Question 1

Which of the following is true of the production possibilities curve?

Accepted Answer

A)   It assumes a fixed level of technology.
B)   It assumes that the prices of the products considered are equal.
C)   It assumes some inefficiency will result in the use of resources.
D)   All of the above are correct.

Question 2

The opportunity cost of choosing an alternative

Accepted Answer

A)   is the value of the highest valued alternative forgone as the result of the choice.
B)   includes only the amount of time spent on whatever is chosen.
C)   includes only the money cost of the option.
D)   is irrelevant for most choices individuals face.

Question 3

High transaction costs will tend to

Accepted Answer

A)   reduce the number of mutually beneficial exchanges that occur.
B)   allow easier specialization according to the law of comparative advantage.
C)   increase the value created by exchanges in an economy.
D)   increase the number of mutually beneficial exchanges that occur.

Question 4

Which of the following statements about exchange is false?

Accepted Answer

A)   The expectation of gain motivates people to engage in trade.
B)   If a party to a potential exchange does not believe that it will lead to personal gain, he or she can chose not to engage in the trade.
C)   Voluntary exchange is generally mutually beneficial to the trading partners.
D)   If one trading partner gains, the other must lose. D

Question 5

Which of the following is true of the production possibilities curve?

Accepted Answer

A)   It assumes a fixed quantity of resources.
B)   It assumes the prices of the products considered are equal.
C)   A point inside the curve is efficient.
D)   All of the above are correct.

Question 6

Which of the following will most likely cause an outward shift in the production possibilities curve?

Accepted Answer

A)   a reduction in the man-made productive resources available to the economy as the result of a decline in investment
B)   an increase in government payments to farmers for taking land out of production
C)   an increase from 40 to 50 hours in the average number of hours worked per week
D)   None of the above would cause an outward shift in the production possibilities curve.

Question 7

The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is

Accepted Answer

A)   an expansion in investment resulting from a reallocation of resources away from consumption.
B)   a larger output resulting from a more efficient use of resources.
C)   greater equality of income resulting from an increase in the number of workers.
D)   an increase in the profitability of business enterprises resulting from an increase in investment.

Question 8

The government enforces property rights by

Accepted Answer

A)   requiring property owners to pay property taxes.
B)   providing police and courts.
C)   forcing people to own property.
D)   providing public parks and recreation facilities.

Question 9

According to the law of comparative advantage, both individuals and nations will be able to produce a larger joint output if each productive activity is undertaken by

Accepted Answer

A)   the high opportunity cost producer.
B)   the low opportunity cost producer.
C)   the producer who is able to hire workers at the lowest wage.
D)   the party that can complete the productive activity most rapidly. B

Question 10

Which of the following appropriately applies the law of comparative advantage?

Accepted Answer

A)   Countries with small amounts of labor relative to capital should specialize in producing labor-intensive commodities.
B)   Since Mexican labor is cheaper than American labor, trade between the countries results in exploitation of American workers.
C)   Since workers in countries such as the United States utilize larger amounts of capital than workers in less developed nations, trade between capital-rich and capital-poor nations results in the exploitation of labor in the less developed countries.
D)   Countries that are low cost producers of agricultural products should trade those products for goods they can produce only at a high opportunity cost.

Question 11

If Sean sells Tom a tennis racket for $50, we would expect

Accepted Answer

A)   both parties to gain from this transaction.
B)   Sean to gain from the transaction, while Tom loses.
C)   Tom to gain from the transaction, while Sean loses.
D)   the well-being of both parties to be unchanged.

Question 12

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 rancher is

Accepted Answer

A)   4 hours of labor.
B)   5 hours of labor.
C)   4/5 pounds of potatoes.
D)   5/4 pounds of potatoes.

Question 13

When an entrepreneur like Bill Gates makes $10 billion through creating and selling new products,

Accepted Answer

A)   there will be exactly $10 billion less for other individuals in the economy.
B)   the total size of the economic pie has been increased.
C)   there will be more than $10 billion in losses to other workers who lose their jobs.
D)   it is likely that the new products are not as good as other products that are available in the market.

