103) When countries specialize in what they do efficiently and trade, the material wealth of
nations
A) expands.
B) contracts
C) remains the same.
D) Need more information to answer this question.
104) Pursuing comparative advantage means
A) adding up the plusses and minuses after a transaction.
B) doing it to the other person first.
C) making equal, fair exchanges for equally valued goods or services.
D) sacrificing something less valuable for the sake of something more valuable.
E) seeking relative status rather than absolute welfare.
105) People specialize in activities in which they have a comparative advantage
A) if they know they are more productive than anyone else in the particular activity.
B) only if they understand the logic of comparative advantage.
C) when they expect to obtain more of whatever they want by doing so.
D) only when all of the above are true.
106) You and your roommate must divide the cooking and cleaning duties. Which of the
following will contribute toward giving you a comparative advantage in cleaning?
A) You develop a contagious disease.
B) Your roommate develops an allergy to dust.
C) Your roommate takes a course in cooking.
D) All of the above.
E) None of the above.
107) George Herman (Babe) Ruth was a superb baseball player, both an excellent pitcher and a
record-breaking batter. Other members of the New York Yankee team, who were not as
competent pitchers as Ruth, nonetheless had a comparative advantage over Ruth in pitching
because
A) Ruth was such a competent batter.
B) the owners of the Yankees were more interested in monetary profits than in winning baseball
games.
C) the price system failed to provide adequate information and incentive.
D) they were allowed to pitch more often and practice increased their productivity.
E) too many players preferred batting to pitching.
108) Should you type your own term paper or hire a specialist to do it for you? Your comparative
advantage as a typist increases as you
A) find you have completed all your studying.
B) get laid off from your job working afternoons at the gas station.
C) improve your skills as a typist.
D) encounter any of the above changes in your situation.
109) Someone who earns her living rolling out pizza dough
A) is inefficiently employed if she could shift to another occupation and produce more than the
person she replaces.
B) is inefficiently employed if someone else could roll out more dough in less time.
C) thinks she has a comparative advantage in rolling out pizza dough.
D) All of the above are true.
110) Could an increase in the demand for compact cars give an American automobile producer a
comparative advantage in their production?
A) No, because comparative advantage depends entirely on productive capabilities.
B) No, because changes in demand can only affect the price of compact cars.
C) Yes, but only if it leads to a change in the techniques of production.
D) Yes, by making compact-car production more profitable.
111) Suppose Maria can make 12 pizzas or 4 lasagnas every Saturday afternoon, while Gina can
make 10 pizzas or 2 lasagnas every Saturday afternoon. Which statement is true?
A) Maria is the most efficient producer of both pizza and lasagna.
B) Gina is the least efficient producer of both pizza and lasagna.
C) It costs Maria 3 pizzas to produce 1 lasagna.
D) It costs Gina 5 lasagnas to produce 1 pizza.
E) All of the above are true.
112) Suppose Maria can make 12 pizzas or 4 lasagnas every Saturday afternoon, while Gina can
make 10 pizzas or 2 lasagnas every Saturday afternoon. Which statement is true?
A) Nobody has a comparative advantage in pizza or in lasagna.
B) Maria has a comparative advantage only in lasagna.
C) Maria has a comparative advantage in pizza and in lasagna.
D) Gina has a comparative disadvantage in pizza and in lasagna.
113) Suppose Maria can make 12 pizzas or 4 lasagnas every Saturday afternoon, while Gina can
make 10 pizzas or 2 lasagnas every Saturday afternoon. Which statement is true?
A) It costs Maria 1/3 of a pizza to make 1 lasagna.
B) It costs Maria 1 pizza to make 1 lasagna.
C) It costs Gina 2 pizzas to make 1 lasagna.
D) It costs Gina 5 pizzas to make 1 lasagna.
114) Harry and Gus fish the same lake together from the same boat. Each morning Harry
typically catches either 20 bluegills or 5 walleyes (depending on how deep he fishes) while Gus
typically catches either 20 bluegills or 2 walleyes (depending on how deep he fishes). Which
statement below is true?
A) Harry is the more efficient catcher of bluegills.
B) Gus is the more efficient catcher of bluegills.
C) Harry is the more efficient catcher of walleyes.
D) Both B and C are true.
115) Harry and Gus fish the same lake together from the same boat. Each morning Harry
typically catches either 20 bluegills or 5 walleyes (depending on how deep he fishes) while Gus
typically catches either 20 bluegills or 2 walleyes (depending on how deep he fishes). Which
statement below is true?
