Deck 3: Economic Tools and Economics Systems

Question 1

Opportunity cost is defined

A)only in terms of money spent
B)as the value of all alternatives not chosen
C)as the value of the best alternative not chosen
D)as the difference between the benefits from a choice and the benefits from the next best alternative
E)as the difference between the benefits from a choice and the costs of that choice

Answer 1

C

Question 2

Expenses for room and board

A)are opportunity costs of attending college, because they are subsidized by the government or by the college
B)are opportunity costs of attending college since they involve cash expenditures
C)are opportunity costs of attending college if you are on scholarship, but not otherwise
D)are not usually part of the opportunity cost of attending college, because you would have to live somewhere and eat something even if you didn't attend college
E)are not usually part of the opportunity cost of attending college, because they are already included in room and board charges, and we wish to avoid double counting

Answer 2

D

Question 3

The opportunity cost of an activity is

A)zero if you choose the activity voluntarily
B)the amount of money spent on the activity
C)the value of the best alternative not chosen
D)the sum of benefits from all of the sacrificed alternatives
E)the difference between the benefits and the costs of that activity

Answer 3

C

Question 4

Opportunity cost is the difference between the benefits and the costs of a choice.

Question 5

Opportunity cost is always measured in dollar terms, rather than in terms of real goods and services.

Question 6

The opportunity cost of college is the same for all students who are receiving full-tuition scholarships.

Question 7

A rational decision maker engages in an activity if that activity is more attractive than the best alternative.

Question 8

Upon graduating from high school you have a job offer which would provide you with $20,000 in income for the coming year. You have also been accepted to Isaac and Avery college. Tuition for the coming year at I&A college is $15,000, room and board is $10,000 and you expect that books will cost you $2,000. What is the opportunity cost of attending I&A college?

A)$37,000
B)$27,000
C)$20,000
D)$32,000
E)$47,000

Question 9

The opportunity cost of going to college is best measured by the

A)cost of room and board
B)cost of tuition
C)cost of room and board plus tuition
D)income forgone by not working, plus tuition
E)income forgone by not working, plus tuition and room and board

Question 10

The Sultan of Brunei, one of the world's richest people, does not face the problem of scarcity.

Question 11

Your opportunity cost of choosing a particular activity

A)can be easily and accurately calculated
B)cannot even be estimated
C)does not change over time
D)varies, depending on time and circumstances
E)is measured by the money you spend on the activity

Question 12

The opportunity cost of going to college includes the costs of tuition, books, fees, and

A)nothing else
B)housing
C)housing and food
D)earnings forgone by not working full-time
E)housing, food, and earnings forgone by not working full-time

Question 13

Opportunity cost is objective; therefore, its value does not change as circumstances change.

Question 14

The opportunity cost of an activity

A)depends on the individual's subjective values and opinions
B)is the same for everyone
C)must be calculated and known before undertaking that activity
D)is irrelevant to decision making
E)is not related to time

Question 15

Suppose you have an hour before your next class starts. You can either read a book, get something to eat, or take a nap. The opportunity cost of getting something to eat is

A)the cost of what you eat
B)the value of reading and sleeping
C)the loss of value from not reading or sleeping
D)the net benefit of sleeping for another hour
E)impossible to determine because the most preferred alternative is not known

Question 16

The cost of attending college

A)is entirely monetary and consists of expenditures on tuition, books, transportation, and meals
B)is not monetary, but consists solely of forgone income
C)is the most valued alternative given up to attend college
D)is negligible for most people, because they really have no choice but to attend college
E)is the same whether you attend a public or a private college

Question 17

Opportunity cost exists because

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 18

A test was scheduled for Monday morning, but you went to a party on Saturday night. If you hadn't attended the party, you could have studied for the test or gone to a movie. Which of the following is true?

A)The opportunity cost of going to the movie is studying for the test.
B)The opportunity cost of going to the party is the movie.
C)The opportunity cost of going to the party is both the movie and the study time.
D)Because you could go to the party only that night but could go to a movie any time, the opportunity cost of the party is the study time.
E)From the above information, it's not possible to determine the opportunity cost of attending the party.

