Question 1

Voluntary free trade results in:

Accepted Answer

A) population growth. 
B) inflation. 
C) higher living standards. 
D) income disparity. 
E) unemployment. 
A) population growth. 
B) inflation. 
C) higher living standards. 
D) income disparity. 
E) unemployment.

Question 2

The giving up of a good or activity in order to obtain some other good or activity is called:

Accepted Answer

A) a tradeoff. 
B) a cost analysis. 
C) a random choice. 
D) an opportunity cost. 
E) a sunk cost. 
A) a tradeoff. 
B) a cost analysis. 
C) a random choice. 
D) an opportunity cost. 
E) a sunk cost.

Question 3

Opportunity cost is best defined as:

Accepted Answer

A) the sum of all alternatives given up when a choice is made. 
B) the money spent once a choice is made. 
C) the highest-valued alternative given up when a choice is made. 
D) the difference between the cost price and the selling price of a good. 
E) the cost of capital resources used in the production of additional capital. 
A) the sum of all alternatives given up when a choice is made. 
B) the money spent once a choice is made. 
C) the highest-valued alternative given up when a choice is made. 
D) the difference between the cost price and the selling price of a good. 
E) the cost of capital resources used in the production of additional capital.

Question 4

If society begins by producing 3 units of X and 4 units of Y and then alters production so that it is now producing 4 units of X and 4 units of Y, and we know that the quantity and quality of resources were unchanged and that technology did not change, then:

Accepted Answer

A) 3 units of X and 4 units of Y are a combination best represented by a point inside the production possibilities curve [PPC]. 
B) society has moved along the PPC. 
C) resources were being fully utilized at 3 units of X and 4 units of Y. 
D) resources were being efficiently utilized at 3 units of X and 4 units of Y. 
E) 3 units of X and 4 units of Y are a combination best represented by a point outside the PPC. 
A) 3 units of X and 4 units of Y are a combination best represented by a point inside the production possibilities curve [PPC]. 
B) society has moved along the PPC. 
C) resources were being fully utilized at 3 units of X and 4 units of Y. 
D) resources were being efficiently utilized at 3 units of X and 4 units of Y. 
E) 3 units of X and 4 units of Y are a combination best represented by a point outside the PPC.

Question 5

The figure given below represents the production possibilities curve for goods and services in an economy. Figure 2.3   Refer to Figure 2.3.The movement from Curve X to Curve Y indicates:

Accepted Answer

A) contraction in the production of goods. 
B) contraction in the production of services. 
C) expansion in the ability to produce both goods and services. 
D) expansion in the ability to produce goods. 
E) expansion in the ability to produce services. 
A) contraction in the production of goods. 
B) contraction in the production of services. 
C) expansion in the ability to produce both goods and services. 
D) expansion in the ability to produce goods. 
E) expansion in the ability to produce services.

Question 6

Which of the following best describes a tradeoff?

Accepted Answer

A) An office executive enrolling into a management course to develop her skills. 
B) An investor buying stocks of a start-up company. 
C) A businessman investing a portion of company profits in research and development. 
D) A college student sacrificing a few hours of study time to work at the town cafeteria. 
E) A worker purchasing a new car with her bonus earnings. 
A) An office executive enrolling into a management course to develop her skills. 
B) An investor buying stocks of a start-up company. 
C) A businessman investing a portion of company profits in research and development. 
D) A college student sacrificing a few hours of study time to work at the town cafeteria. 
E) A worker purchasing a new car with her bonus earnings.

Question 7

The figure given below represents an economy producing corn and planes under different economic situations. Figure 2.2   Refer to Figure 2.2.Assume that the economy experiences a 20% drop in the work force.Which of the following graph(s)in the figure describe(s)the change in the economy's production possibilities curve [PPC]?

Accepted Answer

A) Graph A 
B) Graph B 
C) Graph C 
D) Graph B and C 
E) Graph A and C 
A) Graph A 
B) Graph B 
C) Graph C 
D) Graph B and C 
E) Graph A and C

Question 8

Specialization and trade do not allow individuals, firms, or even nations to acquire goods that lie beyond their production capabilities.

Accepted Answer

A) True 
 B)False

Question 9

If using the same resources, the U.S.workers can produce more of any good than Mexican workers, then the United States should produce every good.

Accepted Answer

A) True 
 B)False

Question 10

Public property rights refer to the right of ownership that is absolutely necessary for trade to occur and are ensured by a legal system of laws and courts.

Accepted Answer

A) True 
 B)False

Question 11

Consider a nation with an endowment of iron ore and petroleum.If the nation specializes in the production of aluminum and gasoline instead of steel we can say that it is operating:

Accepted Answer

A) on its production possibilities curve. 
B) outside its production possibilities curve. 
C) inside its production possibilities curve. 
D) on the highest achievable production possibilities curve. 
E) on the lowest production possibilities curve. 
A) on its production possibilities curve. 
B) outside its production possibilities curve. 
C) inside its production possibilities curve. 
D) on the highest achievable production possibilities curve. 
E) on the lowest production possibilities curve.

Question 12

Which of the following would not cause any kind of an outward shift of a nation's production possibilities curve [PPC]?

