Question 1

Table 2-2
    
-Refer to Table 2-2. Which of the following is correct?

Accepted Answer

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

Question 2

If an economy operates at a point within its production possibilities curve,

Accepted Answer

A) it lacks the resources necessary to reach the curve. 
B) it is utilizing all of its resources efficiently. 
C) it does not confront the problem of scarce goods relative to unlimited wants. 
D) it is not efficiently using all of its resources. 
A) it lacks the resources necessary to reach the curve. 
B) it is utilizing all of its resources efficiently. 
C) it does not confront the problem of scarce goods relative to unlimited wants. 
D) it is not efficiently using all of its resources. D

Question 3

Which of the following is NOT true of opportunity cost?

Accepted Answer

A) Opportunity costs are subjective because they depend upon how the decision-maker values his or her options. 
B) Opportunity costs are only the monetary costs of lost options. 
C) Opportunity costs are the highest-valued alternative sacrificed in order to choose an option. 
D) Only the decision-maker can determine his or her opportunity costs for any particular action. 
A) Opportunity costs are subjective because they depend upon how the decision-maker values his or her options. 
B) Opportunity costs are only the monetary costs of lost options. 
C) Opportunity costs are the highest-valued alternative sacrificed in order to choose an option. 
D) Only the decision-maker can determine his or her opportunity costs for any particular action. B

Question 4

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. 
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 5

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 
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 6

Three basic decisions must be made by all economies. What are they?

Accepted Answer

A) how much will be produced, when it will be produced, and how much it will cost 
B) what the price of each good will be, who will produce each good, and who will consume each good 
C) what will be produced, how goods will be produced, and for whom goods will be produced 
D) how the opportunity cost principle will be applied, if and how the law of comparative advantage will be utilized, and whether the production possibilities constraint will apply 
A) how much will be produced, when it will be produced, and how much it will cost 
B) what the price of each good will be, who will produce each good, and who will consume each good 
C) what will be produced, how goods will be produced, and for whom goods will be produced 
D) how the opportunity cost principle will be applied, if and how the law of comparative advantage will be utilized, and whether the production possibilities constraint will apply

Question 7

A popular video program used to teach economics to primary school children defines opportunity cost as "what you give up to get something." In light of your understanding of opportunity cost, how would you modify this definition?

Accepted Answer

The video program always gives the child

Question 8

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. 
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 9

Private property rights involve

Accepted Answer

A) the right to exclusive use of the property. 
B) legal protection against those who would seek to use or abuse the property without the owner's permission. 
C) the right to transfer, sell, exchange, or mortgage the property. 
D) all of the above. 
A) the right to exclusive use of the property. 
B) legal protection against those who would seek to use or abuse the property without the owner's permission. 
C) the right to transfer, sell, exchange, or mortgage the property. 
D) all of the above.

Question 10

Land used to grow corn could also be used to grow soybeans. Which of the following is true when the farmer plants soybeans and the market price of corn rises?

Accepted Answer

A) The opportunity cost of producing soybeans decreases. 
B) The opportunity cost of producing soybeans increases. 
C) There will be no change in the opportunity cost of producing soybeans. 
D) The opportunity cost of producing corn increases. 
A) The opportunity cost of producing soybeans decreases. 
B) The opportunity cost of producing soybeans increases. 
C) There will be no change in the opportunity cost of producing soybeans. 
D) The opportunity cost of producing corn increases.

Question 11

Other things constant, which of the following would you expect to increase the output growth rate of a country?

Accepted Answer

A) an increase in the rate of taxation on personal income 
B) an increase in the rate of investment as a share of total output 
C) passage of regulations restricting international trade 
D) passage of regulations restricting domestic trade 
A) an increase in the rate of taxation on personal income 
B) an increase in the rate of investment as a share of total output 
C) passage of regulations restricting international trade 
D) passage of regulations restricting domestic trade

Question 12

In an informed and voluntary exchange,

Accepted Answer

A) both parties receive something they value more than what they gave up. 
B) both parties place an equal value on what they received and what they gave up. 
C) neither party can gain more than the other. 
D) one trader can gain only at the expense of the other. 
A) both parties receive something they value more than what they gave up. 
B) both parties place an equal value on what they received and what they gave up. 
C) neither party can gain more than the other. 
D) one trader can gain only at the expense of the other.

Question 13

Entrepreneurs are

Accepted Answer

A) profit-seeking decision makers who decide which business projects to undertake. 
B) people who loan money to other business decision makers. 
C) managers who generally work for a salary because they are unwilling to take risks. 
D) none of the above. 
A) profit-seeking decision makers who decide which business projects to undertake. 
B) people who loan money to other business decision makers. 
C) managers who generally work for a salary because they are unwilling to take risks. 
D) none of the above.

Question 14

Which of the following is not a basic question that each economy must answer?

Accepted Answer

A) Which resources are scarce? 
B) For whom shall the goods be produced? 
C) How shall goods be produced? 
D) What goods shall be produced? 
A) Which resources are scarce? 
B) For whom shall the goods be produced? 
C) How shall goods be produced? 
D) What goods shall be produced?

Question 15

With voluntary exchange,

Accepted Answer

A) both the buyer and seller will be made better off. 
B) the buyer will be made better off, while the seller will be made worse off. 
C) the seller will be made better off, while the buyer will be made worse off. 
D) both the buyer and the seller will be made worse off. 
A) both the buyer and seller will be made better off. 
B) the buyer will be made better off, while the seller will be made worse off. 
C) the seller will be made better off, while the buyer will be made worse off. 
D) both the buyer and the seller will be made worse off.

