Question 1

On average, persons with more education tend to draw Social Security benefits for a

Accepted Answer

A)  longer period of time than average 
B)  shorter period of time than average 
C)  period of time that is comparable to the U.S. average 
D)  longer period of time if they have a master's degree but a shorter period of time if they have a Ph.D.

Question 2

The law of comparative advantage explains why

Accepted Answer

A)  specialization and exchange will make it possible for trading partners to expand their combined output. 
B)  there will be an inverse relationship between the price of a product and the quantity of it that will be demanded. 
C)  larger firms will have lower per unit costs than smaller firms. 
D)  an increase in the price of a good will lead to an expansion in the quantity supplied by business firms.

Question 3

Which of the following about Social Security is true?

Accepted Answer

A)  All of the current revenues flowing into the Social Security system are needed for benefit payments to current retirees. 
B)  If the Social Security surplus was used to pay down the privately held federal debt, this would reduce future taxes and, thereby, make it easier to deal with the retirement of the baby boomers. 
C)  During the 1980s and 1990s, most of the social security surplus was used to reduce the national debt. 
D)  When the Social Security surplus is used to cover the current operating expenses of the federal government, it will make it easier for future taxpayers to provide promised Social Security benefits to baby boomers.

Question 4

Based on the idea of opportunity cost, which of the following students would be most likely to drop out of college before completing their degree?

Accepted Answer

A)  a senior mathematics major with a solid B average 
B)  a junior physical therapy student who has just read about the fantastic job offers available to students with degrees in her area 
C)  a star college football player in his junior year that just received a $5 million offer from a professional team 
D)  a junior economics major who wants to attend graduate school

Question 5

Figure 2-9 
-Refer to Figure 2-9. The opportunity cost of obtaining 15 additional toasters by moving from point D to point C is

Accepted Answer

A)  10 toothbrushes. 
B)  20 toothbrushes. 
C)  30 toothbrushes. 
D)  none of the above; the economy cannot move from point D to point C.

Question 6

The payments made to the beneficiaries of the Social Security program are financed by

Accepted Answer

A)  insurance premiums previously paid into the system by the beneficiaries. 
B)  current receipts derived from the Social Security payroll tax. 
C)  income derived from funds that were previously invested in stocks and bonds. 
D)  governmental savings accounts based on the amount of funds the recipient previously paid into the system.

Question 7

Middlemen, such as grocers, stockbrokers, and realtors

Accepted Answer

A)  specialize in reducing transactions costs. 
B)  provide nothing of value to either the buyer or the seller. 
C)  have no effect on economic output in society. 
D)  do not exist in capitalist economies.

Question 8

Figure 2-10 
-Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?

Accepted Answer

A)  50 baseballs 
B)  100 baseballs 
C)  100 bananas 
D)  300 bananas

Question 9

"Now that Terrance paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects

Accepted Answer

A)  the importance of secondary effects. 
B)  the fallacy of composition. 
C)  the law of comparative advantage. 
D)  behavior inconsistent with economizing.

Question 10

Trade creates value by

Accepted Answer

A)  moving goods from people who value the goods less to people who value the goods more. 
B)  permitting trading partners to expand output through specialization in areas where they each have a comparative advantage. 
C)  permitting trading partners to expand output through the adoption of mass production methods. 
D)  all of the above.

Question 11

A system of economic organization in which the ownership and control of productive capital assets rests with the state and in which resources are allocated through central planning and political decision making is called

Accepted Answer

A)  socialism. 
B)  a market economy. 
C)  a corporate economy. 
D)  capitalism.

Question 12

Over time, an increase in a nation's stock of physical capital will

Accepted Answer

A)  shift the production possibilities curve inward. 
B)  cause an economy to operate inside its production possibilities curve. 
C)  shift the production possibilities curve outward. 
D)  eliminate the basic economic problem of scarcity.

Question 13

Entrepreneurs have a strong incentive to

Accepted Answer

A)  discover new production techniques that reduce costs. 
B)  introduce new products that are highly valued relative to their cost. 
C)  produce goods that are valued more highly than the resources required for their production. 
D)  do all of the above.

