Question 1

On the television show "MythBusters," the hosts design experiments, collect data, and test theories based on popular myths. This is an example of:

Accepted Answer

A)  the scientific method as used in economics. 
B)  economic growth. 
C)  gains from trade. 
D)  production possibilities. 
E)  absolute advantage. 
A)  the scientific method as used in economics. 
B)  economic growth. 
C)  gains from trade. 
D)  production possibilities. 
E)  absolute advantage. A

Question 2

Consider the production possibilities frontier (PPF) shown in the figure below to answer the next three questions.
 
-The set of efficient points is best described as:

Accepted Answer

A)  only area O: points outside the PPF. 
B)  points on the PPF only. 
C)  only area I: points inside the PPF. 
D)  area I: inside the PPF and points on the PPF. 
E)  area O: outside the PPF and points on the PPF. 
A)  only area O: points outside the PPF. 
B)  points on the PPF only. 
C)  only area I: points inside the PPF. 
D)  area I: inside the PPF and points on the PPF. 
E)  area O: outside the PPF and points on the PPF. B

Question 3

Goods that are produced for current consumption are called:

Accepted Answer

A)  capital goods. 
B)  consumer goods. 
C)  investment goods. 
D)  normal goods. 
E)  opportunity goods. 
A)  capital goods. 
B)  consumer goods. 
C)  investment goods. 
D)  normal goods. 
E)  opportunity goods. B

Question 4

The scientific method and the tools of economics are useful in examining:

Accepted Answer

A)  only how individuals make decisions. 
B)  only how business firms make decisions. 
C)  only how government policies affect macroeconomic outcomes. 
D)  only the trade-offs evident in production possibilities frontier (PPF). 
E)  anything; economists will use their tools to study anything in the world around them. 
A)  only how individuals make decisions. 
B)  only how business firms make decisions. 
C)  only how government policies affect macroeconomic outcomes. 
D)  only the trade-offs evident in production possibilities frontier (PPF). 
E)  anything; economists will use their tools to study anything in the world around them.

Question 5

You have a comparative advantage in producing a good whenever:

Accepted Answer

A)  you enjoy producing that good. 
B)  you can produce more of the good than someone else can using the same resources. 
C)  your opportunity cost is constant. 
D)  your opportunity cost of producing that good is lower than that of other producers. 
E)  you have specific training in the production of that good. 
A)  you enjoy producing that good. 
B)  you can produce more of the good than someone else can using the same resources. 
C)  your opportunity cost is constant. 
D)  your opportunity cost of producing that good is lower than that of other producers. 
E)  you have specific training in the production of that good.

Question 6

The accompanying figures depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. If Jim and Pam were to specialize and trade, at what exchange rate would they find some quantity of trade to be mutually beneficial?

Accepted Answer

A)  3 pizzas for 1 stromboli 
B)  1 pizza for 1 stromboli 
C)  10 pizzas for 2 stromboli 
D)  1 pizza for 1/2 stromboli 
E)  1 pizza for 1/4 stromboli 
A)  3 pizzas for 1 stromboli 
B)  1 pizza for 1 stromboli 
C)  10 pizzas for 2 stromboli 
D)  1 pizza for 1/2 stromboli 
E)  1 pizza for 1/4 stromboli

Question 7

How can a person who is "better" or more efficient (in that they have an absolute advantage in the production of various goods on the PPF) at producing several things be made even better off by specialization and trade?

Accepted Answer

It sometimes seems counterintuitive that

Question 8

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier (PPF)?

Accepted Answer

Unemployed labor resources mean that, as

Question 9

Suppose that, on a particular Saturday, Mark Zuckerberg and Bill Gates can either plant trees or spread mulch in their gardens. Their maximum output per day is listed in the following table, along with spaces where you can calculate the opportunity cost. Who has an absolute advantage in spreading mulch? $$\begin{array} { | l | l | l | l | l | } 
\hline & \begin{array} { l } 
\text { Trees } \
\text { Phanted }
\end{array} & \begin{array} { l } 
\text { Opportunity } \
\text { Cost of 1 } \
\text { Tree }
\end{array} & \begin{array} { l } 
\text { Amount } \
\text { of Mulch } \
\text { Spread } \
\text { (incubic } \
\text { yards) }
\end{array} & \begin{array} { l } 
\text { Opportumity } \
\text { Cost of } \
\text { Spreading 1 } \
\text { Cubic Yard } \
\text { of Mulch }
\end{array} \
\hline \text { Zuckerberg } & 20 & & 30 & \
\hline \text { Gates } & 15 & & 30 & \
\hline
\end{array}$$

Accepted Answer

A)  Zuckerberg has the advantage because he gives up fewer trees each time he spreads 1 cubic yard of mulch. 
B)  Gates has the advantage because he gives up fewer trees each time he spreads 1 cubic yard of mulch. 
C)  Zuckerberg has the advantage because he gives up more trees each time he spreads 1 cubic yard of mulch. 
D)  Neither has an absolute advantage in spreading mulch. 
E)  Both parties have an absolute advantage in planting trees. 
A)  Zuckerberg has the advantage because he gives up fewer trees each time he spreads 1 cubic yard of mulch. 
B)  Gates has the advantage because he gives up fewer trees each time he spreads 1 cubic yard of mulch. 
C)  Zuckerberg has the advantage because he gives up more trees each time he spreads 1 cubic yard of mulch. 
D)  Neither has an absolute advantage in spreading mulch. 
E)  Both parties have an absolute advantage in planting trees.

