54)
Consider the following items:
a. the novel The DaVinci Code by Dan Brown
b. the “The Spirited Shipper”, an innovative wine shipping box
c. a Swiss chef‘s award–winning recipe
d. an original fabric design, for example, the fabric used for “Coach” bags and luggage
Which of the items listed is an example of intellectual property?
54)
A)
a and d only
B)
a and b only
C)
a, b, and c
D)
all of the items listed
55)
Without an increase in the supplies of economic resources, how can a nation achieve economic
growth?
55)
A)
by producing more high– value goods and less of low–value goods
B)
by increasing the prices of economic resources
C)
through technological advancement which enables more output with the same quantity of
resources
D)
by lowering the prices of economic resources
Figure 2–6
German auto producer BMW currently produces two types of automobiles, sports utility vehicles (SUVs) and coupes, in its
U.S. plant. Since it opened in 1994, the company has made several strategic production decisions. Figure 2–6 shows changes
to its production possibilities frontier in response to some of these production strategies.
56)
Refer to Figure 2–6. In 2005, the company had to shut down a portion of its facility as it worked on
remodeling the facility to merge two of its separate assembly lines in preparation for the
production of a new model. The production decision to shut down temporarily will result in a
56)
A)
movement from K to L in Graph C.
B)
movement from G to H in Graph B.
C)
movement from J to H in Graph B.
D)
movement from E to F in Graph A.
57)
Economic growth is represented on a production possibilities frontier model by the production
possibility frontier
57)
A)
shifting inward.
B)
shifting outward.
C)
becoming steeper.
D)
becoming flatter.
58)
Specializing in the production of a good or service in which one has a comparative advantage
enables a country to do all of the following except
58)
A)
increase the variety of products that it can consume with no increase in resources.
B)
produce a combination of goods that lie outside its own production possibilities frontier.
C)
engage in mutually beneficial trade with other nations.
D)
consume a combination of goods that lie outside its own production possibilities frontier.
59)
You have an absolute advantage whenever you
59)
A)
can produce something at a lower opportunity cost than others.
B)
can produce more of something than others with the same resources.
C)
prefer to do one particular activity.
D)
are better educated than someone else.
60)
The production possibilities frontier model assumes all of the following except
60)
A)
the level of technology is fixed and unchanging.
B)
the economy produces only two products.
C)
production of goods requires full employment of all resources.
D)
labor, capital, land and natural resources are fixed in quantity.
Figure 2–4
Figure 2–4 shows various points on three different production possibilities frontiers for a nation.
61)
Refer to Figure 2–4. Consider the following events:
a. an increase in the unemployment rate
b. a decrease in a nation’s money supply
c. a war that kills a significant portion of a nation’s population
Which of the events listed above could cause a movement from Y to W ?
61)
A)
a, b and c
B)
a only
C)
a and c only
D)
c only
E)
a and b only
Table 2–2
George Jack
Lawns Mowed 10 6
Gardens
Cultivated 5 4
Table 2–2 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns
or cultivating gardens.
62)
Refer to Table 2–2. What is Jack’s opportunity cost of cultivating a garden?
62)
A)
two–thirds of a garden cultivated
B)
two lawns mowed
C)
one and a half lawns mowed
D)
one–half of a garden cultivated
63)
Which of the following would shift a nation‘s production possibilities frontier inward?
63)
A)
passing a law requiring workers to retire at age 50
B)
producing more capital equipment
C)
the discovery of a cheap way to convert sunshine into electricity
D)
an increase in the unemployment rate
Explanation:
Explanation:
Figure 2–7
Figure 2–7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton
and cashews.
64)
Refer to Figure 2–7. Which country has a comparative advantage in the production of cotton?
64)
A)
Indonesia
B)
Pakistan
C)
They have equal productive abilities.
D)
neither country
Figure 2–2
Figure 2–2 above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat
and vegetables.
65)
Refer to Figure 2–2. What is the opportunity cost of one pound of vegetables?
65)
A)
12 pounds of meat
B)
3
4 pounds of meat
C)
1.2 pounds of meat
D)
11
3 pounds of meat
Figure 2–7
Figure 2–7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton
and cashews.
