Question 1

A friend says, "I really, really need a new car." As an economist, you're thinking

Accepted Answer

A) Right! Everyone needs a new car. 
B) This is an example of how objectively undefinable needs are. Many would argue that this friend could get along just fine with a reliable used car. 
C) If this friend says she needs a new car, then we must all agree that a new car is a need and not just a want. 
D) that a new car can only be considered a need if at least 51% of the public agrees. 
A) Right! Everyone needs a new car. 
B) This is an example of how objectively undefinable needs are. Many would argue that this friend could get along just fine with a reliable used car. 
C) If this friend says she needs a new car, then we must all agree that a new car is a need and not just a want. 
D) that a new car can only be considered a need if at least 51% of the public agrees.

Question 2

Assume that Economy A and Economy B have the same resources, but that individuals in Economy A have specialized whereas individuals in Economy B have not. Given this information, you can determine that

Accepted Answer

A) Economy A will have a higher output than Economy B. 
B) Economy A will have a lower output than Economy B. 
C) Economy A and Economy B will have identical outputs. 
D) Individuals in Economy A will have lower incomes than individuals in Economy B. 
A) Economy A will have a higher output than Economy B. 
B) Economy A will have a lower output than Economy B. 
C) Economy A and Economy B will have identical outputs. 
D) Individuals in Economy A will have lower incomes than individuals in Economy B.

Question 3

Which of the following statements about scarcity is TRUE?

Accepted Answer

A) Scarcity is no longer a problem for industrialized countries. 
B) Scarcity exists in all societies. 
C) Scarcity is a problem only for greedy people. 
D) Scarcity is a problem only in countries that do not use markets to organize economic activity. 
A) Scarcity is no longer a problem for industrialized countries. 
B) Scarcity exists in all societies. 
C) Scarcity is a problem only for greedy people. 
D) Scarcity is a problem only in countries that do not use markets to organize economic activity.

Question 4

The most basic concept in economics is

Accepted Answer

A) wealth. 
B) income. 
C) scarcity. 
D) spending. 
A) wealth. 
B) income. 
C) scarcity. 
D) spending.

Question 5

The production possibilities curve shifts outward when

Accepted Answer

A) the law of increasing additional cost takes hold. 
B) the economy is producing efficiently. 
C) we produce more consumption goods over productive investment in equipment. 
D) there is an increase in resources or technology. 
A) the law of increasing additional cost takes hold. 
B) the economy is producing efficiently. 
C) we produce more consumption goods over productive investment in equipment. 
D) there is an increase in resources or technology.

Question 6

Which of the following is a true statement?

Accepted Answer

A) All goods are economic goods. 
B) All economic goods are goods, but not all goods are economic goods. 
C) Economic goods and goods mean the same thing. 
D) Economic goods do not include services while goods do include services. 
A) All goods are economic goods. 
B) All economic goods are goods, but not all goods are economic goods. 
C) Economic goods and goods mean the same thing. 
D) Economic goods do not include services while goods do include services.

Question 7

Which of the following is true with respect to specialization?

Accepted Answer

A) Adam Smith in The Wealth of Nations referred to specialization and division of labor. 
B) With a given set of resources, specialization results in higher output. 
C) Individuals and nations specialize in their areas of comparative advantage in order to reap the gains of specialization. 
D) All of the above are correct. 
A) Adam Smith in The Wealth of Nations referred to specialization and division of labor. 
B) With a given set of resources, specialization results in higher output. 
C) Individuals and nations specialize in their areas of comparative advantage in order to reap the gains of specialization. 
D) All of the above are correct.

Question 8

With specialization,

Accepted Answer

A) opportunity costs tend to be constant. 
B) there are greater gains in material well being. 
C) there is more emphasis on self-reliance. 
D) society is more productive while individuals are less productive. 
A) opportunity costs tend to be constant. 
B) there are greater gains in material well being. 
C) there is more emphasis on self-reliance. 
D) society is more productive while individuals are less productive.

Question 9

In every economic system, choices must be made because resources

Accepted Answer

A) are unlimited, but human desires and wants are limited. 
B) are limited, but human desires and wants are unlimited. 
C) are unlimited, and so are human desires and wants. 
D) are limited, and so are human desires and wants. 
A) are unlimited, but human desires and wants are limited. 
B) are limited, but human desires and wants are unlimited. 
C) are unlimited, and so are human desires and wants. 
D) are limited, and so are human desires and wants.

Question 10

-In the above figure, points u, v, y, and z show

Accepted Answer

A) an inefficient allocation of society's scarce resources. 
B) possible combinations of televisions and personal computers. 
C) a constant trade-off between televisions and personal computers. 
D) that society prefers more televisions than computers. 
A) an inefficient allocation of society's scarce resources. 
B) possible combinations of televisions and personal computers. 
C) a constant trade-off between televisions and personal computers. 
D) that society prefers more televisions than computers.

Question 11

Division of labor increases the output of society by

Accepted Answer

A) eliminating scarcity. 
B) reducing the choices people have to make to a more manageable number. 
C) ensuring that people are happier in performing their work. 
D) allowing resources to specialize in the tasks for which they have a comparative advantage. 
A) eliminating scarcity. 
B) reducing the choices people have to make to a more manageable number. 
C) ensuring that people are happier in performing their work. 
D) allowing resources to specialize in the tasks for which they have a comparative advantage.

Question 12

Explain what is meant by economic efficiency. Does efficiency imply that the fastest production processes or the most powerful equipment must always be used? Explain.

