Macroeconomics - Chapter 2

Total Flash Cards » 35
 
1. 

1. Opportunity cost is defined

a.

only in terms of money spent

b.

as the value of all alternatives not chosen

c.

as the value of the best alternative not chosen

d.

as the difference between the benefits from a choice and the benefits from the next best alternative

e.

as the difference between the benefits from a choice and the costs of that choice

 

c

 
2. 

2. Suppose you have an hour before your next class starts. You can either read a book, get something to eat, or take a nap. The opportunity cost of getting something to eat is

a.

the cost of what you eat

b.

the value of reading and sleeping

c.

the loss of value from not reading or sleeping

d.

the net benefit of sleeping for another hour

e.

impossible to determine because the most preferred alternative is not known

 

e

 
3. 

3. The opportunity cost of going to college is best measured by the

a.

cost of room and board

b.

cost of tuition

c.

cost of room and board plus tuition

d.

income forgone by not working, plus tuition

e.

income forgone by not working, plus tuition and room and board

 

d

 
4. 

4. Suppose you have a choice of working full-time during the summer or going full-time to summer school. Summer tuition and books are $2,200. If you worked, you could make $7,000. Your rent is $1,000 for the summer, regardless of your choice. The opportunity cost of going to summer school is, therefore,

a.

$2,200

b.

$7,000

c.

$8,000

d.

$9,200

e.

$10,200

 

d

 
5. 

5. The opportunity cost of going to college includes the costs of tuition, books, fees, and

a.

nothing else

b.

housing

c.

housing and food

d.

earnings forgone by not working full-time

e.

housing, food, and earnings forgone by not working full-time

 

d

 
6. 

6. Which economic concept does the expression "time is money" reflect?

a.

opportunity cost

b.

specialization

c.

market exchange

d.

comparative advantage

e.

efficiency

 

a

 
7. 

7 Sunk costs

a.

can only be measured in monetary terms

b.

are opportunity costs

c.

should influence a person’s choice if that person is a marginal decision maker

d.

lower the efficiency of production

e.

should not be considered when making economic decisions

 

e

 
8. 

8. 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

 

b

 
9. 

9. 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

 

e

 
10. 

10. A country has an absolute advantage in the production of a good if that country

a.

can produce the good using fewer resources than another country would require

b.

has the lowest opportunity cost of producing the good and can produce it with the fewest resources

c.

has the lowest opportunity cost of producing the good regardless of whether it is produced with the fewest resources

d.

has the greatest opportunity cost of producing the good regardless of whether it is produced with the fewest resources

e.

has the greatest opportunity cost of producing the good and produces it with the fewest resources

 

a

 
11. 

11. If Sam can chop up more carrots per minute than Joe can, then

a.

Joe has an absolute advantage in carrot chopping

b.

Joe must have a comparative advantage in carrot chopping

c.

Sam has an absolute advantage in carrot chopping

d.

Sam must have a comparative advantage in carrot chopping

e.

we can conclude nothing about absolute advantage

 

c

 
12. 

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

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

 

e

 
13. 

13. In one week, Mohammed can knit 5 sweaters or bake 240 cookies. The opportunity cost per sweater for Mohammed is

a.

$240

b.

240 cookies

c.

48 sweaters

d.

1/48 of a cookie

e.

48 cookies

 

e

 
14. 

14. Barter occurs when

a.

two people share everything

b.

one product is exchanged directly for another product

c.

money is used to buy goods

d.

money is exchanged directly for other money

e.

goods are used to buy money

 

b

 
15. 

15. Money facilitates trade because

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.

division of labor allows money to be produced at a lower cost

e.

people do not benefit from barter unless money is used

 

c

 
16. 

16. A medium of exchange must be

a.

approved by the government

b.

socially acceptable in exchange for goods and services

c.

easy to reproduce

d.

used to eliminate specialization and the division of labor

e.

used when a system of barter exists

 

b

 
17. 

17. Which of the following provide the best evidence of specialization?

a.

a firm that produces a line of related products, such as eight kinds of breakfast cereal

b.

an architect who is willing to practice in only one geographic area

c.

a physician that practices in a specialty area such as cardiology or orthopedic surgery

d.

a family that eats at Wendy's every Thursday night

e.

a retailer that sells goods but provides no services

 

c

 
18. 