Question 10

You can see that the opportunity cost of moving from point B to point D is different from the opportunity cost of moving from point D to point C because:

Accepted Answer

A)  apples are bigger than blueberries. 
B)  the slope of the production possibilities frontier (PPF) is different in each of the two segments. 
C)  they are all efficient points. 
D)  they are all attainable points. 
E)  the opportunity cost is constant along the PPF. 
A)  apples are bigger than blueberries. 
B)  the slope of the production possibilities frontier (PPF) is different in each of the two segments. 
C)  they are all efficient points. 
D)  they are all attainable points. 
E)  the opportunity cost is constant along the PPF.

Question 11

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. Refer to these figures to answer the next three questions.
 
-What is Pam's opportunity cost of making 1 stromboli?

Accepted Answer

A)  30 pizzas 
B)  20 stromboli 
C)  2 pizzas 
D)  1.5 pizzas 
E)  2/3 pizza 
A)  30 pizzas 
B)  20 stromboli 
C)  2 pizzas 
D)  1.5 pizzas 
E)  2/3 pizza

Question 12

Suppose that Sheldon and Leonard can either run errands or wash dishes. Their maximum output per hour is listed in the following table. Given the same quantity of resources, at what terms of trade (relative price ratio) could they specialize and trade so that both consume outside their own production possibilities frontier (PPF)? $$\begin{array} { | l | l | l | l | l | } 
\hline & \begin{array} { l } 
\text { Errands } \
\text { Run }
\end{array} & \begin{array} { l } 
\text { Opporturity } \
\text { Cost of 1 } \
\text { Errand }
\end{array} & \begin{array} { l } 
\text { Dishes } \
\text { Washed }
\end{array} & \begin{array} { l } 
\text { Opportumity } \
\text { Cost of 1 Dish } \
\text { Washed }
\end{array} \
\hline \text { Sheldon } & 1 & 60 \text { dishes } & 60 & 1 / 60 \text { errand } \
\hline \text { Leonard } & 3 & 15 \text { dishes } & 45 & 1 / 15 \text { errand } \
\hline
\end{array}$$

Accepted Answer

A)  1 errand run per 75 dishes washed 
B)  1 errand run per 30 dishes washed 
C)  1 errand run per 12 dishes washed 
D)  1 errand run per 10 dishes washed 
E)  1 errand run per 6 dishes washed 
A)  1 errand run per 75 dishes washed 
B)  1 errand run per 30 dishes washed 
C)  1 errand run per 12 dishes washed 
D)  1 errand run per 10 dishes washed 
E)  1 errand run per 6 dishes washed

Question 13

Why doesn't our society invest more resources into the production of capital goods to enhance the level of growth in our future production possibilities frontier (PPF)?

Accepted Answer

Capital goods are great because they lea

Question 14

Which of the following is NOT an assumption that economists make when developing a production possibilities frontier (PPF)?

Accepted Answer

A)  We live in a world with only two goods. 
B)  There are no increases in technology. 
C)  There is no change in available resources. 
D)  Society will always be producing somewhere on the PPF. 
E)  There are no decreases in technology. 
A)  We live in a world with only two goods. 
B)  There are no increases in technology. 
C)  There is no change in available resources. 
D)  Society will always be producing somewhere on the PPF. 
E)  There are no decreases in technology.

Question 15

Which of the following is a positive statement?

Accepted Answer

A)  Winters in Arkansas are too cold. 
B)  Everyone should work in a bank to understand the true value of money. 
C)  Harvard University is the top education institution in the country. 
D)  On average, people save 15% when they switch to GEICO. 
E)  Everyone ought to have a life insurance policy. 
A)  Winters in Arkansas are too cold. 
B)  Everyone should work in a bank to understand the true value of money. 
C)  Harvard University is the top education institution in the country. 
D)  On average, people save 15% when they switch to GEICO. 
E)  Everyone ought to have a life insurance policy.

Question 16

Which allocation point in the short-run production possibilities frontier (PPF) will lead to the most significant growth in the long-run PPF?