Question 14

If Harry Bartolini's Ford dealership sells Rosa Brown a new automobile for $30,000, economic analysis indicates that

Accepted Answer

A)   both parties to the transaction will gain.
B)   Mr. Bartolini will gain from the transaction, while Rosa Brown will lose.
C)   Rosa Brown will gain from the transaction, while Mr. Bartolini will lose.
D)   the well-being of both parties will be unchanged.

Question 15

A point on the production possibilities curve represents a combination of goods that is

Accepted Answer

A)   inefficient.
B)   efficient.
C)   unattainable.
D)   attainable. B

Question 16

"Now that Blake paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects

Accepted Answer

A)   the importance of secondary effects.
B)   the fallacy of composition.
C)   the law of comparative advantage.
D)   behavior inconsistent with economizing.

Question 17

The opportunity cost to the United States of placing a man on the moon was

Accepted Answer

A)   the loss of government revenues that were allocated to the mission.
B)   the cost of all production involved in the space program.
C)   the loss of utility from the highest valued bundle of products that had to be forgone because of the moon mission.
D)   less than zero, because the long-run benefit of the project will be greater than the cost.

Question 18

If a firm or a nation desires to maximize its output, each productive assignment should be carried out by those persons who

Accepted Answer

A)   have the highest opportunity cost.
B)   have a comparative advantage in the productive activity.
C)   can complete the productive activity most rapidly.
D)   least enjoy performing the productive activity.

Question 19

Rebecca decides to buy a dress that Hillary has for sale; they agree on a price of $20. Which of the following best describes who gains and who loses from the transaction?

Accepted Answer

A)   If the dress originally costs more than $20, Rebecca gains and Hillary loses.
B)   If the dress originally costs less than $20, Hillary gains and Rebecca loses.
C)   Both parties expect to gain from this transaction.
D)   If Hillary gains from the transaction, Rebecca must lose an equal amount.

Question 20

In order to prosper, entrepreneurs must

Accepted Answer

A)   undertake projects that create wealth and increase the value of resources.
B)   find ways to prevent technological change.
C)   have their own wealth with which to finance projects that they want to undertake.
D)   undertake projects that use resources that are more valuable than is the output they produce.

Exam 2: A : Some Tools of the Economist

Which of the following is true of the production possibilities curve?

Correct AnswerverifiedShow Answer

The opportunity cost of choosing an alternative

Correct AnswerverifiedShow Answer

High transaction costs will tend to

Correct AnswerverifiedShow Answer

Which of the following statements about exchange is false?

Correct AnswerverifiedD

Which of the following is true of the production possibilities curve?

Correct AnswerverifiedShow Answer

Which of the following will most likely cause an outward shift in the production possibilities curve?

Correct AnswerverifiedShow Answer

The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is

Correct AnswerverifiedShow Answer

The government enforces property rights by

Correct AnswerverifiedShow Answer

According to the law of comparative advantage, both individuals and nations will be able to produce a larger joint output if each productive activity is undertaken by

Correct AnswerverifiedB

Which of the following appropriately applies the law of comparative advantage?

Correct AnswerverifiedShow Answer

If Sean sells Tom a tennis racket for $50, we would expect

Correct AnswerverifiedShow Answer

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 rancher is

Correct AnswerverifiedShow Answer

When an entrepreneur like Bill Gates makes $10 billion through creating and selling new products,

Correct AnswerverifiedShow Answer

If Harry Bartolini's Ford dealership sells Rosa Brown a new automobile for $30,000, economic analysis indicates that

Correct AnswerverifiedShow Answer

A point on the production possibilities curve represents a combination of goods that is

Correct AnswerverifiedB

"Now that Blake paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects

Correct AnswerverifiedShow Answer

The opportunity cost to the United States of placing a man on the moon was

Correct AnswerverifiedShow Answer

If a firm or a nation desires to maximize its output, each productive assignment should be carried out by those persons who

Correct AnswerverifiedShow Answer

Rebecca decides to buy a dress that Hillary has for sale; they agree on a price of $20. Which of the following best describes who gains and who loses from the transaction?

Correct AnswerverifiedShow Answer

In order to prosper, entrepreneurs must

Correct AnswerverifiedShow Answer

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D

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B

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