Accepted Answer

A) An improvement in the general level of education 
B) Technological innovation 
C) Discovery of a new source of energy 
D) An increase in the size of the labor force 
E) A flood that renders thousands of acres of farmland unusable 
A) An improvement in the general level of education 
B) Technological innovation 
C) Discovery of a new source of energy 
D) An increase in the size of the labor force 
E) A flood that renders thousands of acres of farmland unusable

Question 13

Marginal opportunity cost refers to the:

Accepted Answer

A) amount of one good or service that must be given up to obtain one additional unit of another good or service. 
B) temporary unemployment created in an economy when resources are transferred from one industry to another. 
C) additional input cost borne by producers to increase production. 
D) economies of scope realized by firms through efficient allocation of resources. 
E) economies of scale experienced by firms post specialization. 
A) amount of one good or service that must be given up to obtain one additional unit of another good or service. 
B) temporary unemployment created in an economy when resources are transferred from one industry to another. 
C) additional input cost borne by producers to increase production. 
D) economies of scope realized by firms through efficient allocation of resources. 
E) economies of scale experienced by firms post specialization.

Question 14

People (and all resources):

Accepted Answer

A) tend to specialize in those activities in which their opportunity costs are minimized. 
B) tend to specialize in those activities in which their opportunity costs are maximized. 
C) never consider opportunity costs before specializing in a particular activity. 
D) consider only direct costs while choosing to specialize in a particular activity. 
E) do not act in their own self-interest but specialize in those activities which benefit others. 
A) tend to specialize in those activities in which their opportunity costs are minimized. 
B) tend to specialize in those activities in which their opportunity costs are maximized. 
C) never consider opportunity costs before specializing in a particular activity. 
D) consider only direct costs while choosing to specialize in a particular activity. 
E) do not act in their own self-interest but specialize in those activities which benefit others.

Question 15

The concept of comparative advantage applies to:

Accepted Answer

A) only people with at least a high school diploma. 
B) only people who are currently employed. 
C) situations in which you have information about the salary levels of those with whom you are competing for a job. 
D) every case of trade or exchange. 
E) about half of all cases of trade or exchange. 
A) only people with at least a high school diploma. 
B) only people who are currently employed. 
C) situations in which you have information about the salary levels of those with whom you are competing for a job. 
D) every case of trade or exchange. 
E) about half of all cases of trade or exchange.

Question 16

Economic growth can be illustrated by an outward shift of the PPC.

Accepted Answer

A) True 
 B)False

Question 17

One of the reasons for China's real per capita GDP being far lower than that of Taiwan in 2000 was the lack of private property rights in the former nation.

Accepted Answer

A) True 
 B)False

Question 18

Assume that the United States uses 20 worker-hours to produce 1 computer and 5 worker-hours to produce 1 unit of food;assume also that Japan uses 10 worker-hours to produce 1 computer and 30 worker-hours to produce 1 unit of food.Which of the following statements is true?

Accepted Answer

A) Japan has the comparative advantage in food production. 
B) The United States has the comparative advantage in food production. 
C) The United States has the comparative advantage in the production of computers. 
D) The United States has a lower opportunity cost for making computers. 
E) Japan has a lower opportunity cost for making food. 
A) Japan has the comparative advantage in food production. 
B) The United States has the comparative advantage in food production. 
C) The United States has the comparative advantage in the production of computers. 
D) The United States has a lower opportunity cost for making computers. 
E) Japan has a lower opportunity cost for making food.

Question 19

According to economists, human activity is unresponsive to changes in costs.

Accepted Answer

A) True 
 B)False

Question 20

Individuals, firms, and nations should specialize in those activities which have the highest marginal cost.

Accepted Answer

A) True 
 B)False

Exam 2: Choice, Opportunity Costs, and Specialization

Voluntary free trade results in:

The giving up of a good or activity in order to obtain some other good or activity is called:

Opportunity cost is best defined as:

If society begins by producing 3 units of X and 4 units of Y and then alters production so that it is now producing 4 units of X and 4 units of Y, and we know that the quantity and quality of resources were unchanged and that technology did not change, then:

The figure given below represents the production possibilities curve for goods and services in an economy. Figure 2.3 Refer to Figure 2.3.The movement from Curve X to Curve Y indicates:

Which of the following best describes a tradeoff?

Specialization and trade do not allow individuals, firms, or even nations to acquire goods that lie beyond their production capabilities.

If using the same resources, the U.S.workers can produce more of any good than Mexican workers, then the United States should produce every good.

Public property rights refer to the right of ownership that is absolutely necessary for trade to occur and are ensured by a legal system of laws and courts.

Consider a nation with an endowment of iron ore and petroleum.If the nation specializes in the production of aluminum and gasoline instead of steel we can say that it is operating:

Which of the following would not cause any kind of an outward shift of a nation's production possibilities curve [PPC]?

Marginal opportunity cost refers to the:

People (and all resources):

The concept of comparative advantage applies to:

Economic growth can be illustrated by an outward shift of the PPC.

One of the reasons for China's real per capita GDP being far lower than that of Taiwan in 2000 was the lack of private property rights in the former nation.

Assume that the United States uses 20 worker-hours to produce 1 computer and 5 worker-hours to produce 1 unit of food;assume also that Japan uses 10 worker-hours to produce 1 computer and 30 worker-hours to produce 1 unit of food.Which of the following statements is true?

According to economists, human activity is unresponsive to changes in costs.

Individuals, firms, and nations should specialize in those activities which have the highest marginal cost.

Economics: The World Around You

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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