Question 19

Which economic concept does the expression "time is money" reflect?

A)opportunity cost
B)specialization
C)market exchange
D)comparative advantage
E)efficiency

Question 20

Suppose you have a choice of working full-time during the summer or going full-time to summer school. Summer tuition and books are $2,200. If you worked, you could make $7,000. Your rent is $1,000 for the summer, regardless of your choice. The opportunity cost of going to summer school is, therefore,

A)$2,200
B)$7,000
C)$8,000
D)$9,200
E)$10,200

Question 21

A person who can produce more of a good than another person is said to possess a comparative advantage.

Question 22

The law of comparative advantage states that the person who should produce a good is the person who

A)has the lowest opportunity cost of producing that good
B)can produce that good using the fewest resources
C)will produce that good using the most expensive resources
D)has the most desire for that good
E)has produced that good in the past

Question 23

If you and I agree to exchange four ginger snaps for one chocolate chip cookie, then it must be true that

A)we are both at least as well off as we were before
B)I am better off than I was before, but you are not
C)you are better off than you were before, but I am not
D)we are both better off than before
E)we are both worse off than before

Question 24

It is possible for one person to have an absolute advantage in two tasks and a comparative advantage in only one.

Question 25

The law of comparative advantage says that a person should produce a good if she

A)has the greatest desire to consume that good
B)has the lowest opportunity cost of producing that good
C)has an absolute advantage in a related activity
D)has a comparative advantage in a related activity
E)is equally good at producing this good as someone else is

Question 26

The opportunity cost of a particular activity

A)must be the same for everyone
B)is the value of all alternative activities that are forgone
C)has a maximum value equal to the minimum wage
D)varies from person to person
E)can usually be known with certainty

Question 27

If people specialize in producing those goods for which they possess a comparative advantage, then the economy as a whole can produce a greater quantity of goods.

Question 28

Sunk costs

A)can only be measured in monetary terms
B)are opportunity costs
C)should influence a person's choice if that person is a marginal decision maker
D)lower the efficiency of production
E)should not be considered when making economic decisions

Question 29

It is possible for one person to have a comparative advantage in the production of all products?

Question 30

Suppose you have purchased a non-refundable plane ticket and, at the last moment, you cannot take the trip. You can, however, sell the ticket. If you paid $700 for the ticket, the cost of sending the ticket to someone through overnight mail is $20, and you spend $10 on a courier to get the ticket to the post office for overnight delivery, what is the minimum you should accept for the ticket?

A)$700 because that is what the ticket cost.
B)$720 because that is the cost of the ticket and of getting it to the buyer.
C)$730 because that is the total cost of the ticket and getting it to the buyer.
D)More than $730, so that you can make a profit.
E)$30 because the $700 is a sunk cost.

Question 31

The term opportunity cost suggests that

A)in any exchange situation where one person gains, someone else must lose
B)not all individuals make the most of life's opportunities
C)executives do not always recognize opportunities for profit as quickly as they should
D)the only factor that is important in decision making is cost
E)because goods are scarce, in order to get some good you must give up some other good in return

Question 32

It is impossible for one person to have a comparative advantage in all tasks.

Question 33

If you enjoy playing golf, the opportunity cost of cleaning your room

A)is the same on sunny days as it is on rainy days
B)is greater on sunny days than it is on rainy days
C)is smaller on sunny days than it is on rainy days
D)does not change with the weather conditions
E)is equal to the opportunity cost of any other chore you have to do that day

Question 34

The law of comparative advantage says that

A)the individual with the lowest opportunity cost of producing a particular good should produce it
B)comparative advantage exists only when one person has an absolute advantage in the production of two goods
C)whoever has a comparative advantage in producing a good also has an absolute advantage in producing that good
D)whoever has an absolute advantage in producing a good also has a comparative advantage in producing that good
E)gains from trade are possible only when one person has the comparative advantage in producing both goods

Question 35

The opportunity cost of an activity is best measured

A)only by the monetary costs
B)by the number of alternative activities that were forgone
C)by the cost difference between the chosen activity and the next best alternative
D)by the value expected from the best alternative that is forgone
E)as the time wasted choosing among various activities

Question 36

A university should not disband its football team if it has already paid for the stadium.

