Identify the choice that best completes the statement or answers the question. C
ID: 1232854 • Letter: I
Question
Identify the choice that best completes the statement or answers the question.Can you also explain why it is the answer?
____ 1. Scarcity
a. exists because people have wants that are unlimited relative to the availability of resources to satisfy those wants
b. applies when a resource is not freely available
c. means that each society and each individual must make choices
d. exists in all societies
e. all of the above are true
____ 2. A market
a. is often a physical place
b. facilitates exchanges between buyers and sellers
c. typically involves monetary transactions
d. might not have well-defined geographical limits
e. all of the above
____ 3. Economic information
a. is usually scarce and costly to acquire
b. is usually available free to any decision maker
c. is usually not required for rational decision making
d. must be complete before any decision is made
e. is usually useful only to governments
____ 4. When economists say that people act as rational decision makers, that means
a. they gather all relevant information before making their purchases
b. once a pattern of behavior has been established, people tend to become set in their ways
c. people respond in predictable ways to changes in costs and benefits
d. people rarely make errors when they are permitted to make transactions
e. once made, decisions are never reversed
____ 5. Macroeconomics is the study of
a. the behavior of large firms in the marketplace
b. the economic behavior of individual decision makers
c. the behavior of the economy as a whole
d. how to use the fewest natural resources to produce goods and services
e. government's role as a stabilizing influence on the economy
____ 6. The basic purpose of economic models is to
a. construct simplifying assumptions about the real world
b. explain reality in all its complexity
c. collect empirical data to support the facts
d. construct situations where controlled experiments can be carried out
e. provide explanations for, and predictions of, economic events
____ 7. In an economic model of consumer behavior, rational self-interest would likely be
a. a key variable
b. the hypothesis of the model
c. a behavioral assumption
d. a prediction of the model
e. a method of testing the model
____ 8. Behavioral assumptions
a. make economic models more complex than if these assumptions were removed
b. pertain only to consumers
c. hold all other things constant
d. are ways to test a hypothesis
e. describe how individuals are expected to behave
____ 9. The opportunity cost of an activity is best measured
a. only by the monetary costs
b. by the number of alternative activities that were forgone
c. by the cost difference between the chosen activity and the next best alternative
d. by the value expected from the best alternative that is forgone
e. as the time wasted choosing among various activities
____ 10. The law of comparative advantage says that a person should produce a good if she
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
____ 11. John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct?
a. Harry has a comparative advantage in ironing.
b. Harry has a comparative advantage in typing.
c. Harry has an absolute advantage in typing.
d. Harry has an absolute advantage in ironing.
e. Neither can gain from specialization and exchange.
____ 12. If Monica has a comparative advantage in baking and George has a comparative advantage in sewing, then
a. Monica must have an absolute advantage in baking
b. Monica must have an absolute advantage in sewing
c. George must have an absolute advantage in baking
d. George must have an absolute advantage in sewing
e. we can conclude nothing about absolute advantage
____ 13. If Jeremy has an absolute advantage in cooking and Margaret has an absolute advantage in cleaning, then
a. Jeremy has a comparative advantage in cooking, and Margaret has a comparative advantage in cleaning
b. Jeremy has a comparative advantage in cleaning, and Margaret has a comparative advantage in cooking
c. we can conclude nothing about comparative advantage
d. Jeremy has a comparative advantage in cooking, but we can conclude nothing about Margaret
e. Margaret has a comparative advantage in cleaning, but we can conclude nothing about Jeremy
____ 14. If Robin has an absolute advantage in both gardening and baking when compared to Robert, then
a. Robin cannot benefit by trading with Robert
b. Robin can benefit by specializing in gardening if Robert specializes in baking
c. Robin can benefit by specializing in baking if Robert specializes in gardening
d. Robin and Robert may benefit from trading, but there is insufficient information to determine who should specialize in what
e. neither Robin nor Robert can benefit from trading with the other
Exhibit 2-1
Hans Maria
Loads of laundry per hour 4 12
Pages typed per hour 6 8
____ 15. According to Exhibit 2-1, Hans and Maria would be better off if
a. Hans specialized in typing and Maria in doing laundry
b. Hans specialized in doing laundry and Maria in typing
c. each did their own laundry and typing
d. Maria did all of the typing and all of the laundry
e. Hans did all of the typing and all of the laundry
____ 16. In one week, Tetah can knit 15 sweaters or bake 480 cookies. The opportunity cost per cookie for Tetah is
a. $15
b. 15 sweaters
c. 32 sweaters
d. 1/32 of a sweater
e. 480 sweaters
____ 17. At various points along the production possibilities frontier,
a. the greatest achievable output levels are illustrated
b. resources are not fully employed
c. more of one good can be obtained without giving up more of the other
d. more efficient output levels are possible
e. society is equally well off
____ 18. Society's production possibilities frontier
a. helps explain the immense complexity of the real economy
b. demonstrates that, although resources are scarce for individuals, there is no problem of scarcity for society as a whole
c. is based on unrealistic assumptions and therefore has no value as an economic tool
d. is based on simplifying assumptions, but is still useful for illustrating scarcity, opportunity cost, and economic growth
e. is based on the assumption that technology is constantly changing
Exhibit 2-3
____ 19. In Exhibit 2-3, if all the economy's resources are used efficiently to produce good A, then the economy is at point
a. h
b. e
c. d
d. i
e. c
____ 20. The law of increasing opportunity cost reflects the fact that
a. the production possibilities frontier is bowed inward
b. resources are not perfectly substitutable
c. resources cannot always be used efficiently
d. an economy will operate at a point inside the production possibilities frontier
e. an economy will operate at a point along the production possibilities frontier
Exhibit 2-6
____ 21. In Exhibit 2-5, the opportunity cost of moving from point b to d is
a. 30 mufflers
b. 50 mufflers
c. 100 socks
d. 150 socks
e. 250 socks
____ 22. On a production possibilities frontier, the opportunity cost of one more unit of a commodity per time period is measured by the
a. monetary price of the commodity
b. amount of the other commodity that must be sacrificed
c. amount of unemployed resources that must be used
d. amount of satisfaction it gives consumers
e. amount of tax paid to government for production, sale, and use of the commodity
____ 23. An improvement in technology
a. will always result in a parallel shift of the production possibilities frontier
b. will never result in a parallel shift of the production possibilities frontier
c. will be indicated as a movement along the production possibilities frontier
d. will shift the production possibilities frontier outward but not necessarily to a parallel position
e. may not shift the production possibilities frontier
____ 24. The mixed economy is the dominant economic system in the world because
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
____ 25. Just as resources are scarce for the individual,
a. they are also scarce for the economy as a whole
b. they are never scarce for the economy as a whole
c. they are randomly abundant for other individuals
d. there will be zero resources available for the economy as a whole
e. the economy a whole is never faced with having to make rational choices about using resources
Exhibit 2-9
____ 26. Refer to Exhibit 2-9. Which of the graphs best illustrates the impact on the production possibilities frontier of a technological improvement that will make the resources used to produce consumer goods more efficient?
a. a
b. b
c. c
d. d
e. b and c
____ 27. The law of demand assumes that as the price of a good increases,
a. people recognize that its price may be even higher in the future, so they buy now rather than later
b. consumers tend to shift their purchases to relatively cheaper substitutes
c. people will buy less of it in the hope that the good will be cheaper in the future
d. the consumer
Explanation / Answer
Refer to Exhibit 4-2. A shift from demand curve D to D' illustrates a(n)