A) Gus has a comparative advantage in bluegills and in walleyes.
B) Harry has a comparative advantage in bluegills and in walleyes.
C) Harry has a comparative advantage in walleyes, not bluegills.
D) Because they fish from the same boat, neither one of them has a comparative advantage.
116) Harry and Gus fish the same lake together from the same boat. Each morning Harry
typically catches either 20 bluegills or 5 walleyes (depending on how deep he fishes) while Gus
typically catches either 20 bluegills or 2 walleyes (depending on how deep he fishes). Other
things constant, if they wish to maximize the total number of fish they catch together tomorrow
morning, regardless of species,
A) Harry should fish and Gus should row.
B) Harry should fish only for bluegills and Gus should fish only for walleyes.
C) Gus should fish only for bluegills and Harry should fish only for walleyes.
D) both Harry and Gus should fish for bluegills.
117) Harry and Gus fish the same lake together from the same boat. Each morning Harry
typically catches either 20 bluegills or 5 walleyes (depending on how deep he fishes) while Gus
typically catches either 20 bluegills or 2 walleyes (depending on how deep he fishes). If they
wish to fill their boat with the largest combination of bluegills and walleyes tomorrow morning,
A) Harry should try to catch both bluegills and walleyes, and Gus ought to row.
B) Harry should fish only for walleyes and Gus should fish only for bluegills.
C) Harry should fish only for bluegills and Gus should fish only for walleyes.
D) they best not bother trying.
118) Gomer can make either 200 gallons of corn liquor (L) or 200 gallons of strawberry wine
(W) every six months. Goober can make only 100 gallons of corn liquor (L) or 50 gallons of
strawberry wine (W) every six months. Which statement below is true?
A) It costs Gomer 200 W to make 1 L.
B) It costs Gomer 200 L to make 1 W.
C) It costs Goober 50 W to make 100 L.
D) None of the above.
119) Gomer can make either 200 gallons of corn liquor (L) or 200 gallons of strawberry wine
(W) every six months. Goober can make only 100 gallons of corn liquor (L) or 50 gallons of
strawberry wine (W) every six months. Which statement below is true?
A) It costs Gomer 1 W to make 1/2 L.
B) It costs Gomer 1 L to make 1 W.
C) It costs Gomer 2 L to make 1 W.
D) It costs Goober 2 W to make 1 L.
120) Gomer can make either 200 gallons of corn liquor (L) or 200 gallons of strawberry wine
(W) every six months. Goober can make only 100 gallons of corn liquor (L) or 50 gallons of
strawberry wine (W) every six months. Which statement below is true?
A) Gomer produces L more efficiently than Goober.
B) Gomer producers W more efficiently than Goober.
C) Goober produces W more efficiently than Gomer.
D) Both A and B is true.
121) Gomer can make either 200 gallons of corn liquor (L) or 200 gallons of strawberry wine
(W) every six months. Goober can make only 100 gallons of corn liquor (L) or 50 gallons of
strawberry wine (W) every six months. Which statement below is true?
A) Gomer produces W more efficiently than Goober.
B) Gomer produces L less efficiently than Goober.
C) Goober produces L more efficiently than Gomer.
D) All of the above are true.
122) Gomer can make either 200 gallons of corn liquor (L) or 200 gallons of strawberry wine
(W) every six months. Goober can make only 100 gallons of corn liquor (L) or 50 gallons of
strawberry wine (W) every six months. Which statement below is true?
A) Goober has a comparative advantage only in W.
B) Goober has a comparative advantage in both L and W.
C) Gomer has a comparative advantage only in W.
D) Gomer has a comparative advantage in both L and W.
E) None of the above.
123) Gomer can make either 200 gallons of corn liquor (L) or 200 gallons of strawberry wine
(W) every six months. Goober can make only 100 gallons of corn liquor (L) or 50 gallons of
strawberry wine (W) every six months. Which statement below is true?
A) Neither can gain from specialization and exchange.
B) Only Goober can gain from specialization and exchange.
C) Both can gain through exchange if Gomer specializes in W and Goober specializes in L.
D) Both can gain through exchange if Gomer specializes in L and Goober specializes in W.
124) If Robinson makes 40 purses or 5 wallets per week, and Chamberlin makes 16 purses or 2
wallets per week, then
A) Robinson produces purses more efficiently than Chamberlin.
B) Robinson produces wallets more efficiently than Chamberlin.
C) Chamberlin produces purses more efficiently than Robinson.
D) Chamberlin produces wallets more efficiently than Robinson.
