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31
101) Related to the Economics in Practice on page 25: Which one of the following occurs when an
individual enters the paid work force?
A) The opportunity cost of time for housework increases, because time spent on housework could be
spent on money-earning activities.
B) The opportunity cost of time for housework increases, because money earned at a job can allow
individuals to pay someone to do household chores that the individuals used to do themselves.
C) The opportunity cost of time for housework decreases, because increased earning power makes
individuals less likely to do their own housework.
D) The opportunity cost of time for housework decreases, because as more people enter the work force,
businesses have greater incentives to develop innovations that make housework more efficient.
Topic: Scarcity, Choice, and Opportunity Cost: Economics in Practice
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-20
102) Related to the Economics in Practice on page 25: How did the introduction of the microwave oven in
1960 affect the market for frozen food?
A) It encouraged people to leave the work force by making cooking easier and less time-consuming.
B) It reduced the opportunity cost of eating frozen food by decreasing the amount of time required to
prepare frozen meals.
C) It increased the financial cost of alternative methods of food preparation, such as conventional ovens.
D) It made frozen foods more appealing by increasing the variety of meals that could be frozen and
reheated.
Topic: Scarcity, Choice, and Opportunity Cost: Economics in Practice
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-20
103) Related to the Economics in Practice on page 35: In the survey conducted by Esther Duflo and Abhijit
Banerjee, the extremely poor were found to consume ________ of their budgets on food compared to
people in the United States.
A) a significantly higher percentage
B) about the same percentage
C) a slightly lower percentage
D) approximately 50 percent less
Topic: Scarcity, Choice, and Opportunity Cost: Economics in Practice
Skill: Fact
Learning Outcome: Micro-25
32
104) Related to the Economics in Practice on page 35: The results of the survey conducted by Esther Duflo
and Abhijit Banerjee found that in extremely poor societies,
A) household choice plays no role in consumption decisions.
B) all consumption decisions are made by the government.
C) household choice even plays a role in non-food-related consumption decisions.
D) the only consumption decisions in which household choice plays a role is in the consumption of
biological needs such as food.
Topic: Scarcity, Choice, and Opportunity Cost: Economics in Practice
Skill: Fact
Learning Outcome: Micro-25
105) Production is the process by which
A) products are used by consumers.
B) resources are transformed into useful forms.
C) products are converted into capital.
D) resources are allocated and distributed.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
106) Goods and services of value to households are
A) inputs in the production process.
B) outputs in the production process.
C) both inputs and outputs in the production process.
D) unrelated to the production process.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
107) Which of the following is a resource as the term is used by economists?
A) buildings
B) labor
C) land
D) all of the above
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
33
108) Which of the following would an economist classify as capital?
A) a new deposit of natural gas
B) a government savings bond
C) a police car
D) a $100 traveler's check
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
109) Economists refer to things that have already been produced that are in turn used to produce other
goods and services as
A) land.
B) labor.
C) entrepreneurship.
D) capital.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
110) The principle that the cost of something is equal to what is sacrificed to get it is known as the
A) marginal principle.
B) principle of opportunity cost.
C) principle of diminishing returns.
D) reality principle.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-20
111) If scarcity was eliminated,
A) trade would become unnecessary.
B) opportunity costs would increase.
C) all nations would have an absolute advantage in producing all products.
D) the concept of trade-offs would become irrelevant.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-4
34
112) According to the theory of ________, specialization and free trade will benefit all trade partners, even
when some are absolutely more efficient producers than others.
A) comparative advantage
B) absolute advantage
C) social equity
D) laissez-faire
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
Refer to the information provided in Table 2.2 below to answer the following question(s).
Table 2.2
Molly
Pete
Avatar Design
6
8
Tattoo Design
3
2
113) Refer to Table 2.2. For Molly, the opportunity cost of designing one tattoo is
A) 1/2 of an avatar design.
B) 1 avatar design.
C) 2 avatar designs.
D) 3 avatar designs.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-20
114) Refer to Table 2.2. For Pete, the opportunity cost of designing one tattoo is
A) 1/4 of an avatar design.
B) 2 avatar designs.
C) 4 avatar designs.
D) 6 avatar designs.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-20
35
115) Refer to Table 2.2. Which of the following statements is true?
A) Molly has a comparative advantage in both avatar design and tattoo design.
B) Pete has a comparative advantage in both avatar design and tattoo design.
C) Molly has a comparative advantage in avatar design and Pete has a comparative advantage in tattoo
design.
D) Pete has a comparative advantage in avatar design and Molly has a comparative advantage in tattoo
design.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-20
116) Refer to Table 2.2. To maximize total production,
A) Molly should specialize in avatar design and Pete should specialize in tattoo design.
B) Pete should specialize in avatar design and Molly should specialize in tattoo design.
C) Molly and Pete should both split their time between designing avatars and tattoos.
D) Molly should design avatars and tattoos, but Pete should only design avatars.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-20
117) Refer to Table 2.2. For Pete, the opportunity cost of designing three tattoos is ________ avatar
designs.
