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)  using the existing resources efficiently will shift the production possibilities frontier outward.
E)  society is paying too much for wages.F) B) and E)
G) D) and E)

Question 2

The figure given below shows the production possibilities frontier for Good A and Good B. In the figure below, when moving from point f to point g, the production of:​ ​
Figure 2.2

Accepted Answer

A)  Good B increases without a change in the production of Good A.
B)  Good A increases without a change in the production of Good B.
C)  both Good A and Good B increase.
D)  both Good A and Good B decrease.
E)  Good B increases and the production of Good A decreases.F) A) and B)
G) A) and D)

Question 3

​The term opportunity cost suggests that:

Accepted Answer

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.F) A) and B)
G) A) and C)

Question 4

If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, which of the following is true?​

Accepted Answer

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.F) A) and D)
G) A) and B)

Question 5

Points outside the production possibilities frontier represent:​

Accepted Answer

A)  unemployment of resources.
B)  inefficient use of resources.
C)  combinations that are attainable only if all resources are used fully and efficiently.
D)  currently unattainable combinations of outputs.
E)  the only currently attainable combinations from which society must choose.F) A) and B)
G) A) and C)

Question 6

A point inside the production possibilities curve illustrates a situation in which resources are not fully employed.​

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Inefficiency is a flaw of a command economy because there is less incentive for resources to flow to their highest-valued uses.​

Accepted Answer

A) True 
 B)False

Question 9

The figure given below has four graphs showing the production possibilities frontier for capital goods and consumer goods. Which of the graphs below best illustrates the impact on the production possibilities frontier of a decrease in unemployment?​ ​
Figure 2.5

Accepted Answer

A)  a.
B)   b.
C)   c.
D)   d.
E)   b and d.F) A) and D)
G) B) and C)

Question 10

Comparative advantage refers to:​

Accepted Answer

A)  the ability of an individual to specialize and produce a greater amount of some good than another individual.
B)  the number of units of a 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)  the amount of labor a particular individual needs to produce a fixed amount of capital goods.
E)  the ability of an individual to produce a good using fewer labor hours than other individuals.F) D) and E)
G) A) and B)

Question 11

Money facilitates trade because:​

Accepted Answer

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)  the division of labor allows money to be produced at a lower cost.
E)  people do not benefit from barter unless money is used.F) B) and D)
G) A) and B)

Question 12

Any movement along a bowed-out production possibilities frontier involves the production of:​

Accepted Answer

A)  more of both goods.
B)  more of one good and less of the other.
C)  less of both goods.
D)  more resources.
E)  better technology.F) D) and E)
G) A) and B)

Question 13

Opportunity cost exists because:​

Accepted Answer

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.F) A) and E)
G) D) and E)

Question 14

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.F) None of the above
G) A) and B)

Question 15

Recognizing the incentive power of property rights and markets, some of the most die-hard central planners are now allowing:​

Accepted Answer

A)   more influence from custom or religion.
B)  family relations to play significant roles.
C)  a role for markets.
D)  communal ownership of property.
E)  inefficient use of resources.F) A) and C)
G) C) and D)

Question 16

Adam Smith's term "the invisible hand" refers to:​

Accepted Answer

A)  the hidden role of government in setting regulations that govern trading in markets.
B)  the most capable entrepreneurs in the economy.
C)  market forces.
D)  the unseen work of the financial markets that facilitates trade.
E)  the role of technological change and random events in the economy.F) B) and E)
G) C) and D)

Question 17

Which of the following is not a characteristic of pure capitalism?​

Accepted Answer

A)  Private property rights
B)  Competitive markets
C)  Laissez-faire policies
D)  Central planning
E)  A reliance on prices to direct resources to their best usesF) A) and C)
G) B) and C)

Question 18

If dairy farmers use automatic milking machines instead of milking by hand, which economic question does their decision answer?​

Accepted Answer

A)  What to produce?
B)  How to produce?
C)  For whom to produce?
D)  Who has a comparative advantage in milking?
E)  What is the price of milk?F) A) and D)
G) None of the above

