Question 1

Assume that a doctor makes $200 per hour, a lawyer $250 per hour, an architect $140 per hour, a professor $50 per hour, and a waiter $35 per hour. Which of these professionals is most likely to spend time to negotiate with a car dealer?

Accepted Answer

A)  The doctor 
B)  The lawyer 
C)  The architect 
D)  The professor 
E)  The waiter

Question 2

When there is a choice between the consumption of bundle X and bundle Y, the opportunity cost of consuming bundle X is bundle Y.

Accepted Answer

A) True 
 B)False

Question 3

Voluntary free trade results in:

Accepted Answer

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

Question 4

Which of the following actions is most likely to cause a rightward shift in a production possibilities curve [PPC]?

Accepted Answer

A)  Shifting from the production of one product to the production of another product 
B)  Shifting all resources to the production of one product 
C)  Employing idle resources 
D)  Using fewer resources in production 
E)  Increasing the technological know-how used in production

Question 5

Suppose a society begins by producing 3 units of X and 4 units of Y and then alters production to 4 units of X and 4 units of Y. If the quantity and quality of resources and the technology being used remain unchanged, 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)  we can conclude that the society has moved along the PPC. 
C)  we can conclude that resources were being fully utilized at 3 units of X and 4 units of Y. 
D)  we can conclude that 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 6

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 7

Specialization according to comparative advantage followed by free trade makes every economy better off.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is an example of opportunity cost?

Accepted Answer

A)  The Chinese food that you give up when you choose to eat Italian food. 
B)  The tuition that you pay to attend college. 
C)  For a professor of economics, the pleasure that he or she derives from teaching economics. 
D)  Sweets given up by a person who would never eat them even if he or she could. 
E)  The price paid for a ticket when you go for a movie.

Question 9

If an economy is operating at a point outside the PPC, either the society has resources that are not being fully used or production is not efficient.

Accepted Answer

A) True 
 B)False

Question 10

If an individual can produce a good or service with a lower opportunity cost than another individual, then he or she is said to have the comparative advantage.

Accepted Answer

A) True 
 B)False

Question 11

An economy's PPC illustrates the extent to which the economy consumes what it produces.

Accepted Answer

A) True 
 B)False

Question 12

Which economic concept is the closest to the saying "There's no free lunch"?

Accepted Answer

A)  Specialization 
B)  Unlimited wants 
C)  Underutilization of resources 
D)  Opportunity costs 
E)  Overutilization of resources

Question 13

Which of the following will bring about an inward shift of a production possibilities curve [PPC]?

Accepted Answer

A)  A decrease in the amount of resource employment 
B)  An increase in the working-age population 
C)  An increase in unemployment 
D)  A decrease in the availability of natural resources 
E)  An increase in the amount of capital available

Question 14

Following is the production possibilities schedule for an economy producing two goods, Good A and Good B.?Table 2.1
 
-Refer to Table 2.1. According to the production possibilities schedule, in the table above, which of the following statements is true?

Accepted Answer

A)  Moving from choice 2 to choice 3, the opportunity cost of producing 20 more units of good B is 20 units of good A. 
B)  There are increasing opportunity costs associated with producing more units of good B. 
C)  Moving from choice 3 to choice 4, the opportunity cost of producing 20 more units of good B is 30 units of good A. 
D)  Moving from choice 1 to choice 2, the opportunity cost of producing 20 more units of good B is 10 units of good A. 
E)  All of these statements are true.

Question 15

A point outside the production possibilities curve [PPC]:

Accepted Answer

A)  represents inefficient use of resources. 
B)  represents the prevalence of unemployment. 
C)  is attainable if all resources are used efficiently. 
D)  represents more resources than are currently available. 
E)  will never be attainable, even if the quantity of resources increases.

Question 16

The figure given below represents an economy producing corn and planes under different economic situations.?Figure 2.2
 
-Refer to Figure 2.2. If there is an increase in the education level of the population, graph(s) _____ best illustrate(s) what will happen to the production possibilities curve [PPC].

Accepted Answer

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

Question 17

Figure 2.4
 
-Refer to Figure 2.4 and identify the correct statement.

Accepted Answer

A)  Germany has comparative advantage in the production of cars. 
B)  Korea has comparative advantage in the production of cars. 
C)  Germany has comparative advantage in the production of food. 
D)  Korea has a lower opportunity cost for making cars. 
E)  Germany has a lower opportunity cost for making food.

Question 18

Nicky makes $25,000 a year as a sales clerk. He then decides to quit his job to enter a MBA program full-time (assume Nicky doesn't work in the summer or hold any part-time jobs). His tuition, books, living expenses, and fees total $15,000 a year. Given this information, the annual total cost of Nicky's MBA studies is:

Accepted Answer

A)  $10,000. 
B)  $30,000. 
C)  $40,000. 
D)  $15,000. 
E)  $25,000.

Question 19

Shirley can choose between peanut butter pretzels and caramel coated popcorn for her evening snack. According to economists, her _____ cost of consuming caramel coated popcorn would be the forgone peanut butter pretzels.

Accepted Answer

A)  internal 
B)  opportunity 
C)  average 
D)  transaction 
E)  social

Question 20

Jane wins $100,000 in a lottery and immediately uses her winnings to open up a donuts shop. Her direct cost is $50,000, and she puts the remaining money in a savings account earning 10 percent annual interest. Alternatively, Jane could have placed all her lottery winnings in the 10 percent savings account. Jane's total cost of opening up a donuts shop is:

Accepted Answer

A)  $60,000. 
B)  $50,000. 
C)  $160,000. 
D)  $45,000. 
E)  $55,000.

Exam 2: Scarcity and Opportunity Costs

Assume that a doctor makes $200 per hour, a lawyer $250 per hour, an architect $140 per hour, a professor $50 per hour, and a waiter $35 per hour. Which of these professionals is most likely to spend time to negotiate with a car dealer?

When there is a choice between the consumption of bundle X and bundle Y, the opportunity cost of consuming bundle X is bundle Y.

Voluntary free trade results in:

Which of the following actions is most likely to cause a rightward shift in a production possibilities curve [PPC]?

Suppose a society begins by producing 3 units of X and 4 units of Y and then alters production to 4 units of X and 4 units of Y. If the quantity and quality of resources and the technology being used remain unchanged, then:

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.

Specialization according to comparative advantage followed by free trade makes every economy better off.

Which of the following is an example of opportunity cost?

If an economy is operating at a point outside the PPC, either the society has resources that are not being fully used or production is not efficient.

If an individual can produce a good or service with a lower opportunity cost than another individual, then he or she is said to have the comparative advantage.

An economy's PPC illustrates the extent to which the economy consumes what it produces.

Which economic concept is the closest to the saying "There's no free lunch"?

Which of the following will bring about an inward shift of a production possibilities curve [PPC]?

Following is the production possibilities schedule for an economy producing two goods, Good A and Good B.?Table 2.1 -Refer to Table 2.1. According to the production possibilities schedule, in the table above, which of the following statements is true?

A point outside the production possibilities curve [PPC]:

Figure 2.4 -Refer to Figure 2.4 and identify the correct statement.

Shirley can choose between peanut butter pretzels and caramel coated popcorn for her evening snack. According to economists, her _____ cost of consuming caramel coated popcorn would be the forgone peanut butter pretzels.