A) 6
B) 12
C) 24
D) an indeterminate number of
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-20
118) Refer to Table 2.2. For Molly, the opportunity cost of designing four tattoos is ________ avatar
designs.
A) 6
B) 8
C) 12
D) 24
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-20
36
119) According to the theory of comparative advantage, trade and specialization ________ productivity
by ________ opportunity costs.
A) raise; raising
B) raise; lowering
C) lower; raising
D) lower; lowering
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
120) Specialization and trade exploit differences in productivity across workers and
A) only benefit the exporter.
B) only benefit the importer.
C) make everyone better off.
D) make everyone worse off.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
121) If someone can produce a good at a lower opportunity cost, she ________ in producing that good.
A) has a comparative advantage
B) has an absolute advantage
C) experiences no diminishing returns
D) experiences no marginal costs
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
122) If a vintner has a comparative advantage in producing wine,
A) he can produce more wine using the same resources than other vintners.
B) wine is the only product he can produce.
C) he can produce wine at a lower opportunity cost than other vintners.
D) he also has an absolute advantage in producing wine.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
37
123) Which of the following is an act of economic "investment"?
A) The state legislature authorizes the sale of a state park.
B) An entrepreneur buys 5,000 shares of stock at $5 a share and then sells the stock at a profit for $60 a
share.
C) A brewer purchases a new fermentation system for his beer.
D) A teacher deposits $500 in a retirement account.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
124) In economics, the creation of capital is referred to as
A) investment.
B) comparative advantage.
C) consumption.
D) allocation.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-18
125) The process of using resources to produce ________ is known as investment.
A) money
B) new capital
C) profit
D) inputs
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-18
126) Saving is an example of
A) exchanging capital for cash.
B) exchanging scarce resources for unlimited resources.
C) trading present benefits for future benefits.
D) trading future benefits for present benefits.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-18
38
127) An example of an investment is
A) the purchase of an iPhone by a company for one of its salesmen.
B) the purchase of a share of Berkshire Hathaway stock.
C) the purchase of a government Treasury bill.
D) all of the above
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-18
128) Because resources are scarce, the opportunity cost of investment in capital is
A) past investment.
B) past consumption.
C) foregone present consumption.
D) future consumption.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
129) If the unemployment rate decreases from 9% to 6%, the economy will
A) move closer to a point on the ppf.
B) move away from the ppf toward the origin.
C) remain on the ppf.
D) remain on the origin.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-14
130) Periods of full employment correspond to
A) points outside the ppf.
B) points inside the ppf.
C) points on the ppf.
D) either points inside or outside the ppf.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
39
131) If an economy is fully utilizing its resources, it can produce more of one product only if it
A) doubles manufacturing of the product.
B) produces less of another product.
C) adds more people to the labor force.
D) reduces the price of the most expensive products.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
132) All the combinations of goods and services that can be produced if all of society's resources are used
efficiently are represented on an economy's
A) production possibility frontier.
B) resource availability diagram.
C) factors of production statement.
D) allocative allotment graph.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-19
133) When an economy is producing inside its production possibility frontier,
A) production inefficiency occurs.
B) only technological advances will allow it to increase production.
C) it is efficient so long as it is producing what people want.
D) it must overcompensate by producing outside the curve to achieve efficiency.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-19
134) If an economy is producing on its production possibility frontier but is not producing what people
want, the economy
A) is experiencing technological advancement.
B) is producing at more than one point on the production possibility frontier.
C) is not achieving output efficiency.
D) is not being productively efficient.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-19
40
135) If a society is producing at a point along its production possibility frontier, then the society
A) is fully employing its resources so it must be achieving output efficiency.
B) is fully employing its resources, but not necessarily achieving output efficiency.
C) is underallocating resources so it must be inefficient.
D) is overallocating resources so efficiency is indeterminate.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-19
136) If an economy begins to use its resources less efficiently, it will move
A) to a point closer to its ppf.
B) to a point farther away from its ppf.
C) from a point along its ppf to a point outside its ppf.
D) from one point to another point along its ppf.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-19
137) Assume a society can produce either beer or wine. If the marginal rate of transformation of gallons of
beer into gallons of wine is 0.5, then the opportunity cost of beer is
A) the 2 gallons of beer that must be forgone.
B) the 2 gallons of wine that must be forgone.
C) the 0.5 gallons of beer that must be forgone.
D) the additional 0.5 gallons of beer that can be produced.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
Learning Outcome: Micro-19
138) Assume a society can produce either beer or wine. If the marginal rate of transformation of gallons of
beer into gallons of wine is 0.5, then the opportunity cost of wine is
A) the 2 gallons of beer that must be forgone.
B) the 2 gallons of wine that must be forgone.
C) the 0.5 gallons of beer that must be forgone.
D) the additional 0.5 gallons of beer that can be produced.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
Learning Outcome: Micro-19
