Question 1

Without property rights,

Accepted Answer

A)  people would have more of an incentive to specialize, and the economy would become more efficient. 
B)  there would be more inventions. 
C)  people would not have an incentive to specialize. 
D)  a market economy would become more efficient. 
E)  people would have more of an incentive to specialize. 
A)  people would have more of an incentive to specialize, and the economy would become more efficient. 
B)  there would be more inventions. 
C)  people would not have an incentive to specialize. 
D)  a market economy would become more efficient. 
E)  people would have more of an incentive to specialize. C

Question 2

Exhibit 1-5  
-Refer to Exhibit 1-5. The production possibilities curve representing the given schedule would be a

Accepted Answer

A)  negatively sloped curve that bows outward. 
B)  negatively sloped straight line. 
C)  positively sloped curve that bows outward. 
D)  positively sloped curve that bows inward. 
E)  positively sloped straight line. 
A)  negatively sloped curve that bows outward. 
B)  negatively sloped straight line. 
C)  positively sloped curve that bows outward. 
D)  positively sloped curve that bows inward. 
E)  positively sloped straight line. A

Question 3

Suppose that an economy produces only two goods: computers and movies. If the economy at all times utilizes all its resources, and it decides to use more of its available resources to produce computers,

Accepted Answer

A)  the production of movies will drop. 
B)  the production of both movies and computers will drop. 
C)  the production of movies will rise. 
D)  the production of movies will not change but the production of computers will increase. 
E)  then will be no change in the production of either computers or movies. 
A)  the production of movies will drop. 
B)  the production of both movies and computers will drop. 
C)  the production of movies will rise. 
D)  the production of movies will not change but the production of computers will increase. 
E)  then will be no change in the production of either computers or movies. A

Question 4

Explain how a market economy works to enable the production and allocation of surfboards.

Accepted Answer

Prices in the surfboard market are free

Question 5

An example of opportunity cost

Accepted Answer

A)  is sweets given up by a person who would never eat them even if he or she could. 
B)  for a professor of economics is the pleasure that he or she derives from teaching economics. 
C)  is the Chinese food that you gave up when you chose to eat Italian food. 
D)  is the tuition you pay to attend college. 
E)  is the price paid for a ticket when you go to the movies. 
A)  is sweets given up by a person who would never eat them even if he or she could. 
B)  for a professor of economics is the pleasure that he or she derives from teaching economics. 
C)  is the Chinese food that you gave up when you chose to eat Italian food. 
D)  is the tuition you pay to attend college. 
E)  is the price paid for a ticket when you go to the movies.

Question 6

What does a market economy use to determine the what is produced, how, and for whom problems?

Accepted Answer

A)  A price system 
B)  The government 
C)  An election 
D)  A tax system 
E)  Bribery 
A)  A price system 
B)  The government 
C)  An election 
D)  A tax system 
E)  Bribery

Question 7

Which of the following statements is true?

Accepted Answer

A)  There are no gains from trade between people in different countries because, with international trade, it's the countries that trade, and not its people, that realize the gains. 
B)  Trade between people in different countries cannot occur. 
C)  Trade between people in different countries can occur, but it will not result in an increase in consumer satisfaction. 
D)  Trade between people in different countries can occur, but it will not lead them to better utilize their comparative advantage. 
E)  Trade between people in different countries can occur, and the gains that occur are the same as the gains from trade within a country. 
A)  There are no gains from trade between people in different countries because, with international trade, it's the countries that trade, and not its people, that realize the gains. 
B)  Trade between people in different countries cannot occur. 
C)  Trade between people in different countries can occur, but it will not result in an increase in consumer satisfaction. 
D)  Trade between people in different countries can occur, but it will not lead them to better utilize their comparative advantage. 
E)  Trade between people in different countries can occur, and the gains that occur are the same as the gains from trade within a country.

Question 8

The role of government in a market system

Accepted Answer

A)  includes encouraging market failures. 
B)  does not exist. 
C)  is restricted to establishing property rights. 
D)  includes improving situations that would otherwise result in a government failure. 
E)  includes improving situations that would otherwise result in a market failure. 
A)  includes encouraging market failures. 
B)  does not exist. 
C)  is restricted to establishing property rights. 
D)  includes improving situations that would otherwise result in a government failure. 
E)  includes improving situations that would otherwise result in a market failure.

Question 9

A budget constraint

Accepted Answer

A)  does not occur if there is scarcity. 
B)  enables choices to be avoided. 
C)  is a way to overcome scarcity. 
D)  forces people to make choices. 
E)  prohibits consumers from spending. 
A)  does not occur if there is scarcity. 
B)  enables choices to be avoided. 
C)  is a way to overcome scarcity. 
D)  forces people to make choices. 
E)  prohibits consumers from spending.

Question 10

Property rights are not necessary for a market economy to function.

Accepted Answer

A) True 
 B)False

Question 11

The basic economic problem is

Accepted Answer

A)  lack of money. 
B)  unemployment. 
C)  poverty. 
D)  scarcity. 
E)  inflation. 
A)  lack of money. 
B)  unemployment. 
C)  poverty. 
D)  scarcity. 
E)  inflation.

