Question 1

Three basic decisions must be made by all economies. What are they?

Accepted Answer

A)   how much will be produced, when it will be produced, and how much it will cost
B)   what the price of each good will be, who will produce each good, and who will consume each good
C)   what will be produced, how goods will be produced, and for whom goods will be produced
D)   how the opportunity cost principle will be applied, if and how the law of comparative advantage will be utilized, and whether the production possibilities constraint will applyE) A) and B)
F) None of the above

Question 2

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.E) B) and C)
F) A) and D)

Question 3

Three basic decisions must be made by all economies. What are they?

Accepted Answer

A)   How much will be produced; when will it be produced; who will produce it?
B)   What goods will be produced; how will goods be produced; for whom will goods be produced?
C)   What will be consumed; how will goods be consumed; for whom will goods be consumed?
D)   How will the opportunity cost principle be applied; if the law of comparative advantage will be utilized, how will it be utilized; will the production possibilities constraint apply?E) All of the above
F) B) and C)

Question 4

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,

Accepted Answer

A)   decentralized decision making is inevitable.
B)   central planning and political bargaining will replace market forces.
C)   individual preferences are of no importance.
D)   economic equality will result.E) A) and C)
F) C) and D)

Question 5

Which of the following most accurately states the function of middlemen?

Accepted Answer

A)   Middlemen reduce transaction costs.
B)   Middlemen add to the expense of buyers and sellers without providing any benefit.
C)   Our economy would work just as well without middlemen since they do not expand the availability of physical goods.
D)   Middlemen reduce the number of transactions since they increase the buyer's price and reduce the seller's net receipts.E) A) and B)
F) C) and D)

Question 6

Which of the following is true of exchange?

Accepted Answer

A)   The value of a good is determined by the cost of the resources required to produce the good.
B)   Exchange makes it possible for trading partners to produce more goods through division of labor and adoption of mass production methods.
C)   Nothing new is created by exchange; if one party to an exchange gains, the other must lose an equal amount.
D)   Both a and b are true.E) None of the above
F) B) and C)

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.E) None of the above
F) All of the above

Question 8

The size of a country's "economic pie" is thought of as the total dollar value of all goods and services produced during some period of time. The economic pie

Accepted Answer

A)   is a fixed total waiting to be divided up among people.
B)   determines how much wealth an individual can obtain.
C)   is variable, not fixed, across time periods.
D)   depends solely upon the natural resources of a country.E) All of the above
F) None of the above

Question 9

A nation that protects its workers from unemployment by limiting the use (by employers)  of technological improvements will

Accepted Answer

A)   grow more rapidly because the rate of unemployment will be lower.
B)   grow more rapidly because investors prefer a stable business environment rather than the uncertainties that accompany technological change.
C)   grow less rapidly because technological change is an important factor contributing to the growth of output.
D)   grow just as much as nations that adopt more rapidly technological improvements.E) A) and D)
F) All of the above

Question 10

The opportunity cost of an option

Accepted Answer

A)   measures the undesirable aspects of the option.
B)   includes only the monetary cost of the option.
C)   is the highest-valued alternative that must be given up as the result of choosing the option.
D)   is objective, and it will be the same for all individuals.E) A) and B)
F) A) and C)

Question 11

Which of the following most accurately states the economic significance of exchange?

Accepted Answer

A)   Physical goods have value because they exist; exchange can neither increase nor decrease their value.
B)   Production of physical goods creates value; exchange merely redistributes this value.
C)   Exchange creates value by moving goods from parties who value them less to parties who value them more.
D)   Exchange reduces value since it consumes resources without adding to the physical supply of goods.E) A) and B)
F) A) and C)

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 potatoes for the rancher is

Accepted Answer

A)   5 hours of labor.
B)   4 hours of labor.
C)   5/4 pounds of meat.
D)   4/5 pound of meat.E) B) and C)
F) A) and D)

Question 13

Suppose that country A produces mostly consumption goods and few investment goods, while country B produces mostly investment goods with few consumption goods. Other things constant, which of the following is most likely to happen in the future?

