Question 1

It is impossible for two people to increase their total production if one has a comparative advantage in the production of one particular good.

Accepted Answer

A) True 
 B)False  False

Question 2

Of the following individuals,who bears the highest opportunity cost of going to college?

Accepted Answer

A) A pro-football player earning $1 million a year 
B) A high school graduate without a job 
C) A high school dropout earning the minimum wage in a fast-food restaurant 
D) A person being laid off by a company 
E) A retiree 
A) A pro-football player earning $1 million a year 
B) A high school graduate without a job 
C) A high school dropout earning the minimum wage in a fast-food restaurant 
D) A person being laid off by a company 
E) A retiree A

Question 3

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. A

Question 4

Exhibit 1-6  
-Refer to the production possibilities schedule in Exhibit 1-6.A combination of 40 units of computers and 4 television sets

Accepted Answer

A) cannot be produced with the current supply of resources. 
B) is possible only with full and efficient use of all resources. 
C) has never been and never will be produced. 
D) illustrates underemployment of resources. 
E) will not satisfy the consumers' demands. 
A) cannot be produced with the current supply of resources. 
B) is possible only with full and efficient use of all resources. 
C) has never been and never will be produced. 
D) illustrates underemployment of resources. 
E) will not satisfy the consumers' demands.

Question 5

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

Accepted Answer

Prices in the surfboard market are free

Question 6

A voluntary exchange of existing consumer goods is beneficial because it

Accepted Answer

A) makes those engaging in the exchange better off. 
B) changes the total quantity of goods produced. 
C) reallocates existing goods. 
D) reduces scarcity. 
E) requires choice. 
A) makes those engaging in the exchange better off. 
B) changes the total quantity of goods produced. 
C) reallocates existing goods. 
D) reduces scarcity. 
E) requires choice.

Question 7

International trade exists only when a country can gain a trade advantage over another country.

Accepted Answer

A) True 
 B)False

Question 8

Any point on the production possibilities curve represents the fact that resources are efficiently allocated.

Accepted Answer

A) True 
 B)False

Question 9

Economics is a study of

Accepted Answer

A) choices and interactions among people when resources are scarce. 
B) how to overcome scarcity. 
C) how to make choices and interact in order to avoid scarcity. 
D) how to avoid scarcity by making choices. 
E) how to make money in stock markets. 
A) choices and interactions among people when resources are scarce. 
B) how to overcome scarcity. 
C) how to make choices and interact in order to avoid scarcity. 
D) how to avoid scarcity by making choices. 
E) how to make money in stock markets.

Question 10

A division of labor occurs when some workers do all tasks while others do nothing.

Accepted Answer

A) True 
 B)False

Question 11

Economic interaction occurs in firms as opposed to markets

Accepted Answer

A) because markets are too competitive. 
B) because this is what the government wants. 
C) in order to lower transaction costs. 
D) in order to increase transaction costs. 
E) if workers want to increase wages but not product prices. 
A) because markets are too competitive. 
B) because this is what the government wants. 
C) in order to lower transaction costs. 
D) in order to increase transaction costs. 
E) if workers want to increase wages but not product prices.

Question 12

Does the production possibilities curve represent the economy in which some people win only if others lose? Explain.

Accepted Answer

There are two reasons why the production

Question 13

Trade enables people to specialize in activities in which they have a comparative advantage.

Accepted Answer

A) True 
 B)False

Question 14

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 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 mak

Question 16

Trade takes place when one party gains at the expense of another party.

Accepted Answer

A) True 
 B)False

Question 17

The table below depicts the choices George and Sarah face when deciding whether to cook,wait on tables,or both.   
(A)In which area,if any,does Sarah have a comparative advantage? In which area does George have a comparative advantage?
(B)If George and Sarah do not get together,how many customers will be served?
(C)If George and Sarah do get together,how many customers will be served? What will be the gain resulting from this exchange?

Accepted Answer

(A) Sarah has a comparative advantage in

Question 18

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 19

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 20

To say that a change in taste causes prices to rise is to claim that

Accepted Answer

A) transfer prices are a more accurate gauge of economic activity than market prices. 
B) prices are a signal. 
C) the economy has full information. 
D) prices would not change if people did not know the exact reason for the price change. 
E) price changes cannot be predicted. 
A) transfer prices are a more accurate gauge of economic activity than market prices. 
B) prices are a signal. 
C) the economy has full information. 
D) prices would not change if people did not know the exact reason for the price change. 
E) price changes cannot be predicted.

Exam 1: The Central Idea

It is impossible for two people to increase their total production if one has a comparative advantage in the production of one particular good.

Of the following individuals,who bears the highest opportunity cost of going to college?

Inefficient use of a nation's resources would

Exhibit 1-6 -Refer to the production possibilities schedule in Exhibit 1-6.A combination of 40 units of computers and 4 television sets

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

A voluntary exchange of existing consumer goods is beneficial because it

International trade exists only when a country can gain a trade advantage over another country.

Any point on the production possibilities curve represents the fact that resources are efficiently allocated.

Economics is a study of

A division of labor occurs when some workers do all tasks while others do nothing.

Economic interaction occurs in firms as opposed to markets

Does the production possibilities curve represent the economy in which some people win only if others lose? Explain.

Trade enables people to specialize in activities in which they have a comparative advantage.

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

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

Trade takes place when one party gains at the expense of another party.

A budget constraint

The role of government in a market system

To say that a change in taste causes prices to rise is to claim that

Observing and Explaining the Economy

The Supply and Demand Model

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

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Interaction of People in 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 and Globalization

International Trade

International Finance

Reading,understanding,and Creating Graphs

Consumer Theory With Indifference Curves

Producer Theory With Isoquants

Present Discounted Value

The Miracle of Compound Growth

Deriving the Growth Accounting Formula

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

Filters