Question 12

In a pure market economy, the what, how, and for whom problems are determined by

Accepted Answer

A)  consumers only. 
B)  firms only. 
C)  the government. 
D)  both consumers and firms. 
E)  no one. 
A)  consumers only. 
B)  firms only. 
C)  the government. 
D)  both consumers and firms. 
E)  no one.

Question 13

The government can improve market conditions in case of a market failure.

Accepted Answer

A) True 
 B)False

Question 14

If an individual is able to produce a good with relatively less time, effort, or resources than somebody else, then that individual has

Accepted Answer

A)  avoided opportunity costs. 
B)  an interaction advantage. 
C)  cornered the market. 
D)  removed scarcity. 
E)  a comparative advantage. 
A)  avoided opportunity costs. 
B)  an interaction advantage. 
C)  cornered the market. 
D)  removed scarcity. 
E)  a comparative advantage.

Question 15

Is it possible for an economy to make tradeoffs in the present in order to attain what is currently unattainable? Explain.

Accepted Answer

Yes, it is possible for an economy to ma

Question 16

Who faces the problem of scarcity?

Accepted Answer

A)  Only the rich 
B)  Only the poor 
C)  Only people living next to wealthy people 
D)  Everyone 
E)  Only people living next to poor people 
A)  Only the rich 
B)  Only the poor 
C)  Only people living next to wealthy people 
D)  Everyone 
E)  Only people living next to poor people

Question 17

Exhibit 1-7  
-Refer to Exhibit 1-7. The production possibilities curve indicates that

Accepted Answer

A)  it is possible to produce more of one good without sacrificing some of the other good only if production occurs at a point inside the production possibilities curve. 
B)  Good X is an input in the production of Good Y. 
C)  producing an additional unit of Good X requires producing an additional unit of Good Y. 
D)  more resources exist than the economy can efficiently use. 
E)  the economy is experiencing decreasing opportunity costs. 
A)  it is possible to produce more of one good without sacrificing some of the other good only if production occurs at a point inside the production possibilities curve. 
B)  Good X is an input in the production of Good Y. 
C)  producing an additional unit of Good X requires producing an additional unit of Good Y. 
D)  more resources exist than the economy can efficiently use. 
E)  the economy is experiencing decreasing opportunity costs.

Question 18

What is meant by a division of labor, and why is this a reason for economic interaction?

Accepted Answer

A division of labor occurs when differen

Question 19

According to the textbook, the main reason for Mark Zuckerberg to leave college and to start a new company, Facebook, is that

Accepted Answer

A)  he had failed many courses in college. 
B)  the opportunity cost is higher for him to stay in college than to run Facebook. 
C)  the opportunity cost is lower for him to stay in college than to run Facebook. 
D)  the opportunity cost is zero for him to stay in college. 
E)  the opportunity cost is zero for him to run Facebook. 
A)  he had failed many courses in college. 
B)  the opportunity cost is higher for him to stay in college than to run Facebook. 
C)  the opportunity cost is lower for him to stay in college than to run Facebook. 
D)  the opportunity cost is zero for him to stay in college. 
E)  the opportunity cost is zero for him to run Facebook.

Question 20

When an economy is operating on its production possibilities curve, more production of one good means less production of another because

Accepted Answer

A)  wants are unlimited. 
B)  resources are limited. 
C)  some resources are not employed. 
D)  wants are limited. 
E)  resources are not perfectly adaptable to alternative uses. 
A)  wants are unlimited. 
B)  resources are limited. 
C)  some resources are not employed. 
D)  wants are limited. 
E)  resources are not perfectly adaptable to alternative uses.

Exam 1: The Central Idea

Without property rights,

Exhibit 1-5 -Refer to Exhibit 1-5. The production possibilities curve representing the given schedule would be a

Suppose that an economy produces only two goods: computers and movies. If the economy at all times utilizes all its resources, and it decides to use more of its available resources to produce computers,

Explain how a market economy works to enable the production and allocation of surfboards.

An example of opportunity cost

What does a market economy use to determine the what is produced, how, and for whom problems?

Which of the following statements is true?

The role of government in a market system

A budget constraint

Property rights are not necessary for a market economy to function.

The basic economic problem is

In a pure market economy, the what, how, and for whom problems are determined by

The government can improve market conditions in case of a market failure.

If an individual is able to produce a good with relatively less time, effort, or resources than somebody else, then that individual has

Is it possible for an economy to make tradeoffs in the present in order to attain what is currently unattainable? Explain.

Who faces the problem of scarcity?

Exhibit 1-7 -Refer to Exhibit 1-7. The production possibilities curve indicates that

What is meant by a division of labor, and why is this a reason for economic interaction?

According to the textbook, the main reason for Mark Zuckerberg to leave college and to start a new company, Facebook, is that

When an economy is operating on its production possibilities curve, more production of one good means less production of another because

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model: Price Floors, Price Ceilings, and Elasticity

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

Deriving the Formula for the Keynesian Multiplier and the Forward-Looking Consumption Model

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Capital and Financial Markets

Economic Growth and Globalization

International Trade

International Finance

Reading, Understanding, and Creating Graphs

the Miracle of Compound Growth

Present Discounted Value

Deriving the Growth Accounting Formula

Filters