Accepted Answer

Efficiency involves a situatio

Question 13

On an afternoon that a class meets, you could alternatively study for an exam that will take place in another class the next morning, go to a movie with a friend, or, most desirable to you at present, take a nap. The opportunity cost of attending the afternoon class is

Accepted Answer

A) forgoing the nap. 
B) missing seeing the movie with your friend. 
C) giving up the time to study for the next morning's exam. 
D) being unable to engage in all three of the above activities. 
A) forgoing the nap. 
B) missing seeing the movie with your friend. 
C) giving up the time to study for the next morning's exam. 
D) being unable to engage in all three of the above activities.

Question 14

At a zero price, which of the following conditions is TRUE for an economic good?

Accepted Answer

A) Its quantity supplied exceeds its quantity demanded. 
B) Its quantity demanded exceeds its quantity supplied. 
C) Its quantity demanded equals its quantity supplied. 
D) Scarcity disappears. 
A) Its quantity supplied exceeds its quantity demanded. 
B) Its quantity demanded exceeds its quantity supplied. 
C) Its quantity demanded equals its quantity supplied. 
D) Scarcity disappears.

Question 15

The above table shows the daily production possibilities for a bakery.
Currently the bakery bakes 60 pizzas and 180 loaves of bread, that is-it is at alternative C.
-Using the above table, what is the opportunity cost of moving from alternative C to alternative D?

Accepted Answer

A) 60 loaves of bread 
B) 2 loaves of bread 
C) 30 loaves of bread 
D) 1/2 loaf of bread 
A) 60 loaves of bread 
B) 2 loaves of bread 
C) 30 loaves of bread 
D) 1/2 loaf of bread

Question 16

-Refer to the above figure. Which one of the following statements is true with regard to the economy depicted in the graph?

Accepted Answer

A) Point C cannot be produced. 
B) The best production point is 500 loaves of bread and 50 bales of wool. 
C) The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is more than the amount of resources needed to produce 50 bales of wool and 250 loaves of bread. 
D) The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is the same as the amount of resources needed to produce 50 bales of wool and 250 loaves of bread. 
A) Point C cannot be produced. 
B) The best production point is 500 loaves of bread and 50 bales of wool. 
C) The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is more than the amount of resources needed to produce 50 bales of wool and 250 loaves of bread. 
D) The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is the same as the amount of resources needed to produce 50 bales of wool and 250 loaves of bread.

Question 17

The trade-off between the present and future consumption is measured by

Accepted Answer

A) the money cost of both the present and future consumption. 
B) the foregone present consumption. 
C) the difference between the money price of future goods and the money cost of producing them. 
D) the difference between the money price of present goods and the money cost of producing them. 
A) the money cost of both the present and future consumption. 
B) the foregone present consumption. 
C) the difference between the money price of future goods and the money cost of producing them. 
D) the difference between the money price of present goods and the money cost of producing them.

Question 18

Which of the following is NOT a service?

Accepted Answer

A) Physical labor purchased by a producer 
B) Things purchased by a consumer that do not have physical characteristics 
C) A diamond used in an engagement ring 
D) Tasks performed by someone else 
A) Physical labor purchased by a producer 
B) Things purchased by a consumer that do not have physical characteristics 
C) A diamond used in an engagement ring 
D) Tasks performed by someone else

Question 19

The most basic concept of economics is

Accepted Answer

A) self-interest. 
B) scarcity. 
C) demand. 
D) rationality. 
A) self-interest. 
B) scarcity. 
C) demand. 
D) rationality.

Question 20

The production possibilities curve represents

Accepted Answer

A) the total amount of stocks and bonds that exist in the economy. 
B) the trade-off between human capital and physical capital that exists. 
C) all possible combinations of total output that can be produced. 
D) society's needs. 
A) the total amount of stocks and bonds that exist in the economy. 
B) the trade-off between human capital and physical capital that exists. 
C) all possible combinations of total output that can be produced. 
D) society's needs.

Exam 2: Scarcity and the World of Trade-Offs

A friend says, "I really, really need a new car." As an economist, you're thinking

Assume that Economy A and Economy B have the same resources, but that individuals in Economy A have specialized whereas individuals in Economy B have not. Given this information, you can determine that

Which of the following statements about scarcity is TRUE?

The most basic concept in economics is

The production possibilities curve shifts outward when

Which of the following is a true statement?

Which of the following is true with respect to specialization?

With specialization,

In every economic system, choices must be made because resources

-In the above figure, points u, v, y, and z show

Division of labor increases the output of society by

Explain what is meant by economic efficiency. Does efficiency imply that the fastest production processes or the most powerful equipment must always be used? Explain.

On an afternoon that a class meets, you could alternatively study for an exam that will take place in another class the next morning, go to a movie with a friend, or, most desirable to you at present, take a nap. The opportunity cost of attending the afternoon class is

At a zero price, which of the following conditions is TRUE for an economic good?

The above table shows the daily production possibilities for a bakery. Currently the bakery bakes 60 pizzas and 180 loaves of bread, that is-it is at alternative C. -Using the above table, what is the opportunity cost of moving from alternative C to alternative D?

-Refer to the above figure. Which one of the following statements is true with regard to the economy depicted in the graph?

The trade-off between the present and future consumption is measured by

Which of the following is NOT a service?

The most basic concept of economics is

The production possibilities curve represents

The Nature of Economics

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters