Question 1

Table 2-10
 $$\begin{array} { | l | l | l | } 
\hline &  { \text { Fred } } & \text { Barney } \
\hline \text { Pogo Sticks } & 24 & 28 \
\hline \text { Unicycles } & 8 & 14 \
\hline
\end{array}$$ 
Table 2-10 shows the output per month of two people, Fred and Barney.They can either devote their time to making pogo sticks or making unicycles.
-Refer to Table 2-10.What is Barney's opportunity cost of making a pogo stick?

Accepted Answer

A) 1/2 unicycle 
B) 2 unicycles 
C) 1/3 unicycle 
D) 1.4 pogo sticks

Question 2

Which of the following is an example of spending on goods and services in the circular flow model?

Accepted Answer

A) Belinda purchases a new computer for her tax-preparation business. 
B) Javier buys 800 square feet of wood flooring for his vacation home. 
C) Celeste buys fresh herbs at the farmers' market to use in her restaurant. 
D) Timmy purchases a new examination table for use in his veterinary clinic.

Question 3

Table 2-2
Production choices for Billie's Bedroom Shop
 $\begin{array}{|l|l|l|}
\hline {\text { Choice }} & \begin{array}{l}
\text { Quantity of } \
\text { Pillows } \
\text { Produced }
\end{array} & \begin{array}{l}
\text { Quantity of } \
\text { Blankets } \
\text { Produced }
\end{array} \
\hline \text { A } & 36 & 0 \
\hline \text { B } & 27 & 7 \
\hline \text { C } & 18 & 14 \
\hline \text { D } & 9 & 21 \
\hline \text { E } & 0 & 28 \
\hline
\end{array}$
-Refer to Table 2-2.Assume Billie's Bedroom Shop only produces pillows and blankets.A combination of 5 pillows and 21 blankets would appear

Accepted Answer

A) along Billie's production possibilities frontier. 
B) inside Billie's production possibilities frontier. 
C) outside Billie's production possibilities frontier. 
D) at the vertical intercept of Billie's production possibilities frontier.

Question 4

Table 2-18
 $$\begin{array} { | l | c | c | } 
\hline & \text { Minnie } & \text { Mickey } \
\hline \text { Hats } & 40 & 50 \
\hline \text { Urmbrellas } & 10 & 5 \
\hline
\end{array}$$ 
Table 2-18 shows the output per week of two people, Minnie and Mickey.They can either devote their time to making hats or making umbrellas.
-Refer to Table 2-18.Which of the following statements is true?

Accepted Answer

A) Mickey has an absolute advantage in making both products. 
B) Minnie has an absolute advantage in making both products. 
C) Minnie has an absolute advantage in making hats and Mickey in making umbrellas. 
D) Minnie has an absolute advantage in making umbrellas and Mickey in making hats.

Question 5

Households

Accepted Answer

A) purchase final goods and services in the factor market. 
B) purchase final goods and services in the product market. 
C) purchase resources in the product market. 
D) purchase resources in the factor market.

Question 6

In a two-good,two country world,if one country has an absolute advantage in the production of both goods,it can still benefit by trading with the other country.

Accepted Answer

A) True 
 B)False

Question 7

Figure 2-15
  
Figure 2-15 shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles.
-Refer to Figure 2-15.What is the opportunity cost of producing 1 snow cone in Iceland?

Accepted Answer

A) 2/3 of a popsicle 
B) 3/4 of a popsicle 
C) 1 1/2 popsicles 
D) 180 popsicles

Question 8

Table 2-10
 $$\begin{array} { | l | l | l | } 
\hline &  { \text { Fred } } & \text { Barney } \
\hline \text { Pogo Sticks } & 24 & 28 \
\hline \text { Unicycles } & 8 & 14 \
\hline
\end{array}$$ 
Table 2-10 shows the output per month of two people, Fred and Barney.They can either devote their time to making pogo sticks or making unicycles.
-Refer to Table 2-10.What is Barney's opportunity cost of making a unicycle?

Accepted Answer

A) 1/2 pogo stick 
B) 2 pogo sticks 
C) 1.75 unicycles 
D) 2.8 pogo sticks

Question 9

Stricter laws and regulations to protect intellectual property rights

Accepted Answer

A) will help to create a more successful market system. 
B) will only benefit those companies whose intellectual property rights have in the past been ignored. 
C) will tend to have little impact on an economy since intellectual property is not tangible. 
D) will create a stronger and more successful black market for intellectual property.