E) none of the above is true.
125) If Robinson makes 40 purses or 5 wallets per week, and Chamberlin makes 16 purses or 2
wallets per week, then
A) Chamberlin has a comparative advantage in wallets.
B) Robinson has a comparative advantage in wallets.
C) Chamberlin has a comparative advantage in purses.
D) neither Robinson nor Chamberlin has a comparative advantage.
126) If Robinson makes 40 purses or 5 wallets per week, and Chamberlin makes 16 purses or 2
wallets per week, then
A) neither Robinson nor Chamberlin stands to gain by specialization and exchange.
B) both would gain through exchange if Robinson specialized in purses, Chamberlin in wallets.
C) both would gain through exchange if Robinson specialized in wallets, Chamberlin in purses.
D) only Robinson would gain through specialization and exchange.
127) Jones and Smith are teaching assistants. Jones can grade 20 essays or 50 problem sets a day,
while Smith can grade 20 essays or 10 problem sets a day. Therefore
A) Smith sacrifices 2 graded essays for every 2 problem sets she grades.
B) Smith sacrifices 10 graded essays for every 20 problem sets she grades.
C) Jones sacrifices 2 graded essays for every 5 problem sets he grades.
D) Both Smith and Jones have a comparative advantage in grading essays.
128) Jones and Smith are teaching assistants. Jones can grade 20 essays or 50 problem sets a day,
while Smith can grade 20 essays or 10 problem sets a day. Therefore
A) Smith is more efficient than Jones at grading essays.
B) Jones has a comparative advantage in grading problem sets.
C) a larger combination of essays and problem sets can be graded in a day if Jones specializes in
problem sets and Smith specializes in essays.
D) all of the above are true.
129) Bonnie can produce either 10 hats or 20 scarves in a month. Phil can produce either 5 hats
or 10 scarves in a month. Therefore:
A) Phil has a comparative advantage in hats, Bonnie in scarves.
B) Bonnie has a comparative advantage in hats, Phil in scarves.
C) Phil has a comparative advantage in both hats and scarves.
D) Bonnie has a comparative advantage in both hats and scarves.
E) Neither of them has a comparative advantage in hats or scarves.
130) If Bonnie can produce either 10 hats or 20 scarves in a month, and Phil can produce either 5
hats or 10 scarves in a month then
A) Bonnie is more efficient at producing hats, compared to Phil.
B) Bonnie is more efficient at producing scarves, compared to Phil.
C) both A and B above are true.
D) none of the above is true.
131) Bonnie can produce either 20 hats or 10 scarves in a month. Phil can produce either 5 hats
or 10 scarves in a month. Therefore:
A) Phil has a comparative advantage in hats, Bonnie in scarves.
B) Bonnie has a comparative advantage in hats, Phil in scarves.
C) Phil has a comparative advantage in both hats and scarves.
D) Bonnie has a comparative advantage in both hats and scarves.
E) Neither of them has a comparative advantage in scarves.
132) If Bonnie can produce either 20 hats or 10 scarves in a month, and Phil can produce either 5
hats or 10 scarves in a month, then
A) Bonnie is more efficient at producing hats, compared to Phil.
B) Bonnie is equally efficient at producing scarves, compared to Phil.
C) both A and B above are true.
D) none of the above are true.
133) Bonnie can produce either 10 hats or 20 scarves in a month. Phil can produce either 10 hats
or 5 scarves in a month. Therefore:
A) Phil has a comparative advantage in hats, Bonnie in scarves.
B) Bonnie has a comparative advantage in hats, Phil in scarves.
C) Phil has a comparative advantage in both hats and scarves.
D) Bonnie has a comparative advantage in both hats and scarves.
E) Neither of them has a comparative advantage in hats.
134) If Bonnie can produce either 10 hats or 20 scarves in a month, and Phil can produce either
10 hats or 5 scarves in a month, then
A) Bonnie is equally efficient at producing hats, compared to Phil.
B) Bonnie is more efficient at producing hats, compared to Phil.
C) Bonnie is more efficient at producing scarves, compared to Phil.
D) Phil is more efficient at producing scarves, compared to Bonnie.
135) Suppose Ann can produce 8 units of a material good (M) or 4 units of a spiritual good (S) in
a day, while Ben can produce only 3 Ms or 3 Ss in a day. Which statement below is true?
A) Ann is the most efficient producer of spiritual goods.
B) Ann is the most efficient producer of material goods.
C) Ben is the least efficient producer of spiritual goods.