Question 14

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

Accepted Answer

A)  If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. 
B)  If all the resources of an economy are being used efficiently, it is generally possible to produce more of one good without having to sacrifice the production of other goods. 
C)  Over time, it is generally impossible for a country to expand its production of goods. 
D)  An economy will automatically move toward a point that lies outside of the production possibilities curve unless proper government policy constrains production.

Question 15

Which of the following is true with regard to value and exchange?

Accepted Answer

A)  Exchange generally moves a good from a person who values it more to a person who values it less. 
B)  Transaction costs reduce our ability to gain from potentially advantageous trades. 
C)  Middlemen increase transaction costs and, thereby, reduce the potential gains derived from trade. 
D)  Physical goods have an objective value that is unrelated to time and the person of ownership.

Question 16

Which of the following about Social Security is true?

Accepted Answer

A)  The regressive nature of the Social Security benefit formula works to the disadvantage of blacks and other groups with below-average earnings. 
B)  Social Security works to the disadvantage of blacks and other groups with below-average life expectancy. 
C)  Blacks derive a higher rate of return from their Social Security taxes than whites. 
D)  Hispanics derive a lower rate of return from their Social Security taxes than both whites and blacks.

Question 17

Which of the following about trade is true?

Accepted Answer

A)  Trade does not produce anything new; therefore, it cannot create value. 
B)  The value of a good is determined by the cost of the material resources required for its production. 
C)  The value of a good generally depends on who uses it and circumstances such as when and where it is used. 
D)  All of the above are true.

Question 18

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

Accepted Answer

A)  Resource owners will fail to conserve vital resources, even if they expect their supply to be highly limited in the future. 
B)  Resource owners will ignore the wishes of others, including others who would like to use the resource that is privately owned. 
C)  Resource owners will fail to consider the wishes of potential future buyers when they decide how to employ privately owned resources. 
D)  Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.

Question 19

Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?

Accepted Answer

A)  the dollars spent on his previously acquired education in pharmacy 
B)  the revenue derived from operating the cab 
C)  zero if the pharmacist received his education on a scholarship that paid his full tuition 
D)  the value of the pharmacist's time in its highest valued use other than driving a cab

Question 20

Economic thinking suggests that a nation in which middlemen are considered to be unproductive seekers of profit, and where their activities are heavily restricted by law, will

Accepted Answer

A)  gain by channeling people's efforts away from unproductive middleman activity toward physical output. 
B)  lose the potential gains from trade that would result from lower transaction costs emanating from middleman activities. 
C)  find that it is richer because the added transaction costs normally imposed by middlemen will be reduced. 
D)  gain because the value of total output will rise.

Exam 2: Some Tools of the Economist

On average, persons with more education tend to draw Social Security benefits for a

The law of comparative advantage explains why

Which of the following about Social Security is true?

Based on the idea of opportunity cost, which of the following students would be most likely to drop out of college before completing their degree?

Figure 2-9 -Refer to Figure 2-9. The opportunity cost of obtaining 15 additional toasters by moving from point D to point C is

The payments made to the beneficiaries of the Social Security program are financed by

Middlemen, such as grocers, stockbrokers, and realtors

Figure 2-10 -Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?

"Now that Terrance paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects

Trade creates value by

A system of economic organization in which the ownership and control of productive capital assets rests with the state and in which resources are allocated through central planning and political decision making is called

Over time, an increase in a nation's stock of physical capital will

Entrepreneurs have a strong incentive to

Which of the following most accurately indicates the implications of an economy's production possibilities curve?

Which of the following is true with regard to value and exchange?

Which of the following about Social Security is true?

Which of the following about trade is true?

Which of the following will most likely occur under a system of clearly defined and enforced private property rights?

Which of the following most accurately reflects the opportunity cost to a pharmacist who drives a taxi?

Economic thinking suggests that a nation in which middlemen are considered to be unproductive seekers of profit, and where their activities are heavily restricted by law, will