Accepted Answer

A)  point A 
B)  point B 
C)  point C 
D)  point D 
E)  point E 
A)  point A 
B)  point B 
C)  point C 
D)  point D 
E)  point E

Question 17

At full employment, a society produces:

Accepted Answer

A)  somewhere within its production possibilities frontier (PPF). 
B)  somewhere outside its PPF. 
C)  at the origin on its PPF graph. 
D)  on its PPF. 
E)  only one good. 
A)  somewhere within its production possibilities frontier (PPF). 
B)  somewhere outside its PPF. 
C)  at the origin on its PPF graph. 
D)  on its PPF. 
E)  only one good.

Question 18

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier (PPF).

Accepted Answer

The PPF shows the maximum attainable com

Question 19

Comment on the role of models in economics. What are the strengths and weaknesses of using them to explore the world around us?

Accepted Answer

Models are important because they simpli

Question 20

One reason that economists make assumptions when designing models is to:

Accepted Answer

A)  exclude variables that do not add predictive power to the model. 
B)  make models more like the real world. 
C)  make models more complex. 
D)  increase endogenous factors. 
E)  ensure that all possible factors are included. 
A)  exclude variables that do not add predictive power to the model. 
B)  make models more like the real world. 
C)  make models more complex. 
D)  increase endogenous factors. 
E)  ensure that all possible factors are included.

On the television show "MythBusters," the hosts design experiments, collect data, and test theories based on popular myths. This is an example of:

Consider the production possibilities frontier (PPF) shown in the figure below to answer the next three questions. -The set of efficient points is best described as:

Goods that are produced for current consumption are called:

The scientific method and the tools of economics are useful in examining:

You have a comparative advantage in producing a good whenever:

How can a person who is "better" or more efficient (in that they have an absolute advantage in the production of various goods on the PPF) at producing several things be made even better off by specialization and trade?

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier (PPF)?

You can see that the opportunity cost of moving from point B to point D is different from the opportunity cost of moving from point D to point C because:

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. Refer to these figures to answer the next three questions. -What is Pam's opportunity cost of making 1 stromboli?

Why doesn't our society invest more resources into the production of capital goods to enhance the level of growth in our future production possibilities frontier (PPF)?

Which of the following is NOT an assumption that economists make when developing a production possibilities frontier (PPF)?

Which of the following is a positive statement?

Which allocation point in the short-run production possibilities frontier (PPF) will lead to the most significant growth in the long-run PPF?

At full employment, a society produces:

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier (PPF).

Comment on the role of models in economics. What are the strengths and weaknesses of using them to explore the world around us?

One reason that economists make assumptions when designing models is to:

The Five Foundations of Economics

The Market at Work: Supply and Demand

Elasticity

Price Controls

The Efficiency of Markets and the Costs of Taxation

Market Inefficiencies: Externalities and Public Goods

Business Costs and Production

Firms in a Competitive Market

Understanding Monopoly

Price Discrimination

Monopolistic Competition and Advertising

Oligopoly and Strategic Behavior

The Demand and Supply of Resources

Income, Inequality, and Poverty

Consumer Choice

Behavioral Economics and Risk Taking

Health Insurance and Health Care

Filters

Exam 2: Model Building and Gains From Trade

On the television show "MythBusters," the hosts design experiments, collect data, and test theories based on popular myths. This is an example of:

Consider the production possibilities frontier (PPF) shown in the figure below to answer the next three questions. -The set of efficient points is best described as:

Goods that are produced for current consumption are called:

The scientific method and the tools of economics are useful in examining:

You have a comparative advantage in producing a good whenever:

How can a person who is "better" or more efficient (in that they have an absolute advantage in the production of various goods on the PPF) at producing several things be made even better off by specialization and trade?

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier (PPF)?

You can see that the opportunity cost of moving from point B to point D is different from the opportunity cost of moving from point D to point C because:

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. Refer to these figures to answer the next three questions. -What is Pam's opportunity cost of making 1 stromboli?

Why doesn't our society invest more resources into the production of capital goods to enhance the level of growth in our future production possibilities frontier (PPF)?

Which of the following is NOT an assumption that economists make when developing a production possibilities frontier (PPF)?

Which of the following is a positive statement?

Which allocation point in the short-run production possibilities frontier (PPF) will lead to the most significant growth in the long-run PPF?

At full employment, a society produces:

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier (PPF).

Comment on the role of models in economics. What are the strengths and weaknesses of using them to explore the world around us?

One reason that economists make assumptions when designing models is to:

The Five Foundations of Economics

The Market at Work: Supply and Demand

Elasticity

Price Controls

The Efficiency of Markets and the Costs of Taxation

Market Inefficiencies: Externalities and Public Goods

Business Costs and Production

Firms in a Competitive Market

Understanding Monopoly

Price Discrimination

Monopolistic Competition and Advertising

Oligopoly and Strategic Behavior

The Demand and Supply of Resources

Income, Inequality, and Poverty

Consumer Choice

Behavioral Economics and Risk Taking

Health Insurance and Health Care

Filters