Question 19

In one week, Mohammed can knit 5 sweaters or bake 240 cookies. In one week, Aisha can knit 15 sweaters or bake 480 cookies. Which of the following is correct?​

Accepted Answer

A)  Mohammed has an absolute and comparative advantage in both tasks.
B)  Aisha has an absolute and comparative advantage in both tasks.
C)  Mohammed has an absolute advantage in both tasks and a comparative advantage in knitting sweaters.
D)  Aisha has an absolute advantage in both tasks and a comparative advantage in knitting sweaters.
E)  Mohammed has an absolute advantage in both tasks and a comparative advantage in baking cookies.F) None of the above
G) A) and C)

Question 20

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

Accepted Answer

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 tuningF) A) and C)
G) A) and E)

Exam 2: Economic Tools and Economic Systems

Opportunity cost exists because:​

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A point inside the production possibilities curve illustrates a situation in which resources are not fully employed.​

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Points outside the production possibilities frontier represent:​

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The figure given below has four graphs showing the production possibilities frontier for capital goods and consumer goods. Which of the graphs below best illustrates the impact on the production possibilities frontier of a decrease in unemployment?​ ​ Figure 2.5

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If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, which of the following is true?​

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

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Inefficiency is a flaw of a command economy because there is less incentive for resources to flow to their highest-valued uses.​

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In one week, Mohammed can knit 5 sweaters or bake 240 cookies. In one week, Aisha can knit 15 sweaters or bake 480 cookies. Which of the following is correct?​

Correct AnswerverifiedShow Answer

Money facilitates trade because:​

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Adam Smith's term "the invisible hand" refers to:​

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Which of the following is not a characteristic of pure capitalism?​

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

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Any movement along a bowed-out production possibilities frontier involves the production of:​

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​The term opportunity cost suggests that:

Correct AnswerverifiedShow Answer

If dairy farmers use automatic milking machines instead of milking by hand, which economic question does their decision answer?​

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Recognizing the incentive power of property rights and markets, some of the most die-hard central planners are now allowing:​

Correct AnswerverifiedShow Answer

Comparative advantage refers to:​

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The figure given below shows the production possibilities frontier for Good A and Good B. In the figure below, when moving from point f to point g, the production of:​ ​ Figure 2.2

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Opportunity cost exists because:

Correct Answer
verified

A point inside the production possibilities curve illustrates a situation in which resources are not fully employed.

Correct Answer
verified

Points outside the production possibilities frontier represent:

Correct Answer
verified

The figure given below has four graphs showing the production possibilities frontier for capital goods and consumer goods. Which of the graphs below best illustrates the impact on the production possibilities frontier of a decrease in unemployment? Figure 2.5

Correct Answer
verified

If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, which of the following is true?

Correct Answer
verified

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

Correct Answer
verified

Inefficiency is a flaw of a command economy because there is less incentive for resources to flow to their highest-valued uses.

Correct Answer
verified

In one week, Mohammed can knit 5 sweaters or bake 240 cookies. In one week, Aisha can knit 15 sweaters or bake 480 cookies. Which of the following is correct?

Correct Answer
verified

Money facilitates trade because:

Correct Answer
verified

Adam Smith's term "the invisible hand" refers to:

Correct Answer
verified

Which of the following is not a characteristic of pure capitalism?

Correct Answer
verified

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

Correct Answer
verified

Any movement along a bowed-out production possibilities frontier involves the production of:

Correct Answer
verified

The term opportunity cost suggests that:

Correct Answer
verified

If dairy farmers use automatic milking machines instead of milking by hand, which economic question does their decision answer?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Recognizing the incentive power of property rights and markets, some of the most die-hard central planners are now allowing:

Correct Answer
verified

Comparative advantage refers to:

Correct Answer
verified

The figure given below shows the production possibilities frontier for Good A and Good B. In the figure below, when moving from point f to point g, the production of: Figure 2.2

Correct Answer
verified