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Micro Test 2
Terms in this set (25)
Opportunity cost exists because:
a. technology is fixed at any point in time.
b. the law of comparative advantage is working.
c. resources are scarce but wants are unlimited.
d. the value of lost opportunities varies from person to person.
e. efficiency is measured by the monetary cost of an activity.
The term opportunity cost suggests that:
a. in any exchange situation where one person gains, someone else must lose.
b. not all individuals make the most of life's opportunities.
c. executives do not always recognize opportunities for profit as quickly as they should.
d. the only factor that is important in decision making is cost.
e. because goods are scarce, in order to get some good you must give up some other good in return.
The opportunity cost of choosing a particular activity:
a. can be easily and accurately calculated.
b. cannot be estimated.
c. does not change over time.
d. varies depending on time and circumstances.
e. is measured by the money spent on the activity.
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.
The law of comparative advantage says that a person should produce a good if he or 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.
The law of comparative advantage does not apply to: a. entire nations.
b. natural resources like air and sunshine. c. individuals.
e. regions of a country.
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.
All of the following are evidences of specialization except:
a. a carpenter who builds an entire bedroom set without any help from others.
b. a restaurant that provides continental and oriental food in all its outlets.
c. the credits at the end of a movie.
d. professional mourners in Taiwan.
e. online sellers.
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.
An economy'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
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.
A production possibilities frontier will be bowed out if:
a. there is scarcity.
b. resources are used efficiently.
c. production of one good involves an opportunity cost.
d. resources are not perfectly adaptable to making each good.
e. technology is improving.
The law of increasing opportunity cost explains why:
a. opportunity cost is constant along the production possibilities frontier.
b. the production possibilities frontier is downward sloping.
c. the production possibilities frontier is curved.
d. efficient points lie along the production possibilities frontier.
e. technology remains constant along a production possibilities frontier.
Which of the following would shift the production possibilities frontier outward?
a. An increase in the size of the labor force
b. More efficient use of existing resources and technology
c. The government prints more money
d. The end of a strike by a labor union
e. Society's desire to produce more of one of the goods
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.
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.
The figure below shows the production possibilities frontier for Good A and Good B. In the figure below, if all the economy's resources are used efficiently to produce only good B, then the economy will be at point:
The figure given below shows the production possibilities frontier for education and food. The opportunity cost of moving from point c to point b is _____.
a. 3 units of food
b. 22 units of education
c. 1 unit of food
d. 12 units of education
e. 62 units of education
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.
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?
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.
Adam Smith's term "the invisible hand" refers to:
a. the hidden role of government in setting regulations that govern trading in markets.
b. the most capable entrepreneurs in the economy.
c. market forces.
d. the unseen work of the financial markets that facilitates trade.
e. the role of technological change and random events in the economy.
A major distinguishing feature between capitalist and socialist (or command) economies is that:
a. the average citizen is always wealthier in capitalist economies than in socialist economies.
b. decision making is typically decentralized in socialist economies and is centralized in capitalist economies.
c. resources are privately owned in capitalist economies and private property rights are enforced by a dictator in command economies.
d. resources are publicly owned in capitalist economies.
e. decision making is typically decentralized under capitalism, while it is centralized in command economies.
Adam Smith believed that people's pursuit of their own self-interests:
a. tended to promote general welfare.
b. required the government's "invisible hand" to keep the economy running smoothly.
c. might cause aggregate demand to be greater than aggregate supply.
d. would increase the wealth of a nation, which was the quantity of gold and silver it owned.
e. would decrease the wealth of a nation, which was its ability to produce goods and services.
Pure capitalism and a pure command system represent:
a. two different ways of answering the basic economic questions.
b. two names describing the same method of answering the basic economic questions.
c. the only two ways of answering the basic economic questions.
d. the most efficient ways to answer the basic economic questions.
e. two market systems of resource distribution.
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