Question 1

Each point on a production possibilities frontier requires full employment of resources.

Accepted Answer

A) True 
 B)False  True

Question 2

Specialization of labor

Accepted Answer

A)  increases productivity without creating any problems 
B)  reduces productivity, and is usually eliminated by business firms 
C)  can create problems of boredom and repetitive motion injuries 
D)  prevents the introduction of more sophisticated and efficient production techniques 
E)  ignores individual preferences and natural abilities 
A)  increases productivity without creating any problems 
B)  reduces productivity, and is usually eliminated by business firms 
C)  can create problems of boredom and repetitive motion injuries 
D)  prevents the introduction of more sophisticated and efficient production techniques 
E)  ignores individual preferences and natural abilities C

Question 3

An outward shift of the production possibilities frontier

Accepted Answer

A)  reflects economic stability 
B)  reflects economic growth 
C)  reflects economic decline 
D)  does not relate to the state of the economy 
E)  is always a parallel shift 
A)  reflects economic stability 
B)  reflects economic growth 
C)  reflects economic decline 
D)  does not relate to the state of the economy 
E)  is always a parallel shift B

Question 4

"Efficiency" refers to

Accepted Answer

A)  producing output using the least amount of labor 
B)  producing output using the least amount of capital 
C)  producing as far inside the production possibilities frontier as possible 
D)  producing only one out of many possible commodities 
E)  getting the maximum possible output from available resources 
A)  producing output using the least amount of labor 
B)  producing output using the least amount of capital 
C)  producing as far inside the production possibilities frontier as possible 
D)  producing only one out of many possible commodities 
E)  getting the maximum possible output from available resources

Question 5

NARRBEGIN: Exhibit 2-5
Exhibit 2-6
  
-In Exhibit 2-5, if society moves from point c to point d, society

Accepted Answer

A)  gains 100 socks 
B)  loses 30 mufflers 
C)  is worse off after the change in production 
D)  is not operating efficiently 
E)  experiences some unemployment of resources 
A)  gains 100 socks 
B)  loses 30 mufflers 
C)  is worse off after the change in production 
D)  is not operating efficiently 
E)  experiences some unemployment of resources

Question 6

Comparative advantage is based on opportunity costs.

Accepted Answer

A) True 
 B)False

Question 7

In one week, Tetah can knit 15 sweaters or bake 480 cookies. The opportunity cost per sweater for Tetah is

Accepted Answer

A)  $480 
B)  480 cookies 
C)  32 cookies 
D)  1/32 of a cookie 
E)  15 cookies 
A)  $480 
B)  480 cookies 
C)  32 cookies 
D)  1/32 of a cookie 
E)  15 cookies

Question 8

NARRBEGIN: Exhibit 2-2
Exhibit 2-2
  
-Given the information in Exhibit 2-2, which product should Friday (an individual) make?

Accepted Answer

A)  fishhooks because he can make 30 more per day than Crusoe but only 8 more fishing poles 
B)  both because he is better at both 
C)  fishing poles because that is where his comparative advantage lies 
D)  neither because Crusoe is better at both 
E)  we cannot tell from the given information 
A)  fishhooks because he can make 30 more per day than Crusoe but only 8 more fishing poles 
B)  both because he is better at both 
C)  fishing poles because that is where his comparative advantage lies 
D)  neither because Crusoe is better at both 
E)  we cannot tell from the given information

Question 9

NARRBEGIN: Exhibit 2-3-1
Exhibit 2-3
  
-Point f in Exhibit 2-3 represents

Accepted Answer

A)  an efficient combination of good A and good B 
B)  the only efficient combination of good A and good B 
C)  the combination of good A and good B that the economy will produce 
D)  an inefficient combination of good A and good B 
E)  the only unattainable combination of good A and good B 
A)  an efficient combination of good A and good B 
B)  the only efficient combination of good A and good B 
C)  the combination of good A and good B that the economy will produce 
D)  an inefficient combination of good A and good B 
E)  the only unattainable combination of good A and good B

Question 10

Each point along a nation's production possibilities frontier represents efficient use of all resources.

Accepted Answer

A) True 
 B)False

Question 11

Adam Smith's term, "the invisible hand," refers to

Accepted Answer

A)  the hidden role of government in setting regulations that govern trading in markets 
B)  the most capable entrepreneurs in the economy 
C)  market forces 
D)  the unseen work of the financial markets that facilitates trade 
E)  the role of technological change and random events in the economy 
A)  the hidden role of government in setting regulations that govern trading in markets 
B)  the most capable entrepreneurs in the economy 
C)  market forces 
D)  the unseen work of the financial markets that facilitates trade 
E)  the role of technological change and random events in the economy

Question 12

Recognizing the incentive power of property rights and markets, some of the most die-hard central planners are now allowing

Accepted Answer

A)  more influence from custom or religion 
B)  family relations to play significant roles 
C)  a role for markets 
D)  communal ownership of property 
E)  inefficient use of resources 
A)  more influence from custom or religion 
B)  family relations to play significant roles 
C)  a role for markets 
D)  communal ownership of property 
E)  inefficient use of resources

Question 13

Which economic question does the decision to produce butter instead of guns answer?

Accepted Answer

A)  What to produce? 
B)  How to produce? 
C)  For whom to produce? 
D)  Who has a comparative advantage in gun production? 
E)  Who has an absolute advantage in butter production? 
A)  What to produce? 
B)  How to produce? 
C)  For whom to produce? 
D)  Who has a comparative advantage in gun production? 
E)  Who has an absolute advantage in butter production?

Question 14

Barter occurs when

Accepted Answer

A)  two people share everything 
B)  one product is exchanged directly for another product 
C)  money is used to buy goods 
D)  money is exchanged directly for other money 
E)  goods are used to buy money 
A)  two people share everything 
B)  one product is exchanged directly for another product 
C)  money is used to buy goods 
D)  money is exchanged directly for other money 
E)  goods are used to buy money

Question 15

On a straight-line production possibilities frontier, which of the following is true?

Accepted Answer

A)  The problem of scarcity does not exist. 
B)  Resources are imperfect substitutes. 
C)  Opportunity costs are constant. 
D)  Technology is rapidly expanding. 
E)  Some resources are not being used efficiently. 
A)  The problem of scarcity does not exist. 
B)  Resources are imperfect substitutes. 
C)  Opportunity costs are constant. 
D)  Technology is rapidly expanding. 
E)  Some resources are not being used efficiently.

Question 16

If Evan has an absolute advantage in cleaning and bookkeeping when compared to Gloria, then

Accepted Answer

A)  Evan must also have a comparative advantage in cleaning and bookkeeping 
B)  Evan must have a comparative advantage in cleaning 
C)  Evan must have a comparative advantage in bookkeeping 
D)  Gloria has a comparative advantage in neither activity 
E)  we can conclude nothing about comparative advantage 
A)  Evan must also have a comparative advantage in cleaning and bookkeeping 
B)  Evan must have a comparative advantage in cleaning 
C)  Evan must have a comparative advantage in bookkeeping 
D)  Gloria has a comparative advantage in neither activity 
E)  we can conclude nothing about comparative advantage

Question 17

NARRBEGIN: Exhibit 2-1
Exhibit 2-1
  
-According to Exhibit 2-1, if Maria does one fewer load of laundry, how many pages can she type in the time saved on laundry?

Accepted Answer

A)  4 pages 
B)  6 pages 
C)  2/3 of a page 
D)  3/2 of a page 
E)  it cannot be determined 
A)  4 pages 
B)  6 pages 
C)  2/3 of a page 
D)  3/2 of a page 
E)  it cannot be determined

Question 18

Opportunity cost exists because

Accepted Answer

A)  technology is fixed at any point in time 
B)  the law of comparative advantage is working 
C)  resources are scarce but wants are unlimited 
D)  the value of lost opportunities varies from person to person 
E)  efficiency is measured by the monetary cost of an activity 
A)  technology is fixed at any point in time 
B)  the law of comparative advantage is working 
C)  resources are scarce but wants are unlimited 
D)  the value of lost opportunities varies from person to person 
E)  efficiency is measured by the monetary cost of an activity

Question 19

A production possibilities frontier will shift outward if there is an improvement in technology.

Accepted Answer

A) True 
 B)False

Question 20

NARRBEGIN: Exhibit 2-9
Exhibit 2-9
        
-Refer to Exhibit 2-9. Which of the graphs best illustrates the impact on the production possibilities frontier of a dramatic increase in the rate of immigration into a country?

Accepted Answer

A)  a 
B)  b 
C)  c 
D)  d 
E)  b and c 
A)  a 
B)  b 
C)  c 
D)  d 
E)  b and c

Exam 2: Economic Tools and Economics Systems

Each point on a production possibilities frontier requires full employment of resources.

Specialization of labor

An outward shift of the production possibilities frontier

"Efficiency" refers to

NARRBEGIN: Exhibit 2-5 Exhibit 2-6 -In Exhibit 2-5, if society moves from point c to point d, society

Comparative advantage is based on opportunity costs.

In one week, Tetah can knit 15 sweaters or bake 480 cookies. The opportunity cost per sweater for Tetah is

NARRBEGIN: Exhibit 2-2 Exhibit 2-2 -Given the information in Exhibit 2-2, which product should Friday (an individual) make?

NARRBEGIN: Exhibit 2-3-1 Exhibit 2-3 -Point f in Exhibit 2-3 represents

Each point along a nation's production possibilities frontier represents efficient use of all resources.

Adam Smith's term, "the invisible hand," refers to

Recognizing the incentive power of property rights and markets, some of the most die-hard central planners are now allowing

Which economic question does the decision to produce butter instead of guns answer?

Barter occurs when

On a straight-line production possibilities frontier, which of the following is true?

If Evan has an absolute advantage in cleaning and bookkeeping when compared to Gloria, then

NARRBEGIN: Exhibit 2-1 Exhibit 2-1 -According to Exhibit 2-1, if Maria does one fewer load of laundry, how many pages can she type in the time saved on laundry?

Opportunity cost exists because

A production possibilities frontier will shift outward if there is an improvement in technology.

NARRBEGIN: Exhibit 2-9 Exhibit 2-9 -Refer to Exhibit 2-9. Which of the graphs best illustrates the impact on the production possibilities frontier of a dramatic increase in the rate of immigration into a country?

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Production and Cost in the Firm

A: Perfect Competition

B: Perfect Competition

A: Monopoly

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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