Question 37

Comparative advantage is based on opportunity costs.

Question 38

It is possible for one person to have an absolute advantage in something even if she has no comparative advantage in anything.

Question 39

Melissa is a self-employed lawyer who chooses a higher-priced restaurant 2 miles from home over a cheaper restaurant 15 miles from home. Which of the following is the most likely explanation for her behavior?

A)The opportunity cost of her time is very low.
B)She doesn't take travel time into consideration.
C)She doesn't like to cook or doesn't know how.
D)The prices at the more expensive restaurant understate the opportunity cost of eating there.
E)The higher monetary cost of the more expensive restaurant is offset by the higher opportunity cost of the lower-priced restaurant.

Question 40

Comparative advantage is

A)the ability of an individual to specialize and produce a greater amount of some good than can another individual
B)the number of units of one good given up in order to acquire something
C)the ability of an individual to produce a good at a lower opportunity cost than some other individual can
D)an expression for the amount of labor a particular individual needs to produce a fixed amount of capital goods
E)a reference to an individual having the greatest opportunity cost of producing the good and produces it with the fewest resources

Question 41

Janis mows the lawn in 1 hour and types a paper in 1 hour. Kristen mows the lawn in 2 hours and types a paper in 1 hour. Which of the following statements is true?

A)Kristen has an absolute advantage in typing and a comparative advantage in mowing.
B)Janis has an absolute advantage in both activities and a comparative advantage in typing.
C)Janis has an absolute advantage in both activities and a comparative advantage in mowing.
D)The opportunity cost of mowing the lawn is greater for Kristen than it is for Janis.
E)Neither Janis nor Kristen would gain from specialization.

Question 42

If one person has the absolute advantage in producing both of two goods, then that person

A)must also have a comparative advantage in both goods
B)cannot benefit from trade
C)cannot have a comparative advantage in either good
D)will have the comparative advantage in only one good
E)should specialize in the production of both goods

Question 43

If Daniel produces one pair of shoes in 4 hours and Sarah produces one pair of shoes in 3 hours, then

A)Sarah has a comparative advantage in shoemaking
B)Daniel has a comparative advantage in shoemaking
C)Sarah has an absolute and a comparative advantage in shoemaking
D)Daniel has an absolute and a comparative advantage in shoemaking
E)Sarah has an absolute advantage in shoemaking

Question 44

Helen gives up the opportunity to bake 40 cakes for each room she paints; Josh can paint one room in the time it takes him to bake 60 cakes. The opportunity cost of a cake for Helen is

A)painting one room
B)painting 1/40 of a room
C)painting 1/60 of a room
D)painting 2/3 of a room
E)painting 3/2 of a room

Question 45

A country has an absolute advantage in the production of a good if that country

A)can produce the good using fewer resources than another country would require
B)has the lowest opportunity cost of producing the good and can produce it with the fewest resources
C)has the lowest opportunity cost of producing the good regardless of whether it is produced with the fewest resources
D)has the greatest opportunity cost of producing the good regardless of whether it is produced with the fewest resources
E)has the greatest opportunity cost of producing the good and produces it with the fewest resources

Question 46

If Jason can wash a car in 20 minutes and wash a dog in 10 minutes, and Megan can wash a car in 15 minutes and wash a dog in 15 minutes, which of the following statements is true?

A)The opportunity cost of washing a car is greater for Megan.
B)The opportunity cost of washing a car is one dog bath for Jason.
C)Megan could wash two cars in the time it takes to wash a dog.
D)Jason has both a comparative and an absolute advantage in washing a dog.
E)The opportunity cost of washing a dog is greater for Jason.

Question 47

If Robin has an absolute advantage in both gardening and baking when compared to Robert, then

A)Robin cannot benefit by trading with Robert
B)Robin can benefit by specializing in gardening if Robert specializes in baking
C)Robin can benefit by specializing in baking if Robert specializes in gardening
D)Robin and Robert may benefit from trading, but there is insufficient information to determine who should specialize in what
E)neither Robin nor Robert can benefit from trading with the other

Question 48

John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?

