Question 1

Table 2.4
-The firm depicted in Table 2.4 is likely to face diminishing returns because:

Accepted Answer

A) the amount of fertilizer can only be increased to 5. 
B) land and fertilizer are both fixed. 
C) land and fertilizer are both variable. 
D) land is fixed but fertilizer is variable.

Question 2

When you voluntarily accept a job and exchange your labor for money:

Accepted Answer

A) you and your employer expect to be better off. 
B) you and your employer expect to be worse off. 
C) you expect to be better off while your employer expect to be worse off. 
D) you expect to be worse off while your employer expect to be better off.

Question 3

Suppose that a house painter can earn $200 per day painting houses and painting Jasper Johns' house requires 25 days of labor.According to the application,if Jasper Johns earns $5,000 per day painting art,then he must:

Accepted Answer

A) paint his house if he can paint it in less than a day. 
B) switch occupations and paint houses only. 
C) never paint his house. 
D) paint his house if he can paint it in less than 25 days.

Question 4

Table 2.1
-A group of people has formed a house cleaning and yard maintenance business.The number of houses or yards that they can clean or maintain in any given day is depicted in Table 2.1.The opportunity cost of cleaning the first house in a day is:

Accepted Answer

A) 0 yards maintained. 
B) 1 yard maintained. 
C) 2 yards maintained. 
D) 20 yards maintained.

Question 5

The face value of money or income is called its ________ value.

Accepted Answer

A) real 
B) marginal 
C) nominal 
D) external

Question 6

When two people engage in voluntary trade:

Accepted Answer

A) one will necessarily lose. 
B) both will necessarily lose. 
C) both will expect to be made better off. 
D) each will expect to lose.

Question 7

An unemployed individual decides to spend the day fishing.The opportunity cost of fishing is equal to:

Accepted Answer

A) the cost of bait and any other monetary expenses. 
B) zero,because the person doesn't have a job. 
C) the value of the individual's wages while he was working. 
D) the cost of bait,any other monetary expenses,and the value of the best alternative use of the individual's time.

Question 8

Consider a firm that is trying to determine how many hours to remain open in a day.How would the firm make this decision?

Accepted Answer

The answer of Consider a firm that is trying to...

Question 9

Different people eat different amounts of food when they go to buffet restaurants,even though they all pay the same price.Explain how this relates to the marginal principle.

Accepted Answer

The answer of Different people eat different amounts of food...

Question 10

Suppose your bank pays you 6% interest per year on your savings account.If prices increase by 3% per year over that time,approximately how much nominal value do you gain by keeping $100 in the bank for a year?

Accepted Answer

A) $6 
B) $0 
C) $3 
D) $106

Question 11

The additional cost resulting from a small increase in some activity is called the:

Accepted Answer

A) opportunity cost. 
B) marginal benefit. 
C) marginal cost. 
D) diminishing returns of the activity.

Question 12

Figure 2.4
-Joe runs a business and needs to decide how many hours to stay open.Figure 2.4 illustrates his marginal benefit of staying open for each additional hour.Suppose that Joe's marginal cost of staying open per hour is $32.How many hours should Joe stay open?

Accepted Answer

A) 4 hours 
B) 5 hours 
C) 6 hours 
D) 7 hours

Question 13

Table 2.2
-Julianne runs a business and needs to decide how many hours to stay open.Table 2.2 illustrates her marginal costs of staying open for each additional hour.Suppose that we observe Julianne staying open 5 hours per day.If she is following the marginal principle,what must her marginal benefit be?

Accepted Answer

A) $10 
B) $16 
C) $20 
D) $24

Question 14

According to the principle of diminishing returns,if the number of workers is increased beyond the point of diminishing returns,then the additional worker:

Accepted Answer

A) increases total output by the same amount as previous workers. 
B) increases total output by more than the amount of previous workers. 
C) increases total output by less than the amount of previous workers. 
D) decreases total output.

Question 15

Two parties engage in exchange when each one expects to be made better off by the exchange.

Accepted Answer

A) True 
 B)False

Question 16

When a firm hired its tenth worker,its factory output increased by four units per month.Would you expect the firm's output to increase by eight more units per month if the firm hired two more workers?

Accepted Answer

The answer of When a firm hired its tenth worker,its...

Question 17

Suppose prices increase by 4% per year.What nominal percentage return on your savings account would you require to get a 1% real return?

Accepted Answer

A) 0% 
B) 2% 
C) 5% 
D) 7%

Question 18

Tradeoffs involve an exchange of one thing for another because resources are limited and can be used in different ways.

Accepted Answer

A) True 
 B)False

Question 19

Based on the Application,the marginal cost of sailing a ship faster is:

Accepted Answer

A) more cargo delivered per year. 
B) more fuel cost incurred. 
C) less fuel costs incurred. 
D) less cargo delivered per year.

Question 20

Table 2.4
-Refer to Table 2.4.The principle of diminishing returns sets in with the addition of the ________ tank of fertilizer.

Accepted Answer

A) 2nd 
B) 3rd 
C) 4th 
D) 5th

Exam 2: The Key Principles of Economics

Table 2.4 -The firm depicted in Table 2.4 is likely to face diminishing returns because: