Question 1

An institution through which buyers and sellers interact and engage in exchange is

Accepted Answer

A) a central authority. 
B) "laissez-faire." 
C) a market. 
D) a production frontier. 
A) a central authority. 
B) "laissez-faire." 
C) a market. 
D) a production frontier.

Question 2

Economic growth may occur when

Accepted Answer

A) a society acquires new resources. 
B) a society learns to produce more using existing resources. 
C) the society begins to produce the combination of goods society wants most. 
D) both A and B 
A) a society acquires new resources. 
B) a society learns to produce more using existing resources. 
C) the society begins to produce the combination of goods society wants most. 
D) both A and B

Question 3

The marginal rate of transformation is the

Accepted Answer

A) slope of the production possibility frontier. 
B) dollar value of the best forgone alternative. 
C) process of using resources to produce new capital. 
D) transformation of resources into a form that is useful to people. 
A) slope of the production possibility frontier. 
B) dollar value of the best forgone alternative. 
C) process of using resources to produce new capital. 
D) transformation of resources into a form that is useful to people.

Question 4

In a laissez-faire economy,________ what gets produced,how it is produced,and who gets it.

Accepted Answer

A) the behavior of buyers and sellers determines 
B) the central government authority determines 
C) firms but not consumers determine 
D) consumers but not firms determine 
A) the behavior of buyers and sellers determines 
B) the central government authority determines 
C) firms but not consumers determine 
D) consumers but not firms determine

Question 5

Because resources are scarce,the opportunity cost of investment in capital is

Accepted Answer

A) zero. 
B) forgone future consumption. 
C) forgone present consumption. 
D) infinite. 
A) zero. 
B) forgone future consumption. 
C) forgone present consumption. 
D) infinite.

Question 6

Refer to the information provided in Figure 2.2 below to answer the questions that follow.   Figure 2.2
-Refer to Figure 2.2.Point B represents a situation of

Accepted Answer

A) full employment but production inefficiency. 
B) less than full employment but production efficiency. 
C) both full resource employment and production efficiency. 
D) less than full employment and production inefficiency. 
A) full employment but production inefficiency. 
B) less than full employment but production efficiency. 
C) both full resource employment and production efficiency. 
D) less than full employment and production inefficiency.

Question 7

Periods of less than full employment correspond to

Accepted Answer

A) points outside the ppf. 
B) points underneath the ppf. 
C) points on the ppf. 
D) either points inside or outside the ppf. 
A) points outside the ppf. 
B) points underneath the ppf. 
C) points on the ppf. 
D) either points inside or outside the ppf.

Question 8

A command economy is one in which a central government sets output targets,incomes and prices.

Accepted Answer

A) True 
 B)False

Question 9

Refer to the information provided in Figure 2.5 below to answer the questions that follow.   Figure 2.5
-Refer to Figure 2.5.For this economy to move from Point B to Point C so that an additional 20 plasma televisions could be produced,production of LCD televisions would have to be reduced by

Accepted Answer

A) exactly 30. 
B) fewer than 30. 
C) more than 30. 
D) exactly 60. 
A) exactly 30. 
B) fewer than 30. 
C) more than 30. 
D) exactly 60.

Question 10

Refer to the information provided in Figure 2.3 below to answer the questions that follow.   Figure 2.3
-Refer to Figure 2.3.The law of ________ opportunity costs is best depicted by the production possibilities frontier in panel A.

Accepted Answer

A) increasing 
B) constant 
C) decreasing 
D) zero 
A) increasing 
B) constant 
C) decreasing 
D) zero

Question 11

An economy in which individual people and firms pursue their own self-interest without any central direction or regulation is a(n)

Accepted Answer

A) command economy. 
B) laissez-faire economy. 
C) invisible-hand economy. 
D) private-sector economy. 
A) command economy. 
B) laissez-faire economy. 
C) invisible-hand economy. 
D) private-sector economy.

Question 12

The concept of opportunity cost is based on the principle of

Accepted Answer

A) need. 
B) consumption. 
C) scarcity. 
D) profit. 
A) need. 
B) consumption. 
C) scarcity. 
D) profit.

Question 13

Related to the Economics in Practice on p.28: Which one of the following occurs when an individual enters the paid work force?

Accepted Answer

A) The opportunity cost of time for housework increases,because time spent on housework could be spent on money-earning activities. 
B) The opportunity cost of time for housework increases,because money earned at a job can allow individuals to pay someone to do household chores that the individuals used to do themselves. 
C) The opportunity cost of time for housework decreases,because increased earning power makes individuals less likely to do their own housework. 
D) The opportunity cost of time for housework decreases,because as more people enter the work force,businesses have greater incentives to develop innovations that make housework more efficient. 
A) The opportunity cost of time for housework increases,because time spent on housework could be spent on money-earning activities. 
B) The opportunity cost of time for housework increases,because money earned at a job can allow individuals to pay someone to do household chores that the individuals used to do themselves. 
C) The opportunity cost of time for housework decreases,because increased earning power makes individuals less likely to do their own housework. 
D) The opportunity cost of time for housework decreases,because as more people enter the work force,businesses have greater incentives to develop innovations that make housework more efficient.

Question 14

The value of the slope of a society's production possibility frontier is called its

Accepted Answer

A) marginal rate of substitution. 
B) inflation rate. 
C) unemployment rate. 
D) marginal rate of transformation. 
A) marginal rate of substitution. 
B) inflation rate. 
C) unemployment rate. 
D) marginal rate of transformation.

Question 15

Refer to the information provided in Table 2.1 below to answer the following questions.
Table 2.1
  
-Refer to Table 2.1.Which of the following statements is TRUE?

Accepted Answer

A) Krystal has a comparative advantage in both writing TV commercials and writing poems. 
B) Mark has a comparative advantage in both writing TV commercials and writing poems. 
C) Krystal has a comparative advantage in writing TV commercials,and Mark has a comparative advantage in writing poems. 
D) Mark has a comparative advantage in writing TV commercials,and Krystal has a comparative advantage in writing poems. 
A) Krystal has a comparative advantage in both writing TV commercials and writing poems. 
B) Mark has a comparative advantage in both writing TV commercials and writing poems. 
C) Krystal has a comparative advantage in writing TV commercials,and Mark has a comparative advantage in writing poems. 
D) Mark has a comparative advantage in writing TV commercials,and Krystal has a comparative advantage in writing poems.

Question 16

During the Iraq War,many of Iraq's oil refineries were destroyed.This would best be represented by a

Accepted Answer

A) movement down Iraq's production possibility frontier. 
B) movement off Iraq's production possibility frontier to some point inside the frontier. 
C) shift of Iraq's production possibility frontier toward the origin. 
D) movement up Iraq's production possibility frontier. 
A) movement down Iraq's production possibility frontier. 
B) movement off Iraq's production possibility frontier to some point inside the frontier. 
C) shift of Iraq's production possibility frontier toward the origin. 
D) movement up Iraq's production possibility frontier.

Question 17

An example of forgoing present benefits in order to receive future benefits is

Accepted Answer

A) production. 
B) saving. 
C) consumption. 
D) growth. 
A) production. 
B) saving. 
C) consumption. 
D) growth.

Question 18

As more of a good,such as television sets,is produced,the opportunity costs of producing it increases.This most likely occurs because

Accepted Answer

A) as more of a good is produced,the inputs used to produce that good will increase in price. 
B) consumers would be willing to pay higher prices for the good as more of the good is produced. 
C) resources are not equally well suited to producing all goods,and as more of a good is produced,it is necessary to use resources less well suited to the production of that good. 
D) as more of a good is produced,the quality of that good declines,and therefore the costs of production increase. 
A) as more of a good is produced,the inputs used to produce that good will increase in price. 
B) consumers would be willing to pay higher prices for the good as more of the good is produced. 
C) resources are not equally well suited to producing all goods,and as more of a good is produced,it is necessary to use resources less well suited to the production of that good. 
D) as more of a good is produced,the quality of that good declines,and therefore the costs of production increase.

Question 19

The gap between rich and poor countries

Accepted Answer

A) has decreased over time because poor countries can more easily devote resources to capital production. 
B) has increased over time because poor countries find it difficult to devote resources to capital production. 
C) has remained constant over time because technological advances can be easily shared among nations. 
D) has remained constant over time because the rate of capital production has remained constant in rich and poor nations. 
A) has decreased over time because poor countries can more easily devote resources to capital production. 
B) has increased over time because poor countries find it difficult to devote resources to capital production. 
C) has remained constant over time because technological advances can be easily shared among nations. 
D) has remained constant over time because the rate of capital production has remained constant in rich and poor nations.

Question 20

The "economic problem" is that given scarce resources,how do large societies go about answering the basic economic questions of what will be produced,how it will be produced,and who will get it.

Accepted Answer

A) True 
 B)False

Exam 2: The Economic Problem: Scarcity and Choice

An institution through which buyers and sellers interact and engage in exchange is

Economic growth may occur when

The marginal rate of transformation is the

In a laissez-faire economy,________ what gets produced,how it is produced,and who gets it.

Because resources are scarce,the opportunity cost of investment in capital is

Refer to the information provided in Figure 2.2 below to answer the questions that follow. Figure 2.2 -Refer to Figure 2.2.Point B represents a situation of

Periods of less than full employment correspond to

A command economy is one in which a central government sets output targets,incomes and prices.

Refer to the information provided in Figure 2.5 below to answer the questions that follow. Figure 2.5 -Refer to Figure 2.5.For this economy to move from Point B to Point C so that an additional 20 plasma televisions could be produced,production of LCD televisions would have to be reduced by

Refer to the information provided in Figure 2.3 below to answer the questions that follow. Figure 2.3 -Refer to Figure 2.3.The law of ________ opportunity costs is best depicted by the production possibilities frontier in panel A.

An economy in which individual people and firms pursue their own self-interest without any central direction or regulation is a(n)

The concept of opportunity cost is based on the principle of

Related to the Economics in Practice on p.28: Which one of the following occurs when an individual enters the paid work force?

The value of the slope of a society's production possibility frontier is called its

Refer to the information provided in Table 2.1 below to answer the following questions. Table 2.1 -Refer to Table 2.1.Which of the following statements is TRUE?

During the Iraq War,many of Iraq's oil refineries were destroyed.This would best be represented by a

An example of forgoing present benefits in order to receive future benefits is

As more of a good,such as television sets,is produced,the opportunity costs of producing it increases.This most likely occurs because

The gap between rich and poor countries

The "economic problem" is that given scarce resources,how do large societies go about answering the basic economic questions of what will be produced,how it will be produced,and who will get it.

The Scope and Method of Economics

Demand,supply,and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade,comparative Advantage,and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

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