D) All of the above are true.
136) Suppose Ann can produce 8 units of a material good (M) or 4 units of a spiritual good (S) in
a day, while Ben can produce only 3 Ms or 3 Ss in a day. Which statement below is true?
A) Ben has a comparative advantage in spiritual goods.
B) Ann has a comparative advantage in spiritual goods.
C) Ben has a comparative advantage in material goods.
D) Ann has a comparative advantage in both spiritual and material goods.
137) Suppose Ann can produce 8 units of a material good (M) or 4 units of a spiritual good (S) in
a day, while Ben can produce only 3 Ms or 3 Ss in a day. Which statement below is true?
A) Ann is the low-cost producer of spiritual goods.
B) Ben is the low-cost producer of material goods.
C) Ann is the low-cost producer of material good.
D) Both A and C are true.
138) Suppose Ann can produce 8 units of a material good (M) or 4 units of a spiritual good (S) in
a day, while Ben can produce only 3 Ms or 3 Ss in a day. Which statement below is true?
A) Ben is the inefficient producer of material goods.
B) Ben is the inefficient producer of spiritual goods.
C) Ann is the efficient producer of spiritual goods.
D) All of the above are true.
139) Suppose Ann can produce 8 units of a material good (M) or 4 units of a spiritual good (S) in
a day, while Ben can produce only 3 Ms or 3 Ss in a day. Both Ben and Ann can potentially
produce a larger combination of M and S if
A) Ann produces both M and S and Ben produces neither.
B) Ann specializes in M and Ben specializes in S and neither of them trade.
C) Ann specializes in S and Ben specializes in M and they exchange with one another.
D) Ann specializes in M and Ben specializes in S and they exchange with one another.
140) Let’s assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual good
(S) in a day, while Cal can produce 1 M or 2 Ss in a day. Which statement below is true?
A) Ben can produce spiritual goods more efficiently than Cal.
B) Cal can produce material goods more efficiently than Ben.
C) Ben can produce material goods more efficiently than Cal.
D) Ben can produce both material and spiritual goods more efficiently than Cal.
141) Let’s assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual good
(S) in a day, while Cal can produce 1 M or 2 Ss in a day. Which statement below is true?
A) Ben has a comparative advantage in producing spiritual goods.
B) Ben has a comparative advantage in producing material goods.
C) Cal has a comparative advantage in producing material goods.
D) Both A and B are true.
142) Let’s assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual good
(S) in a day, while Cal can produce 1 M or 2 Ss in a day. Which statement below is true?
A) It costs Ben 1 S to produce 3 Ms.
B) It costs Ben 1 M to produce 3 Ss.
C) It costs Cal 2 Ss to produce 1 M.
D) None of the above.
143) Let’s assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual good
(S) in a day, while Cal can produce 1 M or 2 Ss in a day. Which statement below is true?
A) It costs Cal 1/2 M to produce 1 S.
B) It costs Cal 2 Ss to produce 1 M.
C) It costs Ben 1 S to produce 1 M.
D) All of the above are true.
144) Let’s assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual good
(S) in a day, while Cal can produce 1 M or 2 Ss in a day. Both Ben and Cal can potentially
produce a larger combination of M and S
A) if Ben specializes in S and Cal in M and they exchange with one another.
B) if Ben specializes in M and Cal in S and they exchange with one another.
C) if Ben specializes in both goods and doesn’t exchange with Cal.
D) only if Cal finds a way to also produce 3 M and 3 S per day.
145) Suppose in Italy producers can make 10,000 dresses or 1,000 coats per day, while in
Canada producers can make 14,000 similar dresses or 2,000 similar coats per day. Therefore
A) 1 dress costs 7 coats in Italy.
B) 1 dress costs 10 coats in Italy.
C) 1 coat costs 7 dresses in Canada.
D) 1 coat costs 10 dresses in Canada.
146) Suppose in Italy producers can make 10,000 dresses or 1,000 coats per day, while in
Canada producers can make 14,000 similar dresses or 2,000 similar coats per day. Therefore
A) Canadians have a comparative advantage in coats.
B) Canadians have a comparative advantage in dresses.
C) Italians have comparative disadvantage in dresses.
D) all of the above are true.
147) Suppose in Italy producers can make 10,000 dresses or 1,000 coats per day, while in
Canada producers can make 14,000 similar dresses or 2,000 similar coats per day. Therefore
A) the Italians are relatively more efficient at producing coats.
B) the Italians are relatively more efficient at producing dresses.