Question 10

Table 2-11
 $$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { One Digital } \
\text { Camera }
\end{array} & \text { Wheat (per pound) } \
\hline \text { China } & 100 \text { hours } & 4 \text { hours } \
\hline \text { South Korea } & 60 \text { hours } & 3 \text { hours } \
\hline
\end{array}$$ 
Table 2-11 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea.
-Refer to Table 2-11.What is China's opportunity cost of producing one digital camera?

Accepted Answer

A) 0.04 pounds of wheat 
B) 4 pounds of wheat 
C) 25 pounds of wheat 
D) 40 pounds of wheat

Question 11

Figure 2-5
 
-Refer to Figure 2-5.If the economy is currently producing at point Y,what is the opportunity cost of moving to point W?

Accepted Answer

A) 2 million tons of steel 
B) zero 
C) 9 million tons of paper 
D) 16 million tons of paper

Question 12

Suppose your expenses for this term are as follows: tuition: $9,000,room and board: $1,500,books and other educational supplies: $1,000.Further,during the term,you can only work part-time and earn $3,000 instead of your full-time salary of $8,000.What is the opportunity cost of going to college this term,assuming that your room and board expenses would be the same even if you did not go to college?

Accepted Answer

A) $10,000 
B) $13,000 
C) $15,000 
D) $18,000

Question 13

Table 2-19
 $$\begin{array} { | l | c | c | } 
\hline & \text { Wilrn } & \text { Betty } \
\hline \text { Statues } & 12 & 14 \
\hline \text { Benches } & 4 & 7 \
\hline
\end{array}$$ 
Table 2-19 shows the output per month of two people, Wilma and Betty.They can either devote their time to making marble statues or making marble benches.
-Refer to Table 2-19.What is Betty's opportunity cost of making a bench?

Accepted Answer

A) 1/2 statue 
B) 2 statues 
C) 1.75 benches 
D) 2.8 statues

Question 14

Figure 2-18
 
-Refer to Figure 2-18.One segment of the circular flow diagram in the Figure shows the flow of funds from market F to economic agents G.The funds represent spending on goods and services.What is market F and who are economic agents G?

Accepted Answer

A) F = factor markets; G = households 
B) F = product markets; G = households 
C) F = factor markets; G = firms 
D) F = product markets; G = firms

Question 15

The circular flow model demonstrates

Accepted Answer

A) the role of the government in overseeing the market system. 
B) the roles played by households and firms in the market system. 
C) how shortages and surpluses are eliminated in a market. 
D) how demand and supply for goods and services are brought into equilibrium.

Question 16

If the opportunity cost of producing more of one good increases as more of that good is produced,then the production method is inefficient.

Accepted Answer

A) True 
 B)False

Question 17

Figure 2-11
  
Mercedes Benz produces a full line of luxury automobiles, including coupes, sedans, and SUVs, at a variety of manufacturing plants across the globe.Assume Mercedes Benz produces both coupes and SUVs at its Tuscaloosa, Alabama factory.Figure 2-11 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions at this factory.
-Refer to Figure 2-11.Suppose Mercedes-Benz has to shut down a portion of its facility as it works on remodeling the facility to merge two of its separate assembly lines in preparation for the production of a new,hybrid models.The production decision to shut down temporarily will result in a

Accepted Answer

A) movement from E to F in Graph A. 
B) movement from G to H in Graph B. 
C) movement from K to L in Graph C. 
D) movement from J to H in Graph B.

Question 18

The primary purpose of patents and copyrights is to

Accepted Answer

A) provide owners with large profit forever. 
B) protect firms from being taken advantage of by competing firms. 
C) protect domestic firms from foreign competition. 
D) encourage the expenditure of funds on research and development to create new products.

Question 19

A critical function of the government in facilitating the operation of a market economy is

Accepted Answer

A) producing goods and services for low income households. 
B) setting up and enforcing private property rights. 
C) ensuring an equal distribution of income to all citizens. 
D) controlling the market prices of food items.

Question 20

Table 2-13
 $$\begin{array} { | l | c | c | } 
\hline & \text { Tammi } & \text { Horace } \
\hline \begin{array} { l } 
\text { Dogs } \
\text { Groomed }
\end{array} & 20 & 12 \
\hline \text { Cats Bathed } & 10 & 8 \
\hline
\end{array}$$ 
Table 2-13 shows the output per day of two pet groomers, Tammi and Horace.They can either devote their time to grooming dogs or bathing cats.
-Refer to Table 2-13.What is tammi's opportunity cost of bathing a cat?

Accepted Answer

A) half a groomed dog 
B) two groomed dogs 
C) two-thirds of a groomed dog 
D) one and a half groomed dogs

Exam 2: Trade-Offs, comparative Advantage, and the Market System