A)Harry has a comparative advantage in ironing.
B)Harry has a comparative advantage in typing.
C)Harry has an absolute advantage in typing.
D)Harry has an absolute advantage in ironing.
E)Neither can gain from specialization and exchange.

Question 49

If Monica has a comparative advantage in baking and George has a comparative advantage in sewing, then

A)Monica must have an absolute advantage in baking
B)Monica must have an absolute advantage in sewing
C)George must have an absolute advantage in baking
D)George must have an absolute advantage in sewing
E)we can conclude nothing about absolute advantage

Question 50

Exhibit 2-1

According to Exhibit 2-1, Hans' opportunity cost of doing a load of laundry is

A)12 papers
B)8 papers
C)1 1/2 pages
D)2/3 of a page
E)impossible to compute

Question 51

If Sam can chop up more carrots per minute than Joe can, then

A)Joe has an absolute advantage in carrot chopping
B)Joe must have a comparative advantage in carrot chopping
C)Sam has an absolute advantage in carrot chopping
D)Sam must have a comparative advantage in carrot chopping
E)we can conclude nothing about absolute advantage

Question 52

If Helen gives up the opportunity to bake 40 cakes for each room she paints and Josh can paint one room in the time it takes him to bake 60 cakes, which of the following is true?

A)The opportunity cost of painting is higher for Helen.
B)The opportunity cost of baking cakes is lower for Josh.
C)The opportunity cost of painting one room is 1/40 of a cake for Helen.
D)The opportunity cost of baking one cake is 60 rooms painted for Josh.
E)The opportunity cost of cakes cannot be computed.

Question 53

If Jeremy has an absolute advantage in cooking and Margaret has an absolute advantage in cleaning, then

A)Jeremy has a comparative advantage in cooking, and Margaret has a comparative advantage in cleaning
B)Jeremy has a comparative advantage in cleaning, and Margaret has a comparative advantage in cooking
C)we can conclude nothing about comparative advantage
D)Jeremy has a comparative advantage in cooking, but we can conclude nothing about Margaret
E)Margaret has a comparative advantage in cleaning, but we can conclude nothing about Jeremy

Question 54

Don can produce 10 pens or 20 pencils in one hour while Bob can produce 5 pencils or 15 pens in one hour. Which of the following statements is correct?

A)Don has an absolute advantage over Bob in the production of pencils and Bob in the production of pens
B)Bob has an absolute advantage over Don in the production of pencils
C)Bob has a comparative advantage over Don in the production of pens
D)Don has a comparative advantage over Bob in the production of pens
E)Don does not have a comparative advantage in the production of either good

Question 55

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

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 56

Eileen has a comparative advantage over Jan in piano tuning but not in shoe polishing. Therefore,

A)Jan must have an absolute advantage in piano tuning
B)Eileen must have an absolute advantage in shoe polishing
C)Jan must have a lower opportunity cost of shoe polishing
D)Eileen must have an absolute advantage in shoe polishing and in piano tuning
E)Eileen must have an absolute advantage in piano tuning

Question 57

Helen gives up the opportunity to bake 40 cakes for each room she paints; Josh can paint one room in the time it takes him to bake 60 cakes. The opportunity cost of a cake for Josh is

A)painting one room
B)painting 1/40 of a room
C)painting 1/60 of a room
D)painting 2/3 of a room
E)painting 3/2 of a room

Question 58

Exhibit 2-1

According to Exhibit 2-1, Maria's opportunity cost of typing a page is

A)4 loads of laundry
B)6 loads of laundry
C)2/3 of a load of laundry
D)3/2 of a load of laundry
E)impossible to compute

Question 59

Exhibit 2-1

According to Exhibit 2-1, Hans' opportunity cost of typing one page is

A)12 loads of laundry
B)8 loads of laundry
C)3/2 of a load of laundry
D)2/3 of a load of laundry
E)impossible to compute

Question 60

Absolute advantage is based on opportunity cost.

