Question 1

Property rights to inventions discourage people and firms to produce inventions.

Accepted Answer

A) True 
 B)False  False

Question 2

A college student faces no opportunity cost if her parents pay her college tuition and her living expenses.

Accepted Answer

A) True 
 B)False  False

Question 3

What is the meaning of comparative advantage?

Accepted Answer

An individual or a group has a comparative advantage in producing one good relative to another if it can produce it more efficiently (i.e., with less time, resources, or effort) than another individual or group.

Question 4

What role do property rights play in a market economy?

Accepted Answer

Property rights enable people to keep wh

Question 5

The key elements of a market economy include all of the following except

Accepted Answer

A) freely determined prices. 
B) property rights. 
C) freedom to trade at home. 
D) freedom to trade with another country. 
E) strong government intervention. 
A) freely determined prices. 
B) property rights. 
C) freedom to trade at home. 
D) freedom to trade with another country. 
E) strong government intervention.

Question 6

Aaron's budget is such that he can afford either a large-screen high-definition TV or a trip to Disney for his whole family, both of which cost the same. Which of the following statements about Aaron's opportunity cost is correct?

Accepted Answer

A) The opportunity cost of the Disney trip is the money Aaron pays for the trip. 
B) The opportunity cost of the Disney trip is the same as the opportunity cost of the TV because Aaron can afford only one or the other. 
C) There is nothing to say about the opportunity cost because we don't know how much the TV or the Disney trip costs. 
D) The opportunity cost of the Disney trip is the loss from not being able to buy the TV. 
E) The opportunity cost of either the TV or the Disney trip is the total cost of the TV and the Disney trip. 
A) The opportunity cost of the Disney trip is the money Aaron pays for the trip. 
B) The opportunity cost of the Disney trip is the same as the opportunity cost of the TV because Aaron can afford only one or the other. 
C) There is nothing to say about the opportunity cost because we don't know how much the TV or the Disney trip costs. 
D) The opportunity cost of the Disney trip is the loss from not being able to buy the TV. 
E) The opportunity cost of either the TV or the Disney trip is the total cost of the TV and the Disney trip.

Question 7

Which of the following statements is false?

Accepted Answer

A) There is an opportunity cost associated with any choice made. 
B) If there is a budget constraint, there will be scarcity. 
C) A person without a budget constraint does not face opportunity costs. 
D) Opportunity costs occur because of scarce resources. 
E) Because of scarcity, choices have to be made. 
A) There is an opportunity cost associated with any choice made. 
B) If there is a budget constraint, there will be scarcity. 
C) A person without a budget constraint does not face opportunity costs. 
D) Opportunity costs occur because of scarce resources. 
E) Because of scarcity, choices have to be made.

Question 8

Given a production possibilities curve for defense goods and nondefense goods, if a nation is producing at a point inside the production possibilities curve, then

Accepted Answer

A) too many resources are being used for nondefense goods. 
B) only new technology will increase the production of defense or nondefense goods. 
C) too many resources are being used for defense goods. 
D) society is maximizing output from the limited number of resources. 
E) it is possible to increase defense goods production without sacrificing nondefense goods production. 
A) too many resources are being used for nondefense goods. 
B) only new technology will increase the production of defense or nondefense goods. 
C) too many resources are being used for defense goods. 
D) society is maximizing output from the limited number of resources. 
E) it is possible to increase defense goods production without sacrificing nondefense goods production.

Question 9

A centrally planned economy is also called a market economy.

Accepted Answer

A) True 
 B)False

Question 10

A budget constraint

Accepted Answer

A) does not occur if there is scarcity. 
B) is faced only by poor people. 
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) is faced only by poor people. 
C) is a way to overcome scarcity. 
D) forces people to make choices. 
E) prohibits consumers from spending.

Question 11

Exhibit 1-2  
-According to Exhibit 1-2, if Anne spent all her time cooking, how many meals would she be able to prepare per day?

Accepted Answer

A) 20 
B) 2 
C) 4 
D) 40 
E) 5 
A) 20 
B) 2 
C) 4 
D) 40 
E) 5

Question 12

Amy has only $50 to spend for her weekend entertainment. She can go to a college football game for $50, or she can go to the movies for $10. Explain the problem of scarcity and choice in this context. What will Amy consider as she decides whether to go to the football game or the movie?

Accepted Answer

The scarcity represented by the limited

Question 13

Exhibit 1-2  
-According to Exhibit 1-2, if Anne and Sam join forces, with Anne doing all the cooking and Sam doing all the serving, the number of customers served per day would be

Accepted Answer

A)  40. 
B)  4. 
C)  20. 
D)  8. 
E)  5. 
A)  40. 
B)  4. 
C)  20. 
D)  8. 
E)  5.