Accepted Answer

A)   The per capita income of country A will grow more rapidly than country B.
B)   The population of country B will grow more rapidly than country A.
C)   The production possibilities curve (PP
C)   of country B will shift out more rapidly than the PPC of country A.
D)   The production possibilities curve (PP
C)   of country A will shift out more rapidly than the PPC of country B.E) A) and D)
F) All of the above

Question 14

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.E) All of the above
F) B) and D)

Question 15

Suppose you can type a paper in two hours or mow the lawn in four hours, while it takes your friend Gabriela eight hours to type a paper or two hours to mow the lawn. Which of the following is true?

Accepted Answer

A)   You have a comparative advantage in typing.
B)   You have a comparative advantage in mowing the lawn.
C)   You and Gabriela could save time if you mowed her lawn while she typed your paper.
D)   You and Gabriela cannot gain from specialization and trade.E) A) and D)
F) B) and C)

Question 16

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 video program always gives the child...

Question 17

Based on the idea of opportunity cost, which of the following students would be most likely to drop out of college before completing their degree?

Accepted Answer

A)   a senior mathematics major with a solid B average
B)   a junior physical therapy student who has just read about the fantastic job offers available to students with degrees in her area
C)   a star college football player in his junior year that just received a $5 million offer from a professional team
D)   a junior economics major who wants to attend graduate schoolE) C) and D)
F) A) and D)

Question 18

Which of the following most accurately states the function of middlemen?

Accepted Answer

A)   Middlemen add to the expense of buyers and sellers without providing any benefit.
B)   Our economy would work just as well without middlemen since they do not expand the availability of physical goods.
C)   Middlemen reduce the number of transactions since they increase the buyer's price and reduce the seller's net revenue.
D)   Middlemen create value by arranging trades and providing information to buyers and sellers.E) All of the above
F) A) and B)

Question 19

Entrepreneurs have a strong incentive to

Accepted Answer

A)   discover new production techniques that reduce costs.
B)   introduce new products that are highly valued relative to their cost.
C)   produce goods that are valued more highly than the resources required for their production.
D)   do all of the above.E) All of the above
F) B) and D)

Question 20

A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called

Accepted Answer

A)   a key man.
B)   an entrepreneur.
C)   a progressor.
D)   a stakeholder.E) A) and C)
F) C) and D)

Exam 2: Some Tools of the Economist

In order to prosper, entrepreneurs must

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Three basic decisions must be made by all economies. What are they?

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Which of the following most accurately states the function of middlemen?

Correct AnswerverifiedShow Answer

Which of the following most accurately states the economic significance of exchange?

Correct AnswerverifiedShow Answer

Which of the following is true of exchange?

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Three basic decisions must be made by all economies. What are they?

Correct AnswerverifiedShow Answer

Which of the following most accurately states the function of middlemen?

Correct AnswerverifiedShow Answer

The opportunity cost of an option

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

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

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A nation that protects its workers from unemployment by limiting the use (by employers) of technological improvements will

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Suppose you can type a paper in two hours or mow the lawn in four hours, while it takes your friend Gabriela eight hours to type a paper or two hours to mow the lawn. Which of the following is true?

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Based on the idea of opportunity cost, which of the following students would be most likely to drop out of college before completing their degree?

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A profit-seeking decision maker who decides which business projects to undertake and how they should be undertaken is called

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Suppose that country A produces mostly consumption goods and few investment goods, while country B produces mostly investment goods with few consumption goods. Other things constant, which of the following is most likely to happen in the future?

Correct AnswerverifiedShow Answer

Entrepreneurs have a strong incentive to

Correct AnswerverifiedShow Answer

The size of a country's "economic pie" is thought of as the total dollar value of all goods and services produced during some period of time. The economic pie

Correct AnswerverifiedShow Answer

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedThe video program always gives the child...View AnswerShow 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 potatoes for the rancher is

Correct AnswerverifiedShow Answer

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The video program always gives the child...
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