Question 61

Exhibit 2-1

According to Exhibit 2-1, Hans and Maria would be better off if

A)Hans specialized in typing and Maria in doing laundry
B)Hans specialized in doing laundry and Maria in typing
C)each did their own laundry and typing
D)Maria did all of the typing and all of the laundry
E)Hans did all of the typing and all of the laundry

Question 62

Exhibit 2-1

According to Exhibit 2-1, if Maria types one fewer page, how many loads of laundry can she do in the time saved on typing?

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

Question 63

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

A)$15
B)15 sweaters
C)32 sweaters
D)1/32 of a sweater
E)480 sweaters

Question 64

In one week, Mohammed can knit 5 sweaters or bake 240 cookies. The opportunity cost per cookie for Mohammed is

A)$5
B)5 sweaters
C)48 sweaters
D)1/48 of a sweater
E)48 cookies

Question 65

Exhibit 2-1

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

A)12 pages
B)8 pages
C)3/2 of a page
D)2/3 of a page
E)it cannot be determined

Question 66

Exhibit 2-1

According to Exhibit 2-1, if Hans types one fewer page, how many loads of laundry can he do in the time saved on typing?

A)12 loads
B)8 loads
C)3/2 of a load
D)2/3 of a load
E)it cannot be determined

Question 67

If I trade a ginger snap for a chocolate chip cookie, I am engaging in

A)barter
B)comparative advantage
C)absolute advantage
D)privatization
E)division of labor

Question 68

Money facilitates trade because

A)it eliminates the need for specialization
B)it prevents people from taking advantage of each other
C)it serves as a medium of exchange
D)division of labor allows money to be produced at a lower cost
E)people do not benefit from barter unless money is used

Question 69

In one week, Mohammed can knit 5 sweaters or bake 240 cookies. The opportunity cost per sweater for Mohammed is

A)$240
B)240 cookies
C)48 sweaters
D)1/48 of a cookie
E)48 cookies

Question 70

Exhibit 2-1

According to Exhibit 2-1, Maria's opportunity cost of doing a load of laundry is

A)4 pages
B)6 pages
C)2/3 of a page
D)3/2 of a page
E)impossible to compute

Question 71

Specialization can sometimes create problems such as boredom and repetitive motion injuries.

Question 72

Barter occurs when

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 73

Specialization often leads to gains in productivity for society as a whole.

Question 74

Barter is

A)illegal in the United States
B)an efficient system of exchange
C)most useful when there is much specialization and international trade
D)only possible if money is used as a medium of exchange
E)the direct exchange of goods, without the use of money

Question 75

Exhibit 2-1

According to Exhibit 2-1, in any given amount of time,

A)Maria has an absolute and a comparative advantage in typing
B)Maria has an absolute and a comparative advantage in doing laundry
C)Maria has a comparative advantage in both typing and doing laundry
D)Hans has an absolute and a comparative advantage in typing
E)Hans has an absolute advantage in doing laundry

Question 76

In one week, Mohammed can knit 5 sweaters or bake 240 cookies. In one week, Tetah can knit 15 sweaters or bake 480 cookies. In this example,

A)Mohammed has the absolute and comparative advantage in both tasks
B)Tetah has the absolute and comparative advantage in both tasks
C)Mohammed has the absolute advantage in both tasks and the comparative advantage in knitting sweaters
D)Tetah has the absolute advantage in both tasks and the comparative advantage in knitting sweaters
E)Mohammed has the absolute advantage in both tasks and the comparative advantage in baking cookies

Question 77

In one week, Mohammed can knit 5 sweaters or bake 240 cookies. In one week, Tetah can knit 15 sweaters or bake 480 cookies. Mohammed and Tetah would produce the maximum quantities of cookies and sweaters if

A)Mohammed knitted and baked and Tetah did nothing
B)Tetah knitted and baked and Mohammed did nothing
C)Mohammed knitted and Tetah baked
D)Tetah knitted and Mohammed baked
E)Mohammed knitted and baked and Tetah just knitted

Question 78

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?

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

Question 79

Exhibit 2-2

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

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 80

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

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