Question 1

If an economy is operating at a point inside the production possibilities frontier, then

Accepted Answer

A)   some of the nation's resources are unemployed
B)   the production decisions are made by the government
C)   unlimited resources must satisfy scarce desires
D)   there is a scarcity of human resources relative to human wants therefore society must have some mechanism for making choices
E)   society is paying too much for wages

Question 2

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

Accepted Answer

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 3

NARRBEGIN: Exhibit 2-1
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?

Accepted Answer

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

Question 4

Of the various types of economic systems, pure market capitalism involves the greatest government interference and control over the economy.

Accepted Answer

A) True 
 B)False

Question 5

An improvement in technology would

Accepted Answer

A)   enable the economy to produce outside its original production possibilities frontier
B)   enable the economy to move along its original production possibilities frontier
C)   eliminate scarcity; therefore, the production possibilities frontier would no longer exist
D)   have no effect on the production possibilities frontier
E)   change the production possibilities frontier to a line with a positive slope

Question 6

The U.S. economy is best characterized as

Accepted Answer

A)   pure capitalism
B)   a command economy
C)   socialism
D)   a mixed capitalist economy
E)   market socialism

Question 7

A production possibilities frontier will shift inward if there is more unemployment of labor.

Accepted Answer

A) True 
 B)False

Question 8

Because resources are not perfectly adaptable to the production of both good A and good B,

Accepted Answer

A)   the opportunity cost of A increases as production of A increases
B)   the opportunity cost of A decreases as production of A increases
C)   it is impossible for the economy to produce both A and B
D)   the opportunity cost of A is constant
E)   the opportunity cost of B is constant

Question 9

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

Accepted Answer

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 10

An economic system

Accepted Answer

A)   must answer the three economic questions to the satisfaction of everyone in society
B)   must not allow some members of society to gain an unfair advantage when answering the three economic questions
C)   must choose pure capitalism to adequately answer the three economic questions
D)   is a set of social institutions and mechanisms organized to answer the three economic questions
E)   can address problems of scarcity only by embracing the social institution of private property

Question 11

The division of labor

Accepted Answer

A)   allows more people to be employed
B)   allows tasks to be performed more efficiently
C)   makes people happier on the job
D)   means that less management is required
E)   means that less equipment will be used

Question 12

People have less incentive to invest the more concerned they are that their investment will not be

Accepted Answer

A)   appropriated by government
B)   stolen by thieves
C)   protected from high tax rates
D)   destroyed by civil unrest
E)   blown up by terrorists

Question 13

Absolute advantage is based on opportunity cost.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

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 15

NARRBEGIN: Exhibit 2-10
Exhibit 2-10
  
-Refer to exhibit 2-10. The United States has an absolute advantage in bothe the production of T-shirts and rice.

Accepted Answer

A) True 
 B)False

Question 16

The production possibilities frontier will shift if there is a change in

Accepted Answer

A)   technology
B)   unemployment
C)   product prices
D)   society's preferences for commodities
E)   the quantities of the two goods being produced

Question 17

The mixed economy is the dominant economic system in the world because

Accepted Answer

A)   custom and religion have no influence on economic decisions in these systems
B)   pure capitalist economies have placed more control in the hands of individuals in recent years
C)   there is public (i.e., governmental)  ownership of resources but regulation of government by individuals reduces some of the flaws of pure capitalism
D)   there is private ownership of property but government regulation of individuals reduces some of the flaws of pure capitalism
E)   governments in pure command economies have increased their control over decision-making in recent years

Question 18

One flaw of pure capitalism is that a person who owns no resources could starve.

Accepted Answer

A) True 
 B)False

Question 19

Comparative advantage is

Accepted Answer

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 20

The opportunity cost of going to college consists of more than just the tuition that will be paid.

Accepted Answer

A) True 
 B)False

Exam 2: Economic Tools and Economics Systems

An improvement in technology would

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The production possibilities frontier will shift if there is a change in

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An economic system

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Because resources are not perfectly adaptable to the production of both good A and good B,

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NARRBEGIN: Exhibit 2-10 Exhibit 2-10 -Refer to exhibit 2-10. The United States has an absolute advantage in bothe the production of T-shirts and rice.

Correct AnswerverifiedShow Answer

If an economy is operating at a point inside the production possibilities frontier, then

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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

Correct AnswerverifiedShow Answer

The opportunity cost of going to college consists of more than just the tuition that will be paid.

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The U.S. economy is best characterized as

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People have less incentive to invest the more concerned they are that their investment will not be

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One flaw of pure capitalism is that a person who owns no resources could starve.

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

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Of the various types of economic systems, pure market capitalism involves the greatest government interference and control over the economy.

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Absolute advantage is based on opportunity cost.

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The mixed economy is the dominant economic system in the world because

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A production possibilities frontier will shift inward if there is more unemployment of labor.

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NARRBEGIN: Exhibit 2-1 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?

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The division of labor

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

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Comparative advantage is

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