Question 1

A factory can be thought of as

Accepted Answer

A) a land and labor combination. 
B) a trade-off with land. 
C) physical capital. 
D) a type of entrepreneurship. 
A) a land and labor combination. 
B) a trade-off with land. 
C) physical capital. 
D) a type of entrepreneurship.

Question 2

Opportunity cost is illustrated on the production possibilities curve by a

Accepted Answer

A) bowed-out shape of the curve. 
B) shift to the right of the curve. 
C) shift to the left of the curve. 
D) movement along the curve. 
A) bowed-out shape of the curve. 
B) shift to the right of the curve. 
C) shift to the left of the curve. 
D) movement along the curve.

Question 3

Opportunity costs arise from

Accepted Answer

A) choices. 
B) taxes. 
C) mistakes. 
D) regrets. 
A) choices. 
B) taxes. 
C) mistakes. 
D) regrets.

Question 4

Explain how comparative advantage, specialization and division of labor are related.

Accepted Answer

Comparative advantage is the ability to

Question 5

A bowed-outward production possibilities curve demonstrates the concept of

Accepted Answer

A) constant opportunity costs as production shifts from the production of one good to the production of the other good. 
B) decreasing opportunity costs as production shifts from the production of one good to the production of the other good. 
C) increasing opportunity costs as production shifts from the production of one good to the production of the other good. 
D) increasing opportunity costs at first but the opportunity costs steadily decrease as you move down along the curve. 
A) constant opportunity costs as production shifts from the production of one good to the production of the other good. 
B) decreasing opportunity costs as production shifts from the production of one good to the production of the other good. 
C) increasing opportunity costs as production shifts from the production of one good to the production of the other good. 
D) increasing opportunity costs at first but the opportunity costs steadily decrease as you move down along the curve.

Question 6

Resources are also known as

Accepted Answer

A) minerals. 
B) factories. 
C) factors of production. 
D) stocks, bonds, and other financial instruments. 
A) minerals. 
B) factories. 
C) factors of production. 
D) stocks, bonds, and other financial instruments.

Question 7

-Refer to the above figure. A farmer has 50 acres of land on which to grow wheat or beans. An acre of land yields 400 bushels of beans or 800 bushels of wheat. Which of the following is a possible combination of beans and wheat that can be grown, assuming the land is farmed efficiently?

Accepted Answer

A) 30,000 bushels of each 
B) 20,000 bushels of beans and 40,000 bushels of wheat 
C) 5,000 bushels of beans and 5,000 bushels of wheat 
D) 16,000 bushels of beans and 8,000 bushels of wheat 
A) 30,000 bushels of each 
B) 20,000 bushels of beans and 40,000 bushels of wheat 
C) 5,000 bushels of beans and 5,000 bushels of wheat 
D) 16,000 bushels of beans and 8,000 bushels of wheat

Question 8

Opportunity cost is

Accepted Answer

A) the combined value of all the alternatives not selected. 
B) the same thing as the money price of a good. 
C) the value of the next best alternative which was given up. 
D) based on the intrinsic value of the good itself. 
A) the combined value of all the alternatives not selected. 
B) the same thing as the money price of a good. 
C) the value of the next best alternative which was given up. 
D) based on the intrinsic value of the good itself.

Question 9

-Refer to the above figure. The Law of Increasing Additional Costs applies in

Accepted Answer

A) Panel A only. 
B) Panel B only. 
C) Panels A and B. 
D) neither Panel A nor B. 
A) Panel A only. 
B) Panel B only. 
C) Panels A and B. 
D) neither Panel A nor B.

Question 10

Which of the following statements is TRUE about scarcity?

Accepted Answer

A) Both rich and poor people face the problem of scarcity. 
B) Scarcity exists only when supply is insufficient to meet demand. 
C) Scarcity exists only when a shortage exists. 
D) Scarcity can be eliminated when a country becomes richer. 
A) Both rich and poor people face the problem of scarcity. 
B) Scarcity exists only when supply is insufficient to meet demand. 
C) Scarcity exists only when a shortage exists. 
D) Scarcity can be eliminated when a country becomes richer.

Question 11

Suppose you order a slice of pepperoni pizza and a soda at a shopping mall food court. What are examples of the opportunity costs of this decision?

Accepted Answer

The opportunity cost of an action is the

Question 12

The production possibilities curve shows all possible combinations of

Accepted Answer

A) two goods that are desired by society. 
B) two goods that can be efficiently produced with a given set of resources. 
C) two goods that can be purchased given the prices of the goods. 
D) two goods that two countries can trade with each other. 
A) two goods that are desired by society. 
B) two goods that can be efficiently produced with a given set of resources. 
C) two goods that can be purchased given the prices of the goods. 
D) two goods that two countries can trade with each other.

