Question 1

Exhibit 1-9 
-Refer to Exhibit 1-9. Suppose the amount of energy available to the economy declines. Which of the following is the most likely to happen?

Accepted Answer

A)   A movement from Point D to Point C along the curve
B)   A movement from Point C to Point D along the curve
C)   A shift to Point B
D)   A shift to Point A
E)   A shift from Point A to Point B

Question 2

Suppose a financial crisis prevents many companies to get loans so that their production levels fall as they are unable to purchase the same amount of inputs as before. We can conclude that the economy is

Accepted Answer

A)   operating on the production possibility curve.
B)   operating outside the production possibility curve.
C)   operating inside the production possibility curve.
D)   efficient.
E)   experiencing economic growth.

Question 3

Which of the following refers to a decline in production and employment that lasts for six months or more?

Accepted Answer

A)   Financial crisis
B)   Economic growth
C)   Market failure
D)   Government failure
E)   Recession

Question 4

In a pure market economy, the what, how, and for whom problems are determined by

Accepted Answer

A)   consumers only.
B)   firms only.
C)   the government.
D)   both consumers and firms.
E)   no one.

Question 5

A government failure results when

Accepted Answer

A)   the government allows a market failure to occur.
B)   the government establishes property rights.
C)   the market economy does not provide good answers to the three questions.
D)   government intervention is unable to correct a market failure.
E)   the government intervenes in a market economy.

Question 6

A voluntary exchange of existing consumer goods is beneficial because it

Accepted Answer

A)   makes those engaging in the exchange better off.
B)   changes the total quantity of goods produced.
C)   reallocates existing goods.
D)   reduces scarcity.
E)   requires choice.

Question 7

Without property rights,

Accepted Answer

A)   people would have more of an incentive to specialize, and the economy would become more efficient.
B)   there would be more inventions.
C)   people would not have an incentive to specialize.
D)   a market economy would become more efficient.
E)   people would have more of an incentive to specialize.

Question 8

What role do property rights play in a market economy?

Accepted Answer

Property rights enable people to keep wh...

Question 9

There is no legitimate role for government in a market economy.

Accepted Answer

A) True 
 B)False

Question 10

The government can improve market conditions in case of a market failure.

Accepted Answer

A) True 
 B)False

Question 11

Kyle has two options to spend her school break in the summer: get a summer job that pays $2,000 or travel in Europe. The opportunity cost of the summer job is that Kyle

Accepted Answer

A)   can earn more than $2,000.
B)   can also travel in Europe.
C)   has to give up traveling in Europe.
D)   can save the money for traveling in Europe.
E)   has to work and travel at the same time.

Question 12

Exhibit 1-7 
-Refer to Exhibit 1-7. Point C

Accepted Answer

A)   occurs when resources are not efficiently allocated.
B)   may be attained with a sufficient improvement in technology.
C)   can be obtained with existing resources.
D)   is impossible to attain, even in the future.
E)   shows the most efficient use of valuable resources.

Question 13

Exhibit 1-9 
-Refer to Exhibit 1-9. If the economy depicted is at Point B, then

Accepted Answer

A)   more consumption can be produced, but at the expense of education.
B)   any further increase in education will involve a decrease in consumption.
C)   any further increase in consumption will involve a decrease in education.
D)   any further increase in either consumption or education will benefit everyone.
E)   any further increase in either consumption or education will hurt everyone.

Question 14

The production possibilities curve is immovable, meaning that it is fixed regardless of the availability of resources.

Accepted Answer

A) True 
 B)False

Question 15

John's budget is such that he can afford either a computer or a Caribbean vacation, both of which cost the same. Which of the following statements about his opportunity cost is correct?

Accepted Answer

A)   The opportunity cost of a Caribbean vacation is the money John pays for the vacation.
B)   The opportunity cost of the vacation is the same as the opportunity cost of the computer because John can afford only one or the other.
C)   There is nothing to say about the opportunity cost because we don't know how much the computer or the Caribbean vacation costs.
D)   The opportunity cost of going on a vacation is the loss from not being able to buy the computer.
E)   The opportunity cost of the computer is the total cost of the computer and the Caribbean vacation.

Question 16

In a command economy, the what, how, and for whom problems are determined by

Accepted Answer

A)   consumers.
B)   firms.
C)   the government.
D)   both consumers and firms.
E)   markets.

Question 17

A centrally planned economy is also called a market economy.

Accepted Answer

A) True 
 B)False

Question 18

International trade exists only when a country can gain a trade advantage over another country.

Accepted Answer

A) True 
 B)False

Question 19

When an economy is operating on its production possibilities curve, more production of one good means less production of another because

Accepted Answer

A)   wants are unlimited.
B)   resources are limited.
C)   some resources are not employed.
D)   wants are limited.
E)   resources are not perfectly adaptable to alternative uses.

Question 20

A resource is not scarce if

Accepted Answer

A)   there is more of this resource than people want.
B)   it can be found in any store.
C)   people have enough money to pay for it.
D)   it has a low opportunity cost.
E)   its supply exceeds its demand.

Exam 1: The Central Idea

A voluntary exchange of existing consumer goods is beneficial because it

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The production possibilities curve is immovable, meaning that it is fixed regardless of the availability of resources.

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Suppose a financial crisis prevents many companies to get loans so that their production levels fall as they are unable to purchase the same amount of inputs as before. We can conclude that the economy is

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Kyle has two options to spend her school break in the summer: get a summer job that pays $2,000 or travel in Europe. The opportunity cost of the summer job is that Kyle

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Which of the following refers to a decline in production and employment that lasts for six months or more?

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A centrally planned economy is also called a market economy.

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International trade exists only when a country can gain a trade advantage over another country.

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John's budget is such that he can afford either a computer or a Caribbean vacation, both of which cost the same. Which of the following statements about his opportunity cost is correct?

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The government can improve market conditions in case of a market failure.

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What role do property rights play in a market economy?

Correct AnswerverifiedProperty rights enable people to keep wh...View AnswerShow Answer

Exhibit 1-7 -Refer to Exhibit 1-7. Point C

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Exhibit 1-9 -Refer to Exhibit 1-9. If the economy depicted is at Point B, then

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When an economy is operating on its production possibilities curve, more production of one good means less production of another because

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A resource is not scarce if

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In a pure market economy, the what, how, and for whom problems are determined by

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Without property rights,

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Exhibit 1-9 -Refer to Exhibit 1-9. Suppose the amount of energy available to the economy declines. Which of the following is the most likely to happen?

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There is no legitimate role for government in a market economy.

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A government failure results when

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In a command economy, the what, how, and for whom problems are determined by

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Property rights enable people to keep wh...
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