Question 14

Market failure

Accepted Answer

A) caused the collapse of centrally planned economies in Eastern Europe. 
B) is the consequence of government involvement in the economy. 
C) is something that never happens in a market economy. 
D) occurs when the market is unable to allocate resources correctly. 
E) occurs only when supply exceeds demand. 
A) caused the collapse of centrally planned economies in Eastern Europe. 
B) is the consequence of government involvement in the economy. 
C) is something that never happens in a market economy. 
D) occurs when the market is unable to allocate resources correctly. 
E) occurs only when supply exceeds demand.

Question 15

Economics is the study of how people deal with

Accepted Answer

A) unlimited resources. 
B) too much money. 
C) scarcity. 
D) limited human wants. 
E) a lack of choices. 
A) unlimited resources. 
B) too much money. 
C) scarcity. 
D) limited human wants. 
E) a lack of choices.

Question 16

Gains from voluntary trade arise because

Accepted Answer

A) it reallocates goods between individuals. 
B) it occurs in a household. 
C) it reallocates goods between individuals in a way they both prefer. 
D) it occurs in a market. 
E) of the power involved. 
A) it reallocates goods between individuals. 
B) it occurs in a household. 
C) it reallocates goods between individuals in a way they both prefer. 
D) it occurs in a market. 
E) of the power involved.

Question 17

If an economy produces only movies and computers, then the opportunity cost of producing more movies is

Accepted Answer

A) the value of forgone computer production. 
B) the value of more computer production. 
C) the value of movie production minus the value of computer production 
D) the total value of movie and computer production. 
E) zero because computers and movies are unrelated. 
A) the value of forgone computer production. 
B) the value of more computer production. 
C) the value of movie production minus the value of computer production 
D) the total value of movie and computer production. 
E) zero because computers and movies are unrelated.

Question 18

If an individual is able to produce a good with a lower opportunity cost than someone else, then that individual has

Accepted Answer

A) avoided opportunity costs. 
B) an interaction advantage. 
C) the advantage of producing all goods. 
D) removed scarcity. 
E) a comparative advantage. 
A) avoided opportunity costs. 
B) an interaction advantage. 
C) the advantage of producing all goods. 
D) removed scarcity. 
E) a comparative advantage.

Question 19

A point lying inside the production possibilities curve

Accepted Answer

A) indicates that resources are not being fully or efficiently used. 
B) illustrates resources being used to their fullest potential. 
C) requires more resources than are presently available. 
D) represents an increase in resources. 
E) is not an attainable combination. 
A) indicates that resources are not being fully or efficiently used. 
B) illustrates resources being used to their fullest potential. 
C) requires more resources than are presently available. 
D) represents an increase in resources. 
E) is not an attainable combination.

Question 20

Inefficient use of a nation's resources would

Accepted Answer

A) be depicted as a point inside or below a production possibilities curve. 
B) be depicted as a point on a production possibilities curve. 
C) shift a production possibilities curve outward. 
D) cause the economy's production possibilities curve to bow inward. 
E) be depicted as a point outside or above a production possibilities curve. 
A) be depicted as a point inside or below a production possibilities curve. 
B) be depicted as a point on a production possibilities curve. 
C) shift a production possibilities curve outward. 
D) cause the economy's production possibilities curve to bow inward. 
E) be depicted as a point outside or above a production possibilities curve.

Exam 1: The Central Idea

Property rights to inventions discourage people and firms to produce inventions.

A college student faces no opportunity cost if her parents pay her college tuition and her living expenses.

What is the meaning of comparative advantage?

What role do property rights play in a market economy?

The key elements of a market economy include all of the following except

Aaron's budget is such that he can afford either a large-screen high-definition TV or a trip to Disney for his whole family, both of which cost the same. Which of the following statements about Aaron's opportunity cost is correct?

Which of the following statements is false?

Given a production possibilities curve for defense goods and nondefense goods, if a nation is producing at a point inside the production possibilities curve, then

A centrally planned economy is also called a market economy.

A budget constraint

Exhibit 1-2 -According to Exhibit 1-2, if Anne spent all her time cooking, how many meals would she be able to prepare per day?

Amy has only $50 to spend for her weekend entertainment. She can go to a college football game for $50, or she can go to the movies for $10. Explain the problem of scarcity and choice in this context. What will Amy consider as she decides whether to go to the football game or the movie?

Exhibit 1-2 -According to Exhibit 1-2, if Anne and Sam join forces, with Anne doing all the cooking and Sam doing all the serving, the number of customers served per day would be

Market failure

Economics is the study of how people deal with

Gains from voluntary trade arise because

If an economy produces only movies and computers, then the opportunity cost of producing more movies is

If an individual is able to produce a good with a lower opportunity cost than someone else, then that individual has

A point lying inside the production possibilities curve

Inefficient use of a nation's resources would

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

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

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

Filters