Question 1

In economics, capital refers to

Accepted Answer

A)   funds used by businesses to acquire goods and services.
B)   the process of raising money in the stock market.
C)   manufactured buildings and equipment used in the production process.
D)   anything that adds to human capital.

Question 2

(Table)  If Germany decided to produce skirts, what is Germany's opportunity cost?

Accepted Answer

A)   2 sweaters
B)   0.5 sweater
C)   1 sweater
D)   0.25 sweater

Question 3

Human capital is

Accepted Answer

A)   the improvement of labor capabilities from training, education, and apprenticeship programs.
B)   the equipment that companies use in the production process.
C)   included in land.
D)   included in entrepreneurial ability.

Question 4

In economics, the term "land" includes

Accepted Answer

A)   mostly agricultural land.
B)   natural resources, excluding water resources.
C)   all natural resources.
D)   resources found on the Earth's surface.

Question 5

(Figure: Biscuits and Cookies PPFs)  Greg and Melissa face the production possibilities frontiers shown for biscuits and cookies. When Melissa completely specializes in producing the good she has a comparative advantage in, she produces

Accepted Answer

A)   160 biscuits and 80 cookies.
B)   0 biscuits and 80 cookies.
C)   80 biscuits and 40 cookies.
D)   160 biscuits and 0 cookies

Question 6

Points that are unattainable for an economy are shown as points

Accepted Answer

A)   inside the production possibilities frontier.
B)   on the production possibilities frontier.
C)   outside the production possibilities frontier.
D)   of unemployment.

Question 7

What are the three basic economic questions each society must answer?

Accepted Answer

A)   What to produce? How to produce? For whom to produce?
B)   How much to produce? What quality to produce? What price to sell at?
C)   What to produce? How much to produce? How to consume?
D)   How much goes to the government? How much goes to consumers? How much is exported?

Question 8

Allocative efficiency ensures that the goods and services demanded by society are produced.

Accepted Answer

A) True 
 B)False

Question 9

When two countries gain from trade

Accepted Answer

A)   one country must have an absolute advantage over the other in producing all goods.
B)   both countries can consume beyond their domestic production possibilities frontiers.
C)   one country must have a comparative advantage over the other in producing all goods.
D)   both countries must be equal in size.

Question 10

A lawyer can argue a case in court for one hour and make $300. She could alternatively use that hour of time to type a legal brief in her office. What is the opportunity cost of her typing the legal brief?

Accepted Answer

A)   nothing, since she would never type a legal brief
B)   nothing, since she would always hire an administrative assistant to type for her
C)   $300, since that is the amount she could have made by arguing a case in court
D)   $13.50, the average hourly wage for a typist

Question 11

The conversion of resources to satisfy wants is described as

Accepted Answer

A)   consumption.
B)   distribution.
C)   production.
D)   conservation.

Question 12

In a planned economy, most of the productive resources are owned by

Accepted Answer

A)   households.
B)   business firms.
C)   the government.
D)   foreign countries.

Question 13

When society produces the mix of goods and services that are most desired and produces them at the lowest cost possible

Accepted Answer

A)   production efficiency is achieved.
B)   allocative efficiency is achieved.
C)   production and allocative efficiency are achieved.
D)   inefficiency occurs.

Question 14

(Figure: Interpreting PPF Shifts)  According to the graph, which changes may cause the production possibilities frontier to shift inward from PPF1 to PPF0? 1 to PPF0?   A)  increase in the labor force B)  improve the skills of the workers C)  increase government regulation on businesses overall D)  increase in the population" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   increase in the labor force
B)   improve the skills of the workers
C)   increase government regulation on businesses overall
D)   increase in the population

Question 15

Entrepreneurs receive profits for their efforts primarily because they

Accepted Answer

A)   combine land, labor, and capital to produce goods and services.
B)   combine land, labor, and capital to produce goods and services and assume the risks associated with business.
C)   assume the risks associated with business.
D)   have the best ideas.

Question 16

Which items restrict our choices so that we must make tradeoffs?

Accepted Answer

A)   time and money
B)   money and personal preferences
C)   time and personal preferences
D)   time, money, and personal preferences

Question 17

The theory of comparative advantage says that countries

Accepted Answer

A)   should restrict trade by cutting off all imports.
B)   should import those goods they can produce at a lower opportunity cost than another country.
C)   can never benefit from specialization in trade.
D)   should export those goods they can produce at a lower opportunity cost than another country.

Question 18

Which action will NOT shift a production possibilities frontier curve outward?

Accepted Answer

A)   increasing the number of workers
B)   increasing worker productivity
C)   shifting preferences of consumers to cheaper products
D)   technological change

Question 19

"The economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by that transaction." This statement indicates that its author

Accepted Answer

A)   fails to understand the fallacy of composition.
B)   fails to understand that all voluntary trades benefit both parties involved.
C)   fails to understand the significance of the production possibilities frontier.
D)   uses sound economic thinking-the statement is essentially correct.

Question 20

A country operating inside of its production possibilities frontier (PPF)  is operating

Accepted Answer

A)   efficiently.
B)   inefficiently and at an unattainable level.
C)   inefficiently but in an area that can be attained.
D)   in the unattainable region.

Exam 2: Production, Economic Growth, and Trade

Which action will NOT shift a production possibilities frontier curve outward?

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A lawyer can argue a case in court for one hour and make $300. She could alternatively use that hour of time to type a legal brief in her office. What is the opportunity cost of her typing the legal brief?

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Human capital is

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What are the three basic economic questions each society must answer?

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In economics, capital refers to

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Points that are unattainable for an economy are shown as points

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The conversion of resources to satisfy wants is described as

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When society produces the mix of goods and services that are most desired and produces them at the lowest cost possible

Correct AnswerverifiedShow Answer

When two countries gain from trade

Correct AnswerverifiedShow Answer

In economics, the term "land" includes

Correct AnswerverifiedShow Answer

(Table) If Germany decided to produce skirts, what is Germany's opportunity cost?

Correct AnswerverifiedShow Answer

(Figure: Interpreting PPF Shifts) According to the graph, which changes may cause the production possibilities frontier to shift inward from PPF1 to PPF0?

Correct AnswerverifiedShow Answer

The theory of comparative advantage says that countries

Correct AnswerverifiedShow Answer

In a planned economy, most of the productive resources are owned by

Correct AnswerverifiedShow Answer

"The economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by that transaction." This statement indicates that its author

Correct AnswerverifiedShow Answer

Which items restrict our choices so that we must make tradeoffs?

Correct AnswerverifiedShow Answer

Entrepreneurs receive profits for their efforts primarily because they

Correct AnswerverifiedShow Answer

(Figure: Biscuits and Cookies PPFs) Greg and Melissa face the production possibilities frontiers shown for biscuits and cookies. When Melissa completely specializes in producing the good she has a comparative advantage in, she produces

Correct AnswerverifiedShow Answer

A country operating inside of its production possibilities frontier (PPF) is operating

Correct AnswerverifiedShow Answer

Allocative efficiency ensures that the goods and services demanded by society are produced.

Correct AnswerverifiedShow Answer

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(Figure: Interpreting PPF Shifts) According to the graph, which changes may cause the production possibilities frontier to shift inward from PPF₁ to PPF₀?

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