Question 13

Absolute advantage is

Accepted Answer

A) producing at a lower opportunity cost. 
B) producing a good using the fewest inputs. 
C) producing a good only when demand is high. 
D) producing a good that requires imported components. 
A) producing at a lower opportunity cost. 
B) producing a good using the fewest inputs. 
C) producing a good only when demand is high. 
D) producing a good that requires imported components.

Question 14

Carlos is an executive of a major corporation. Boris is a baker. Carlos earns a salary ten times as large as the salary Boris earns, and Carlos has a much larger oven for baking break. Carlos can make a loaf of bread that tastes better than Boris's bread but Boris can bake faster.

Accepted Answer

A) Carlos has an absolute and comparative advantage over Boris in making bread. 
B) Carlos has an absolute but not comparative advantage over Boris in making bread. 
C) Carlos had a comparative but not absolute advantage over Boris in making bread. 
D) Carlos does not have an absolute or comparative advantage over Boris in making bread. 
A) Carlos has an absolute and comparative advantage over Boris in making bread. 
B) Carlos has an absolute but not comparative advantage over Boris in making bread. 
C) Carlos had a comparative but not absolute advantage over Boris in making bread. 
D) Carlos does not have an absolute or comparative advantage over Boris in making bread.

Question 15

Explain what will happen to the production possibilities curve over time if society gives up some consumption goods in favor of more capital goods.

Accepted Answer

If society chooses to give up some consu

Question 16

Division of labor

Accepted Answer

A) increases the amount of capital in the economy. 
B) leads to an increase in the amount of output in the economy. 
C) makes economic goods possible. 
D) is not possible for service goods. 
A) increases the amount of capital in the economy. 
B) leads to an increase in the amount of output in the economy. 
C) makes economic goods possible. 
D) is not possible for service goods.

Question 17

Which of the following statements about economic scarcity is FALSE?

Accepted Answer

A) Scarcity occurs among the poor and the rich. 
B) Scarcity only occurs if there are shortages and people wait in line to buy things. 
C) Scarcity results from not having enough resources to produce all the things we want. 
D) Scarcity results in the necessity to make choices. 
A) Scarcity occurs among the poor and the rich. 
B) Scarcity only occurs if there are shortages and people wait in line to buy things. 
C) Scarcity results from not having enough resources to produce all the things we want. 
D) Scarcity results in the necessity to make choices.

Question 18

Production refers to

Accepted Answer

A) physically producing material goods only. 
B) any activity carried on by a firm, whether a corporation, partnership, or sole proprietorship. 
C) any activity that results in the conversion of resources into goods and services that can be consumed. 
D) any activity that causes a material conversion of manufactured goods. 
A) physically producing material goods only. 
B) any activity carried on by a firm, whether a corporation, partnership, or sole proprietorship. 
C) any activity that results in the conversion of resources into goods and services that can be consumed. 
D) any activity that causes a material conversion of manufactured goods.

Question 19

Which is the best example of an intangible good?

Accepted Answer

A) The car you dream of owning but cannot afford. 
B) The suit you hope will make a good impression when you go on job interviews. 
C) The textbook study guide you hope will prepare you to perform well on examinations. 
D) The advice and expertise provided by the music store clerk who sold you that CD. 
A) The car you dream of owning but cannot afford. 
B) The suit you hope will make a good impression when you go on job interviews. 
C) The textbook study guide you hope will prepare you to perform well on examinations. 
D) The advice and expertise provided by the music store clerk who sold you that CD.

Question 20

What is the difference between comparative advantage and absolute advantage?

Accepted Answer

Absolute advantage refers to the ability

Exam 2: Scarcity and the World of Trade-Offs

A factory can be thought of as

Opportunity cost is illustrated on the production possibilities curve by a

Opportunity costs arise from

Explain how comparative advantage, specialization and division of labor are related.

A bowed-outward production possibilities curve demonstrates the concept of

Resources are also known as

-Refer to the above figure. A farmer has 50 acres of land on which to grow wheat or beans. An acre of land yields 400 bushels of beans or 800 bushels of wheat. Which of the following is a possible combination of beans and wheat that can be grown, assuming the land is farmed efficiently?

Opportunity cost is

-Refer to the above figure. The Law of Increasing Additional Costs applies in

Which of the following statements is TRUE about scarcity?

Suppose you order a slice of pepperoni pizza and a soda at a shopping mall food court. What are examples of the opportunity costs of this decision?

The production possibilities curve shows all possible combinations of

Absolute advantage is

Carlos is an executive of a major corporation. Boris is a baker. Carlos earns a salary ten times as large as the salary Boris earns, and Carlos has a much larger oven for baking break. Carlos can make a loaf of bread that tastes better than Boris's bread but Boris can bake faster.

Explain what will happen to the production possibilities curve over time if society gives up some consumption goods in favor of more capital goods.

Division of labor

Which of the following statements about economic scarcity is FALSE?

Production refers to

Which is the best example of an intangible good?

What is the difference between comparative advantage and absolute advantage?

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

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