Question 1

The current Social Security system works to the disadvantage of blacks primarily because the

Accepted Answer

A)  average annual earnings of blacks are generally lower than other groups. 
B)  average life expectancy of blacks is generally less than other groups. 
C)  Social Security tax rates imposed on blacks are higher than those imposed on other groups. 
D)  Social Security benefit formula is disadvantageous to blacks.

Question 2

Which of the following sayings best reflects the concept of opportunity cost?

Accepted Answer

A)  "You can't teach an old dog new tricks." 
B)  "Time is money." 
C)  "I have a baker's dozen." 
D)  "There's no business like show business."

Question 3

Use the production possibilities data below for Honduras and Nicaragua to answer the following question(s).
Table 2-2
 
-Refer to Table 2-2. According to the law of comparative advantage, both Honduras and Nicaragua could gain if

Accepted Answer

A)  Honduras produced all of the apples and oranges and Nicaragua did not produce anything. 
B)  Honduras specialized in producing apples, Nicaragua specialized in producing oranges, and they traded. 
C)  Honduras specialized in producing oranges, Nicaragua specialized in producing apples, and they traded. 
D)  Nicaragua and Honduras were both were self-sufficient and did not trade.

Question 4

The previous surplus of the Social Security system is expected to become a deficit because the

Accepted Answer

A)  payroll tax rate is scheduled to decline at that time. 
B)  number of workers relative to the number of Social Security recipients will decline as the baby boom generation moves into the retirement phase of life. 
C)  stock market is not expected to perform nearly as well during the next two decades as was the case during the 1980s and 1990s. 
D)  growth rate of the U.S. economy is expected to slow during the next two decades.

Question 5

It can be said that, ultimately, consumers are the driving force in answering the three basic economic questions. Explain the consumer's role in providing these answers.

Accepted Answer

The answer of It can be said that, ultimately, consumers...

Question 6

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

Accepted Answer

A)  Alexander has a comparative advantage over Jayden in the production of pencils 
B)  Alexander has a comparative advantage over Jayden in the production of pens 
C)  Jayden has a comparative advantage over Alexander in the production of pens 
D)  Alexander and Jayden cannot gain from specialization and exchange.

Question 7

If the U.S. economy grew rapidly in the future, would this eliminate the long run deficit of Social Security?

Accepted Answer

A)  No; future Social Security benefits are tied to nominal wages and therefore increases in real incomes will also increase the future retirement benefits. 
B)  Yes; a rapid real growth rate would increase tax revenues without increasing the real benefit levels of future recipients. 
C)  Yes, more rapid growth would lead to inflation and this would help eliminate the system's long run deficit. 
D)  Yes, but only if the rapid growth led to a substantial increase in net exports.

Question 8

Suppose the price of an airline ticket from Dallas to Boston costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than

Accepted Answer

A)  $6 per hour. 
B)  $8 per hour. 
C)  $10 per hour. 
D)  $15 per hour.

Question 9

After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. Use the production possibilities curve to demonstrate how this might affect the production of other goods in the United States.

Accepted Answer

The answer of After the terrorist attacks on September 11,...

Question 10

Use the production possibilities data below for Austria and Italy to answer the following question(s).
Table 2-1
 
-Refer to Table 2-1. Which of the following is true?

Accepted Answer

A)  Austria has the comparative advantage in both goods. 
B)  Austria has the comparative advantage in food. 
C)  Italy has the comparative advantage in food. 
D)  It would be impossible for Austria and Italy to gain from trade.

Question 11

Maurice can drive or fly from Jacksonville, Florida to Atlanda, Georgia, for a one-day business trip. If he drives, he will be able to work three hours once he arrives in Atlanta, whereas traveling by plane will enable him to work eight hours. His expected income from each hour of work in Atlanta is $30. If Maurice is a rational decision maker, he will fly if and only if the price differential (air cost minus driving cost) is less than

Accepted Answer

A)  $30. 
B)  $90. 
C)  $150. 
D)  $240.

Question 12

A popular video program used to teach economics to primary school children defines opportunity cost as "what you give up to get something." In light of your understanding of opportunity cost, how would you modify this definition?

Accepted Answer

The answer of A popular video program used to teach...

Question 13

The net value to the federal government of the bonds currently held in the Social Security Trust Fund is

Accepted Answer

A)  approximately $1 trillion. 
B)  now approaching $2 trillion. 
C)  greater than $2.5 trillion. 
D)  zero, because the federal government is both the payee and recipient of the interest and principal represented by these bonds.

Question 14

In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curves for the countries of Europe at that time?

Accepted Answer

A)  The production possibilities curves for these countries would have shifted outward. 
B)  The production possibilities curves for these countries would have shifted inward. 
C)  The production possibilities curves for these countries would have been unaffected. 
D)  This would have been illustrated by a movement along the production possibilities curves for these countries, but it would not have shifted them.

Question 15

Suppose a country attempts to be self-sufficient and doesn't trade with any other countries. From an economic perspective, citizens of this nation can be expected to

Accepted Answer

A)  gain materially from this policy because they can consume more goods over time than if they engaged in trade with foreigners. 
B)  produce less total value than they could if they specialized and engaged in trade with other nations. 
C)  gain from more rapid growth since home markets are reserved for home producers. 
D)  be just as well off without trade since the value of what is sent to other nations in trade just equals the value of what is received in trade.

Question 16

The Social Security Trust Fund

Accepted Answer

A)  will provide a stream of future revenue for the federal government. 
B)  is a "pot" of money set aside for the payment of future benefits. 
C)  is a net asset of the U.S. Treasury worth approximately $2 trillion. 
D)  is of zero asset value to the federal government.

Question 17

Demographic conditions

Accepted Answer

A)  were much less favorable for the Social Security system in 1950 than is currently the case. 
B)  are currently unfavorable because the number of retirees is growing rapidly as the result of the high birth rate in the United States during 1930-1945. 
C)  will be less favorable for the Social Security system once the baby boom generation begins to retire. 
D)  don't affect the financial status of the Social Security system because it is based on the same principles as private insurance programs.

Question 18

In economics, the term for a person who reduces transaction costs by arranging trades for buyers and sellers is

Accepted Answer

A)  an exchange broker. 
B)  a middleman. 
C)  a transactions specialist. 
D)  an opportunity finder.

Question 19

With time, which one of the following strategies will most likely result in an outward shift in an economy's production possibilities curve?

Accepted Answer

A)  passage of legislation reducing the workweek to 30 hours 
B)  institution of a tax policy encouraging research that advances technology 
C)  institution of a tax policy encouraging consumption at the expense of investment 
D)  passage of a law requiring the minimum wage to increase every year

Question 20

Use the production possibilities data below to answer the following question(s).
Table 2-3
 
-Refer to Table 2-3. The opportunity cost of 1 pound of meat for the farmer is

Accepted Answer

A)  1/4 hour of labor. 
B)  4 hours of labor. 
C)  4 pounds of potatoes. 
D)  1/4 pound of potatoes.

Exam 2: Some Tools of the Economist