C) the Italians are relatively less efficient at producing both coats and dresses.
D) the Canadians have a comparative advantage in both coats and dresses.
148) Suppose in Italy producers can make 10,000 dresses or 1,000 coats per day, while in
Canada producers can make 14,000 similar dresses or 2,000 similar coats per day. Therefore
A) only the Italians can gain through specialization and exchange.
B) only the Canadians can gain through specialization and exchange.
C) Canadians have an incentive to specialize in coats.
D) Italians have an incentive to specialize in coats.
149) If Croatian firms can make 600 pitchforks or 100 hammers in a week and Slovenian firms
can make 200 pitchforks or 200 hammers in a week, then
A) 1 pitchfork costs 3 hammers in Croatia.
B) 1 pitchfork costs 6 hammers in Croatia.
C) 1 pitchfork costs 2 hammers in Slovenia.
D) 1 pitchfork costs 1 hammer in Slovenia.
150) If Croatian firms can make 600 pitchforks or 100 hammers in a week and Slovenian firms
can make 200 pitchforks or 200 hammers in a week, then
A) Croatia has a comparative advantage in hammers.
B) Slovenia has a comparative advantage in hammers.
C) Slovenia has a comparative advantage in pitchforks.
D) Slovenia has a comparative advantage in neither hammers nor pitchforks.
151) If Croatian firms can make 600 pitchforks or 100 hammers in a week and Slovenian firms
can make 200 pitchforks or 200 hammers in a week, then
A) the costs of production differ in each country.
B) the Croats have an incentive to specialize in hammers.
C) the Slovenes have an incentive to specialize in pitchforks.
D) all of the above are true.
152) Suppose firms in Hong Kong can produce 40,000 plastic dolls or 80,000 squirt guns each
week, while firms in Taiwan can produce 40,000 plastic dolls or 40,000 squirt guns each week.
Therefore
A) People in Hong Kong sacrifice two dolls for every squirt gun produced.
B) People in Taiwan sacrifice two dolls for every squirt gun produced.
C) People in Hong Kong sacrifice 2 squirt guns for every doll produced.
D) none of the above are true.
153) Suppose firms in Hong Kong can produce 40,000 plastic dolls or 80,000 squirt guns each
week, while firms in Taiwan can produce 40,000 plastic dolls or 40,000 squirt guns each week.
Therefore, when we compare the two groups:
A) the costs of production are the same in each country.
B) the people in Hong Kong are the most efficient producers of both plastic dolls and squirt
guns.
C) the people in Taiwan produce plastic dolls with the same efficiency as Hong Kong.
D) none of the above are true.
154) Suppose firms in Hong Kong can produce 40,000 plastic dolls or 80,000 squirt guns each
week, while firms in Taiwan can produce 40,000 plastic dolls or 40,000 squirt guns each week.
Therefore
A) nobody has an incentive to specialize and exchange.
B) people in both countries have an incentive to specialize and exchange.
C) only people in Hong Kong have an incentive to specialize and exchange.
D) only people in Taiwan have an incentive to specialize and exchange.
155) Let’s assume producers in Canada can make 200 units of beef or 50 units of oranges, and
U.S. producers can make 50 units of beef or 200 units of oranges per time period. Pick the true
statement:
A) The opportunity cost of 1 unit of beef in Canada is 4 units of oranges.
B) The opportunity cost of 1 unit of oranges in the U.S. is 4 units of beef.
C) Canada is has a comparative advantage in oranges.
D) The U.S. has a comparative advantage in beef.
E) None of the above is true.
156) Let’s assume producers in Canada can make 200 units of beef or 50 units of oranges, and
U.S. producers can make 50 units of beef or 200 units of oranges per time period. Therefore
A) U.S. producers have a comparative advantage in oranges.
B) Canadian producers have a comparative advantage in beef.
C) both countries could gain through specialization and exchange.
D) all of the above are true.
E) none of the above is true.
157) Let’s assume producers in Canada can make 200 units of beef or 50 units of oranges, and
U.S. producers can make 50 units of beef or 200 units of oranges per time period. Producers in
which nation have an incentive to specialize in beef production?
A) The U.S.
B) Canada
C) Both of the above have an incentive to specialize in beef production.
D) Neither of the above have an incentive to specialize in beef production.
158) Let’s assume producers in Canada can make 200 units of beef or 50 units of oranges, and
U.S. producers can make 50 units of beef or 200 units of oranges per time period. Producers in
which nation have an incentive to specialize in orange production?
A) The U.S.
