Question 1

Use the production possibilities data below for Avokia and Baldonia to answer the following question(s).
Table 2-2
  Refer to Table 2-2. Which of the following is correct?

Accepted Answer

A)  Avokia has the comparative advantage in both goods. 
B)  Baldonia has the comparative advantage in oranges. 
C)  Avokia has the comparative advantage in oranges. 
D)  It would be impossible for Avokia and Baldonia to gain from trade.

Question 2

Figure 2-9 
Refer to Figure 2-9. Suppose the economy is producing at point B. Which of the following statements would best explain this situation?

Accepted Answer

A)  The economy lacks the resources to produce at a more desirable point. 
B)  The economy's available technology prevents it from producing at a more desirable point. 
C)  There is widespread unemployment in the economy. 
D)  Any of the above statements would be a legitimate explanation for this situation.

Question 3

Figure 2-9 
Refer to Figure 2-9. If the economy moves from point A to point D, the opportunity cost is

Accepted Answer

A)  10 toasters. 
B)  20 toasters. 
C)  30 toasters. 
D)  30 toothbrushes.

Question 4

Air travel from New York to Miami costs $300 and takes 6 hours. A bus ticket between the cities costs $150 and takes 56 hours. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be

Accepted Answer

A)  $1 per hour. 
B)  $3 per hour. 
C)  $5 per hour. 
D)  $50 per hour.

Question 5

Given your knowledge of the incentives created by private ownership, which of the following would you expect to be false ?

Accepted Answer

A)  People will take better care of their own personal automobile than they will a rental car. 
B)  People will take better care of a home they own than they will of a home they rent. 
C)  Property owned privately will tend to be better conserved and kept than public property or property owned in common. 
D)  People will be more likely to throw trash out onto their own lawn than they will be to throw it out onto the side of an interstate highway.

Question 6

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 7

If the citizens of a country were to work harder and take less leisure time, it would

Accepted Answer

A)  shift the production possibilities curve outward. 
B)  cause an economy to operate inside its production possibilities curve. 
C)  shift the production possibilities curve inward. 
D)  cause an economy to move from one point on the production possibilities curve to another point on the curve.

Question 8

In Africa, which of the following policies has been most successful at increasing elephant populations?

Accepted Answer

A)  Banning the ivory trade by making the buying and selling of ivory illegal. 
B)  Making elephants the common property of the people of the country through government ownership and control and making the killing of elephants illegal 
C)  Allowing private ownership of elephants and making the ivory trade legal 
D)  When used together, the policies in a and b have been more successful than the policy in c.

Question 9

A point inside the production possibilities curve represents a combination of goods that is

Accepted Answer

A)  inefficient. 
B)  efficient. 
C)  unattainable. 
D)  attainable.

Question 10

A department store buys a wool coat for $120 and sets its retail price at $300. The coat costs $85 to produce. When the coat doesn't sell, the store marks the price down to $200, then $100, and finally $70. At $70, Amy buys the coat. What was the coat's true value? Why?

Accepted Answer

The answer of A department store buys a wool coat...

Question 11

The law of comparative advantage indicates that

Accepted Answer

A)  a group of people will reduce their output when each good or service is supplied by the low opportunity cost producer. 
B)  trading partners lose when they can acquire a good through trade cheaper than they can produce it. 
C)  trade is most effective when people trade only among those in their own nation. 
D)  a group of people can increase their output when each good or service is supplied by the low opportunity cost producer.

Question 12

Don can produce 10 pens or 20 pencils in one hour while Bob can produce 15 pens or 5 pencils in one hour. Which of the following statements is correct?

Accepted Answer

A)  Bob has a comparative advantage over Don in the production of pencils 
B)  Bob has a comparative advantage over Don in the production of pens 
C)  Don has a comparative advantage over Bob in the production of pens 
D)  Bob and Don cannot gain from specialization and exchange.

Question 13

Which of the following most accurately states the economic significance of exchange?

Accepted Answer

A)  Physical goods have value because they exist; exchange can neither increase nor decrease their value. 
B)  Production of physical goods creates value; exchange merely redistributes this value. 
C)  Exchange creates value by moving goods from parties who value them less to parties who value them more. 
D)  Exchange reduces value since it consumes resources without adding to the physical supply of goods.

Question 14

In economics, the term for a person who reduces transaction costs by arranging trades for buyers and sellers is

Accepted Answer

A)  an exchange broker. 
B)  a middleman. 
C)  a transactions specialist. 
D)  an opportunity finder.

Question 15

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 16

The creation of a new product or process, often facilitated by the knowledge of engineering and scientific relationships, is known as

Accepted Answer

A)  invention. 
B)  innovation. 
C)  application. 
D)  sublimation.

Question 17

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 18

The reason that the production possibilities curve is usually a bow-shaped curve instead of a straight line is that

Accepted Answer

A)  it makes it easier to illustrate the concepts of scarcity and prices with a bow-shaped curve than it is with a straight line 
B)  early economists began drawing them in this way and the convention has continued throughout the years 
C)  output eventually reaches a maximum and then declines 
D)  resources are not perfectly adaptable to the production of all goods

Question 19

Use the figure to answer the following question.
Figure 2-11

In Figure 2-11, which shows the production possibilities curve,

Accepted Answer

A)  A is efficient. 
B)  B is inefficient. 
C)  C is unattainable. 
D)  all of the above are true.

Question 20

Figure 2-4 
Which of the following is true of Figure 2-4?

Accepted Answer

A)  If the economy operates at point A , it is impossible to produce more of both food and clothing. 
B)  If the economy operates at point B , it is impossible to increase the output of clothing without giving up food production. 
C)  If the economy operates at point A , resources are being used efficiently. 
D)  If the economy operates at point B , resources are being used inefficiently.

Exam 2: Some Tools of the Economist

Use the production possibilities data below for Avokia and Baldonia to answer the following question(s) . Table 2-2 Refer to Table 2-2. Which of the following is correct?

Figure 2-9 Refer to Figure 2-9. Suppose the economy is producing at point B. Which of the following statements would best explain this situation?

Figure 2-9 Refer to Figure 2-9. If the economy moves from point A to point D, the opportunity cost is