66)
Refer to Figure 2–7. Which country has a comparative advantage in the production of cashews?
66)
A)
Indonesia
B)
Pakistan
C)
They have equal productive abilities.
D)
neither country
67)
A major factor contributing to the slow growth rate of less developed economies is
67)
A)
the lack of natural resources.
B)
the lack of well–defined and enforceable property rights.
C)
the high rate of illiteracy.
D)
the lack of workers.
B
68)
If opportunity costs are constant, the production possibilities frontier would be graphed as
68)
A)
a positively sloped straight line.
B)
a negatively sloped curve bowed in toward the origin.
C)
a ray from the origin.
D)
a negatively sloped straight line.
D
B
69)
Households
69)
A)
purchase factors of production in the factor market.
B)
purchase factors of production in the product market.
C)
purchase final goods and services in the factor market.
D)
purchase final goods and services in the product market.
Table 2–2
George Jack
Lawns Mowed 10 6
Gardens
Cultivated 5 4
Table 2–2 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns
or cultivating gardens.
70)
Refer to Table 2–2. What is George‘s opportunity cost of mowing a lawn?
70)
A)
one and a half lawns mowed
B)
two–thirds of a garden cultivated
C)
two lawns mowed
D)
one–half of a garden cultivated
Explanation:
71)
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of
chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of
the following is true about the comparative advantage between the two countries?
71)
A)
Germany has the comparative advantage in watches and chocolate.
B)
Switzerland has the comparative advantage in chocolate.
C)
Switzerland has the comparative advantage in watches.
D)
Germany has the comparative advantage in watches.
Explanation:
Explanation:
72)
In 2002, BMW made a tactical decision to use a robot to attach the gearbox to the engines of its
vehicles instead of using two workers as it had done previously. The robot method had a higher
cost but installed the gearbox in exactly the right position. In making this decision, BMW
72)
A)
eroded some of its competitiveness in the luxury car market because of its increased cost of
production.
B)
adopted a negative technological change because it replaced workers with robots.
C)
faced a tradeoff between higher cost and lower precision (in installing the gearbox in exactly
the right position).
D)
faced no tradeoffs because the robot method increased efficiency.
Figure 2–4
Figure 2–4 shows various points on three different production possibilities frontiers for a nation.
73)
Refer to Figure 2–4. Consider the following movements:
a. from point V to point W
b. from point W to point Y
c. from point Y to point Z
Which of the movements listed above represents economic growth?
73)
A)
a only
B)
b only
C)
b and c only
D)
a, b, and c
Figure 2–6
German auto producer BMW currently produces two types of automobiles, sports utility vehicles (SUVs) and coupes, in its
U.S. plant. Since it opened in 1994, the company has made several strategic production decisions. Figure 2–6 shows changes
to its production possibilities frontier in response to some of these production strategies.
74)
Refer to Figure 2–6. In response to changing consumer demands, BMW has cut back on the
production of coupes and increased its production of SUVs. This strategy is best represented by a
74)
A)
movement from K to L in Graph C.
B)
movement from E to F in Graph A.
C)
movement from G to H in Graph B.
D)
movement from J to H in Graph B.
75)
In a production possibilities frontier model, a point inside the frontier is
75)
A)
inefficient. Maximum output is not being obtained from available resources.
B)
productively efficient
C)
allocatively inefficient.
D)
allocatively efficient.
Figure 2–7
Figure 2–7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton
and cashews.
76)
Refer to Figure 2–7. What is the opportunity cost of producing 1 pound of cashews in Indonesia?
76)
A)
320 bolts of cotton
B)
3/8 bolts of cotton
C)
2 2/3 bolts of cotton
D)
5/8 bolts of cotton
77)
Refer to Table 2–2. What is Jack’s opportunity cost of mowing a lawn?
77)
A)
one and a half lawns mowed
B)
one–half of a garden cultivated
C)
two lawns mowed
D)
two–thirds of a garden cultivated
Explanation:
Explanation:
Figure 2–8
78)
Refer to Figure 2–8. The segment of the circular flow diagram in the Figure shows the flow of labor
services from market K to economic agents J. What is market K and who are economic agents J?
