Microeconomics Midterm Chapter 2

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Sophomore Year Bentley 2011

Opportunity cost is the difference between the benefits and the costs of a choice. T or F?

False. Opportunity Cost is the cost of an alternative that must be forgone in order to pursue a certain action

Opportunity cost is objective; therefore, its value does not change as circumstances change. T or F?

False. Opportunity cost is objective, therefore its value changes as circumstances change.

A test was scheduled for Monday morning, but you went to a party on Saturday night. If you hadn't attended
the party, you could have studied for the test or gone to a movie. Which of the following is true?

It's not possible to determine the opportunity cost of attending the party.

If you enjoy playing golf, the opportunity cost of cleaning your room

is greater on sunny days than it is on rainy days

If people specialize in producing those goods for which they possess a comparative advantage, then the
economy as a whole can produce a greater quantity of goods. T or F?

True

If Jeremy has an absolute advantage in cooking and Margaret has an absolute advantage in cleaning, then

we can conclude nothing about comparative advantage.

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

Sarah has an absolute advantage in shoe making

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

48 cookies

If I trade a ginger snap for a chocolate chip cookie, I am engaging in

barter

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

The introduction of labor-saving machinery is possible

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

somewhere on its production possibilities frontier

Points inside the production possibilities frontier represent

Inefficiency or unemployment

Points outside the production possibilities frontier represent

Currently unattainable combination of outputs

A point inside the production possibilities curve illustrates a situation in which resources are not fully employed. T or F?

True

Along a bowed-out production possibilities frontier, as more of one good is produced

technology remains constant

If an economy is operating at a point inside the production possibilities frontier, then

some of the nations resources are unemployed

Which of the following would shift the production possibilities frontier outward?

an increase in the size of the labor force

Which of the following would not shift the production possibilities frontier?

a change to a more inefficient production process

Which of the following would shift the production possibilities frontier outward?

an improvement in technology

An improvement in technology would

enable the economy to produce outside its original production possibilities frontier

An outward shift of the production possibilities frontier

reflects economic growth

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

what to produce

The economic question of what will be produced is

faced by all economies regardless of their wealth

Pure capitalism and a pure command system represent

two different ways of answering the basic economic questions

One of the most centrally planned economies in the world today is found in

North Korea

All of the following are evidence of specialization except

a solo carpenter who builds a whole bedroom set

People have less incentive to invest the more concerned they are that their investment will not be

protected from high tax rates

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