Question 1

"Efficiency" refers to

Accepted Answer

A)  producing output using the least amount of labor
B)  producing output using the least amount of capital
C)  producing as far inside the production possibilities frontier as possible
D)  producing only one out of many possible commodities
E)  getting the maximum possible output from available resources E

Question 2

Inefficiency is a flaw of a command economy because there is less incentive for resources to flow to their highest-valued uses.

Accepted Answer

A) True 
 B)False  True

Question 3

Exhibit 2-12 Maria and Hans Production Possibilities for Laundry and Typing 
-According to Exhibit 2-12,Hans' opportunity cost of doing a load of laundry is

Accepted Answer

A)  12 papers
B)  8 papers
C)  1 1/2 pages
D)  2/3 of a page
E)  impossible to compute C

Question 4

Points outside the production possibilities frontier represent

Accepted Answer

A)  unemployment of resources
B)  inefficient use of resources
C)  combinations that are attainable only if all resources are used fully and efficiently
D)  currently unattainable combinations of outputs
E)  the only currently attainable combinations from which society must choose

Question 5

Exhibit 2-12 Maria and Hans Production Possibilities for Laundry and Typing 
-According to Exhibit 2-12,Maria's opportunity cost of doing a load of laundry is

Accepted Answer

A)  4 pages
B)  6 pages
C)  2/3 of a page
D)  3/2 of a page
E)  impossible to compute

Question 6

Exhibit 2-4 
-Which of the following points in Exhibit 2-4 represents an inefficient use of the economy's resources?

Accepted Answer

A)  g
B)  i
C)  f
D)  d
E)  h

Question 7

A person who can produce more of a good than another person is said to possess a comparative advantage.

Accepted Answer

A) True 
 B)False

Question 8

Suppose you have an hour before your next class starts.From your most preferred alternative to the least,you can either read a book,get something to eat,or take a nap.The opportunity cost of getting something to eat is

Accepted Answer

A)  the cost of what you eat
B)  the value of an hour's worth of reading your book
C)  the loss of value from not reading or sleeping
D)  the net benefit of sleeping for another hour
E)  impossible to determine because the most preferred alternative is not known

Question 9

The "division of labor" refers to

Accepted Answer

A)  discrimination in labor markets
B)  separating a job into smaller tasks completed by different people
C)  one worker who divides his time among different jobs and duties
D)  defining a job according to the appropriate sex
E)  the fact that two 20-year-olds are more productive than one 40-year-old

Question 10

If dairy farmers use automatic milking machines instead of milking by hand,which economic question does their decision answer?

Accepted Answer

A)  What to produce?
B)  How to produce?
C)  For whom to produce?
D)  Who has a comparative advantage in milking?
E)  What is the price of milk?

Question 11

Exhibit 2-7 
-In Exhibit 2-7,if society moves from point c to point d,society

Accepted Answer

A)  gains 100 socks
B)  loses 30 mufflers
C)  is worse off after the change in production
D)  is not operating efficiently
E)  experiences some unemployment of resources

Question 12

The idea that resources are scarce but wants are unlimited is known as

Accepted Answer

A)  marginal cost
B)  opportunity cost
C)  sunk cost
D)  resource cost
E)  production cost

Question 13

If Evan has an absolute advantage in cleaning and bookkeeping when compared to Gloria,then

Accepted Answer

A)  Evan must also have a comparative advantage in cleaning and bookkeeping
B)  Evan must have a comparative advantage in cleaning
C)  Evan must have a comparative advantage in bookkeeping
D)  Gloria has a comparative advantage in neither activity
E)  we can conclude nothing about comparative advantage

Question 14

Adam Smith's term,"the invisible hand," refers to

Accepted Answer

A)  the hidden role of government in setting regulations that govern trading in markets
B)  the most capable entrepreneurs in the economy
C)  market forces
D)  the unseen work of the financial markets that facilitates trade
E)  the role of technological change and random events in the economy

Question 15

Every economy must answer each of the following questions except one.Which is the exception?

Accepted Answer

A)  Which goods will be produced?
B)  Why are these particular goods produced?
C)  Which resources should be used?
D)  How should resources be combined to produce each product?
E)  Who will actually consume the goods produced?

Question 16

Just as resources are scarce for the individual,

Accepted Answer

A)  they are also scarce for the economy as a whole
B)  they are never scarce for the economy as a whole
C)  they are randomly abundant for other individuals
D)  there will be zero resources available for the economy as a whole
E)  the economy a whole is never faced with having to make rational choices about using resources

Question 17

Your opportunity cost of choosing a particular activity

Accepted Answer

A)  can be easily and accurately calculated
B)  cannot even be estimated
C)  does not change over time
D)  varies,depending on time and circumstances
E)  is measured by the money you spend on the activity

Question 18

Each point on a production possibilities frontier requires full employment of resources.

Accepted Answer

A) True 
 B)False

Question 19

On a production possibilities frontier,the opportunity cost of one more unit of a commodity per time period is measured by the

Accepted Answer

A)  monetary price of the commodity
B)  amount of the other commodity that must be sacrificed
C)  amount of unemployed resources that must be used
D)  amount of satisfaction it gives consumers
E)  amount of tax paid to government for production,sale,and use of the commodity

Question 20

Which of the following is an example of division of labor?

Accepted Answer

A)  an author writing a book one chapter at a time
B)  a firm trying to get rid of a labor union
C)  separating resources into four categories: land,labor,capital,and entrepreneurial ability
D)  allocating revenue among a firm's resource suppliers
E)  dividing an assembly process into separate steps

Exam 2: Economic Tools and Economics Systems