78)
A)
K= factor markets; J= firms
B)
K= factor markets; J= households
C)
K= product markets; J= households
D)
K= product markets; J= firms
79)
A critical function of the government in facilitating the operation of a market economy is
79)
A)
setting up and enforcing private property rights.
B)
ensuring an equal distribution of income to all citizens.
C)
controlling the market prices of food items.
D)
producing goods and services for low income households.
80)
A guild is
80)
A)
an organization of producers that limits the production of a good.
B)
a group of nations who agree not to compete with each other.
C)
a group of independent producers competing with each other.
D)
a nation that is a free market benchmark.
81)
Which of the following is not a factor of production?
81)
A)
a drill press in a machine shop
B)
$1,000 in cash.
C)
an acre of farmland
D)
the manager of the local tire shop
Figure 2–7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton
and cashews.
82)
Refer to Figure 2–7. If the two countries have the same amount of resources and the same
technological knowledge, which country has an absolute advantage in the production of cotton?
82)
A)
They have the same advantage.
B)
Pakistan
C)
Indonesia
D)
cannot be determined
83)
Refer to Figure 2–11. Which two arrows in the diagram depict the following transaction: Stanley
purchases the novel, “Night of Sorrows” for his summer reading pleasure.
83)
A)
K and M
B)
J and G
C)
J and M
D)
K and G
Figure 2–4
Figure 2–4 shows various points on three different production possibilities frontiers for a nation.
84)
Refer to Figure 2–4. A movement from X to Y
84)
A)
is the result of advancements in food production technology only, with no change in the
technology for plastic production.
B)
could be due to a change in consumers‘ tastes and preferences.
C)
is the result of advancements in plastic production technology only, with no change in
food production technology.
D)
could occur because of an influx of immigrant labor.
85)
The principle of opportunity cost is that
85)
A)
taking advantage of investment opportunities involves costs.
B)
in a market economy, taking advantage of profitable opportunities involves some money cost.
C)
the economic cost of using a factor of production is the alternative use of that factor that is
given up.
D)
the cost of production varies depending on the opportunity for technological application.
C
D
86)
Which of the following are flows in the circular flow model?
86)
A)
the flow of income earned by factors of production and the flow of expenditures on goods
and services
B)
the flow of income received by households and the flow of tax revenues paid by households
C)
the flow of goods and the flow of services
D)
the flow of costs and the flow of revenue
87)
Scarcity
87)
A)
can be overcome by discovering new resources.
B)
stems from the incompatibility between limited resources and unlimited wants.
C)
is a bigger problem in market economies than in socialist economies.
D)
can be eliminated by rationing products.
88)
In 18th century Europe, governments gave guilds legal authority to limit production of goods. Did
this authority obstruct or improve the market mechanism and how?
88)
A)
It obstructed the market mechanism because the guild’s actions prevented the forces of
demand and supply from coordinating the self–interested decisions of producers and
consumers.
B)
It obstructed the market mechanism because with one more party having to coordinate
activities (the guilds) there were delays in getting the products to consumers.
C)
It improved the market mechanism by making it more efficient because the guilds were able
to quickly identify and rectify any market shortages and surpluses.
D)
It improved the market mechanism because the government’s actions provided the correct set
of signals to the market so that producers could adjust their output to better meet the needs of
consumers.
89)
The unattainable points in a production possibilities diagram are
89)
A)
the horizontal and vertical intercepts.
B)
the points within the production possibilities frontier.
C)
the points outside the production possibilities frontier.
D)
the points along the production possibilities frontier.
Figure 2–2
Figure 2–2 above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat
and vegetables.
90)
Refer to Figure 2–2. What is the opportunity cost of one pound of meat?
90)
A)
3
4 pounds of vegetables
B)
16 pounds of vegetables
C)
11
3 pounds of vegetables
D)
1.6 pounds of vegetables
91)
The circular flow model demonstrates
91)
A)
how demand and supply for goods and services are brought into equilibrium.
B)
the role of the government in overseeing the market system.
C)
the roles played by households and firms in the market system.
D)
how shortages and surpluses are eliminated in a market.