology, these tornadoes are said to have caused

A company office can be thought of as

Which of the following activities are production?

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

The most basic concept in economics is

Scarcity is

There are not enough of four goods to satisfy the wants of people. For good A, this is true when the price is $100. This is true for good B at a price of $10, for good C at a price of $1, and for good D at a price of zero. Which situation reflects scarcity rather than shortage?

If individual X has comparative advantage in painting and individual Y has comparative advantage in carpentry, then

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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