18. The division of labor

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

 

b

 
19. 

19 Which of the following is not a gain from division of labor?

a.

Workers' abilities are matched to tasks.

b.

Workers gain experience from the repetition of the tasks.

c.

Workers save time by not moving to different tasks.

d.

Workers' morale increases as tasks become more specialized.

e.

The introduction of labor-saving machinery is possible.

 

d

 
20. 

20. Division of labor increases productivity because

a.

tasks can be assigned according to individual tastes and abilities

b.

workers who repeatedly perform the same tasks become bored

c.

each worker must learn each of the numerous tasks in the total production process

d.

specialization of labor allows for the introduction of cheaper, less sophisticated production techniques

e.

managers can force workers to produce goods that are valued more highly than the costs of producing them.

 

a

 
21. 

21. Because of specialization and comparative advantage, most people

a.

consume only what they produce themselves

b.

consume the products produced by their family and friends

c.

consume the products of many other specialists

d.

do not use money as a medium of exchange

e.

share whatever they produce

 

c

 
22. 

22. The "division of labor" refers to

a.

discrimination in labor markets

b.

separating a job into smaller tasks completed by different people

c.

one worker who divides his time among different jobs and duties

d.

defining a job according to the appropriate sex

e.

the fact that two 20-year-olds are more productive than one 40-year-old

 

b

 
23. 

23. Which of the following is an example of division of labor?

a.

an author writing a book one chapter at a time

b.

a firm trying to get rid of a labor union

c.

separating resources into four categories: land, labor, capital, and entrepreneurial ability

d.

allocating revenue among a firm's resource suppliers

e.

dividing an assembly process into separate steps

 

e

 
24. 

24. 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

 

a

 
25. 

25. 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

 

d

 
26. 

26. "Efficiency" refers to

a.

producing output using the least amount of labor

b.

producing output using the least amount of capital

c.

producing as far inside the production possibilities frontier as possible

d.

producing only one out of many possible commodities

e.

getting the maximum possible output from available resources

 

e

 
27. 

27. If all resources are used efficiently to produce goods and services, a nation will find itself producing

a.

inside its production possibilities frontier

b.

somewhere on its production possibilities frontier

c.

outside of its production possibilities frontier

d.

at one extreme end of its production possibilities frontier

e.

more of one product with no decrease in the production of any other product

 

b

 
28. 

28 A point outside the production possibilities frontier

a.

represents unemployment of resources

b.

represents full employment of resources

c.

would not represent an efficient combination of goods

d.

cannot be reached using the available technology

e.

is less desirable than one that lies inside the frontier

 

d

 
29. 

34. Increases in resources or improvements in technology will cause the production possibilities frontier to

a.

shift outward

b.

shift inward

c.

become a straight line

d.

become horizontal

e.

become vertical

 

a

 
30. 

30

35. An outward shift of the production possibilities frontier

a.

reflects economic stability

b.

reflects economic growth

c.

reflects economic decline

d.

does not relate to the state of the economy

e.

is always a parallel shift

 

b

 
31. 

36 Which economic question does the decision to produce butter instead of guns answer?

a.

What to produce?

b.

How to produce?

c.

For whom to produce?

d.

Who has a comparative advantage in gun production?

e.

Who has an absolute advantage in butter production?

 

a

 
32. 

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

 

b

 
33. 

38. Which economic question does the decision to give all of the butter the economy produces to the homeless answer?

a.

What to produce?

b.

How to produce?

c.

For whom to produce?

d.

Who has a comparative advantage in butter production?

e.

Who has an absolute advantage in butter production?

 

c

 
34. 

39. Every economy must answer each of the following questions except one. Which is the exception?

a.

Which goods will be produced?

b.

Why are these particular goods produced?

c.

Which resources should be used?

d.

How should resources be combined to produce each product?

e.

Who will actually consume the goods produced?

 

b

 
35. 

40. The set of mechanisms and institutions that resolve the basic economic questions is called the

a.

economic system

b.

production possibilities dilemma

c.

business resolution device

d.

absolute advantage determination

e.

comparative advantage determination

 

a