1. Which of the Following Is the Most Accurate Statement About

Exam 050651

Lesson 1

Introduction to Economics

1. Which of the following is the most accurate statement about

production possibilities?

A. An economy can produce at any point inside or outside

a production possibilities frontier.

B. An economy can produce only on the production

possibilities frontier.

C. An economy can produce at any point on or inside the

production possibilities frontier, but not outside the

frontier.

D. An economy can produce at any point inside the

production possibilities frontier, but not on or outside

the frontier.

2. The production possibilities frontier shows the opportunity cost

of obtaining more of one good as the

A. amount of the other good that must be given up.

B. number of dollars that must be spent to produce it.

C. amount of resources that must be devoted to its production.

D. cost to consumers of buying the additional amount produced.

3. If a rancher is better at producing hamburgers, and a farmer is better at producing French

fries,

A. the rancher and the farmer can be better off if each specializes in the production of

the good he or she is best at producing.

B. the rancher and the farmer can be better off if each specializes in the production

of the good he or she is best at producing, then trades.

C. neither can be made better off unless he or she specializes first.

D. it's not clear whether either can be made better off through trade.

4. A cookie shop in a mall is open from 9 A.M. to 7 P.M. Monday through Friday. The cost of

making and selling cookies averages $0.50 per cookie. At 6:30 P.M. Friday evening, the

owner still has several dozen unsold cookies. The cookies won't be sellable on Monday.

A. The owner should reduce the price of the cookies, and keep reducing the price so

that all the cookies are sold by closing time, even if the price falls below $0.50 each.

B. The owner should reduce the price of the cookies, but shouldn't sell any for less

than $0.50.

C. The owner should sell as many cookies as possible at the normal price, then discard

the rest.

D. The owner should sell as many cookies as possible at $0.50 per cookie, then make

fewer cookies in the future.

5. Which of the following is the most correct statement about the scientific method?

A. The scientific method is useful in determining physical laws, but not very useful in

other applications.

B. The scientific method is useful in determining physical laws and in the biological

sciences, but not useful in the social sciences.

C. The scientific method is useful in the natural and biological sciences, and in

economics, but not in "nonquantitative" social sciences.

D. The scientific method is useful in all sciences.

6. Language commonly used by economists includes terms such as

A. axioms, vector spaces, and fuzzy sets.

B. ego, id, and cognitive dissonance.

C. supply, demand, and comparative advantage.

D. torts, venue, and promissory estoppel.

7. Which of the following is the most accurate statement about centrally planned economies?

A. In centrally planned economies, planners decided what goods and services were

produced and how much was produced, but not who produced and consumed them.

????? B. In centrally planned economies, planning and markets played equally important roles.

C. The collapse of communism in the Soviet Union and Eastern Europe wasn't related

to central economic planning.

D. Most countries that once had centrally planned economies have abandoned that

system and are trying to develop market economies.

8. Look at the table that's shown in Figure A-1. According to the table, which of the following

statements is accurate?

I do not have a table to look at for 8 and 9

A. Mexico has an absolute advantage in both goods, and Canada has a comparative

advantage in T-shirts.

B. Mexico has an absolute advantage in neither good, and Canada has a comparative

advantage in both goods.

C. Mexico has an absolute advantage in both goods, and Canada has a comparative

advantage in beer.

D. Mexico has an absolute advantage in beer, and Canada has a comparative advantage

in T-shirts.

9. According to the table, which of the following statements is accurate?

A. If Mexico and Canada trade based on the principle of comparative advantage, Mexico

will export T-shirts, and Canada will import T-shirts.

B. If Mexico and Canada trade based on the principle of comparative advantage, Mexico

will export T-shirts, and Canada will import beer.

C. If Mexico and Canada trade based on the principle of comparative advantage, Mexico

will export beer, and Canada will import beer.

D. If Mexico and Canada trade based on the principle of comparative advantage, Mexico

will export beer, and Canada will import T-shirts.

10. Which of the following is the best definition of economics?

A. Economics is the study of how people save money.

B. Economics is the study of what people buy with their money.

C. Economics is the study of how people interact with their environment.

D. Economics is the study of how people manage scarce resources.

11. During the 1980s, policymakers attempted to stabilize the economy by setting targets for

monetary growth, then adjusted policy as needed in an effort to meet the targets. For

economic scientists, this period provided primarily which of the following?

A. An opportunity to criticize government policy

??B. A natural experiment in the economic system

C. More consulting opportunities

D. More investment opportunities

12. Look at the table that's illustrated in Figure A-2. According to the table, which of the

following statements is accurate?

Labor hours needed for 1 pound of

Meat potatoes

Farmer10 5

Rancher 4 1

A. The rancher has an absolute advantage in meat, and the farmer has a comparative

advantage in meat.

B. The rancher has an absolute advantage in meat, and the farmer has a comparative

advantage in potatoes.

??C. The rancher has an absolute advantage in meat, and the farmer has a comparative

advantage in neither good.

D. The rancher has an absolute advantage in potatoes, and the farmer has a comparative

advantage in potatoes.

13. An economist studies the effects of a change in government policy on the economy by

making

A. the same assumptions regardless of the policy.

B. the same assumptions regardless of the time horizon.

C. different assumptions for different policies, but not for different time horizons.

D. different assumptions for different policies and for different time horizons.

14. College-age athletes who drop out of school to play professional sports are

A. making a bad economic decision, because they can't play forever.

B. well aware that their opportunity cost of attending college is very high.

C. unaware of their opportunity cost of attending college.

D. underestimating the value of a college education.

15. A circular-flow diagram consists of two loops that illustrate the organization of the

economy. What part of the economy does each of these loops represent?

A. One loop represents the flow of goods; the other loop represents the flow of services.

B. One loop represents the flow of goods and services; the other loop represents the

flow of dollars.

C. One loop represents the flow of capital goods; the other loop represents the flow of

consumer goods.

D. One loop represents the flow of dollars; the other loop represents the flow of financial

assets.

16. Sometimes, public policies have unintended effects on society because

A. the courts don't enforce the policies.

B. individuals in society don't always understand the policies.

C. the policies may alter private incentives in ways not considered by policymakers.

D. public policies always reward the politically powerful.

17. When a society decides that businesses must reduce pollution, there's

A. a tradeoff only if some businesses are forced to close.

B. a tradeoff because of reduced incomes to the business owners, workers,

and customers.

C. no tradeoff for society as a whole, since the cost of reducing pollution falls

only on the businesses affected by the requirements.

D. no tradeoff, since everyone benefits from reduced pollution.

18. Look at the table that's illustrated in Figure A-3. The opportunity cost of one airplane

for the United States is

Labor hours needed to make

One Car One Airplane

In United States 40 160

In Japan 50 150

??A. 160 labor hours.C. 4 cars.

B. 1/4 car. D. 3 cars.

19. According to the table in Figure A-3, if the United States and Japan trade based on the