Question 16

Entrepreneurs have a strong incentive to

Accepted Answer

A) discover new production techniques that reduce costs. 
B) introduce new products that are highly valued relative to their cost. 
C) produce goods that are valued more highly than the resources required for their production. 
D) do all of the above. 
A) discover new production techniques that reduce costs. 
B) introduce new products that are highly valued relative to their cost. 
C) produce goods that are valued more highly than the resources required for their production. 
D) do all of the above.

Question 17

Which of the following is true regarding value and exchange?

Accepted Answer

A) Middlemen fail to create value since they do not expand the supply of physical goods. 
B) A good or service has a given value regardless of who uses it or how it is used. 
C) If it were not for middlemen, transaction costs would be zero. 
D) Voluntary exchange creates value by channeling goods into the hands of people who value them most. 
A) Middlemen fail to create value since they do not expand the supply of physical goods. 
B) A good or service has a given value regardless of who uses it or how it is used. 
C) If it were not for middlemen, transaction costs would be zero. 
D) Voluntary exchange creates value by channeling goods into the hands of people who value them most.

Question 18

If Sean sells Tom a tennis racket for $50, we would expect

Accepted Answer

A) both parties to gain from this transaction. 
B) Sean to gain from the transaction, while Tom loses. 
C) Tom to gain from the transaction, while Sean loses. 
D) the well-being of both parties to be unchanged. 
A) both parties to gain from this transaction. 
B) Sean to gain from the transaction, while Tom loses. 
C) Tom to gain from the transaction, while Sean loses. 
D) the well-being of both parties to be unchanged.

Question 19

Which of the following sayings best reflects the concept of opportunity cost?

Accepted Answer

A) "You can't teach an old dog new tricks." 
B) "Time is money." 
C) "I have a baker's dozen." 
D) "There's no business like show business." 
A) "You can't teach an old dog new tricks." 
B) "Time is money." 
C) "I have a baker's dozen." 
D) "There's no business like show business."

Question 20

Economic thinking suggests that a nation in which middlemen are considered to be unproductive seekers of profit, and where their activities are heavily restricted by law, will

Accepted Answer

A) gain by channeling people's efforts away from unproductive middleman activity toward physical output. 
B) lose the potential gains from trade that would result from lower transaction costs emanating from middleman activities. 
C) find that it is richer because the added transaction costs normally imposed by middlemen will be reduced. 
D) gain because the value of total output will rise. 
A) gain by channeling people's efforts away from unproductive middleman activity toward physical output. 
B) lose the potential gains from trade that would result from lower transaction costs emanating from middleman activities. 
C) find that it is richer because the added transaction costs normally imposed by middlemen will be reduced. 
D) gain because the value of total output will rise.

Table 2-2 -Refer to Table 2-2. Which of the following is correct?

If an economy operates at a point within its production possibilities curve,

Which of the following is NOT true of opportunity cost?

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

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?

Three basic decisions must be made by all economies. What are they?

A popular video program used to teach economics to primary school children defines opportunity cost as "what you give up to get something." In light of your understanding of opportunity cost, how would you modify this definition?

The law of comparative advantage indicates that

Private property rights involve

Land used to grow corn could also be used to grow soybeans. Which of the following is true when the farmer plants soybeans and the market price of corn rises?

Other things constant, which of the following would you expect to increase the output growth rate of a country?

In an informed and voluntary exchange,

Entrepreneurs are

Which of the following is not a basic question that each economy must answer?

With voluntary exchange,

Entrepreneurs have a strong incentive to

Which of the following is true regarding value and exchange?

If Sean sells Tom a tennis racket for $50, we would expect

Which of the following sayings best reflects the concept of opportunity cost?

Economic thinking suggests that a nation in which middlemen are considered to be unproductive seekers of profit, and where their activities are heavily restricted by law, will

The Economic Approach

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters

Exam 2: Some Tools of the Economist

Table 2-2 -Refer to Table 2-2. Which of the following is correct?

If an economy operates at a point within its production possibilities curve,

Which of the following is NOT true of opportunity cost?

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

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?

Three basic decisions must be made by all economies. What are they?

A popular video program used to teach economics to primary school children defines opportunity cost as "what you give up to get something." In light of your understanding of opportunity cost, how would you modify this definition?

The law of comparative advantage indicates that

Private property rights involve

Land used to grow corn could also be used to grow soybeans. Which of the following is true when the farmer plants soybeans and the market price of corn rises?

Other things constant, which of the following would you expect to increase the output growth rate of a country?

In an informed and voluntary exchange,

Entrepreneurs are

Which of the following is not a basic question that each economy must answer?

With voluntary exchange,

Entrepreneurs have a strong incentive to

Which of the following is true regarding value and exchange?

If Sean sells Tom a tennis racket for $50, we would expect

Which of the following sayings best reflects the concept of opportunity cost?

Economic thinking suggests that a nation in which middlemen are considered to be unproductive seekers of profit, and where their activities are heavily restricted by law, will

The Economic Approach

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Taking the Nations Economic Pulse

Economic Fluctuations, Unemployment, and Inflation

An Introduction to Basic Macroeconomic Markets

Dynamic Change, Economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and the Historical Development of Macroeconomics

Fiscal Policy, Incentives, and Secondary Effects

Money and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, Output, and Employment

Creating an Environment for Growth and Prosperity

Institutions, Policies, and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Filters