27 terms

# Microeconomics Midterm Chapter 2

Sophomore Year Bentley 2011
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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
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
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