B) Canada
C) Both of the above have an incentive to specialize in orange production.
D) Neither of the above have an incentive to specialize in orange production.
159) Let’s assume producers in Canada can make 200 units of beef or 50 units of oranges, and
U.S. producers can make 50 units of beef or 200 units of oranges per time period. Which country
faces the lowest opportunity cost of producing beef?
A) The U.S.
B) Canada
C) Both countries
D) Neither country
160) Let’s assume producers in Canada can make 200 units of beef or 50 units of oranges, and
U.S. producers can make 50 units of beef or 200 units of oranges per time period. Which country
faces the lowest opportunity cost of producing oranges?
A) The U.S.
B) Canada
C) Both countries
D) Neither country
161) Let’s assume producers in Canada can make 200 units of beef or 50 units of oranges, and
U.S. producers can make 50 units of beef or 200 units of oranges per time period. Pick the true
statement:
A) The U.S. has a comparative advantage in orange production because it can produce more than
Canada.
B) Canada has a comparative advantage in beef production because it can produce more than the
U.S.
C) Both of the above are true.
D) None of the above is true.
162) The most important function of middlemen is to
A) act as marketing agents for producers.
B) expand the number of jobs in the economy.
C) produce valuable information and lower transaction costs.
D) protect consumers from exploitation.
E) stand between buyers and sellers to control markups.
163) Retailers and other middlemen provide benefits to patrons
A) because people don’t realize how much they could save by cutting out middlemen.
B) but the middlemen benefit far more.
C) by lowering the cost to their customers of acquiring valuable information.
D) only because their customers are irrational.
164) A grocery shopper considers “eliminating” the middleman. What might she do?
A) Raise her own cows, slaughter them, and butcher her own meat.
B) Grow her own wheat, mill it into flour, and bake her own bread.
C) Build her own fishing boat and begin halibut fishing.
D) All of the above.
165) Middlemen would serve no productive function if
A) information is scarce and transactions costs are zero.
B) information is free and transactions costs are significant.
C) information is free and transactions costs are zero.
D) people only purchased what they need, rather than what they want.
166) Fill in the blank: Middlemen tend to have ________ in information production.
A) no interest
B) a comparative advantage
C) a monopoly
D) little time to engage
E) a wasteful way of engaging
167) According to your text, who among the following have a comparative advantage in
providing information that reduce transaction costs?
A) The consumer
B) The bureaucrat
C) The middleman
D) The career politician
168) The common habit of viewing middlemen as unproductive bandits on the highway of free
trade assumes
A) transaction costs are zero.
B) information is a free good.
C) voluntary exchange is not mutually beneficial.
D) all of the above.
E) none of the above.
169) Middlemen have a comparative advantage in
A) lowering transaction costs.
B) raising transaction costs.
C) robbery and theft.
D) tax evasion.
E) buying products at a high price and selling them at a lower price.
170) Information is a scarce good because
A) buyers typically know more than sellers about the products they are selling.
B) competition encourages buyers and sellers to conceal a portion of what they know.
C) its possession enables people to increase their wealth, and it cannot be acquired without cost.
D) sellers typically know more than buyers about the products they are selling.
171) Sensible buyers or sellers will want to continue acquiring information
A) as long as the additional information extends their choices.
B) as long as the anticipated additional benefit exceeds the additional cost of doing so.
C) as long as they can be assured of acquiring correct information.
D) indefinitely, because more information is better than less.
172) A sensible buyer will want to acquire additional information before committing herself as
long as the expected value of the information she is gathering
A) is greater than the anticipated value of the purchase.
B) is greater than the expected cost of acquiring it.
C) will enable her to avoid all mistakes.
D) will enable her to avoid possible mistakes she will subsequently regret having made.
173) Fill in the blank: Information is a ________ good.
A) free
B) scarce
C) futile
D) non-economic
174) In the economic way of thinking, information is a scarce economic good because
A) people need more information.
B) modern-day capitalism turned information into a tradable commodity.
C) it is valuable, and there are opportunity costs to get it.
D) a political conspiracy limits its production to keep citizens uninformed.
175) Pick the best answer using the economic way of thinking. If information is a scarce good,
then ignorance might be
A) a sin.
B) stupid.
C) bliss.
D) rational.
E) inefficient.
176) Failing to be fully informed may be efficient if information
A) is free.
B) is scarce.
C) is subject to increasing returns.
D) has no opportunity cost of production.
177) What might prompt a fresh college graduate to turn down the first job offer he or she
receives?
A) They do not wish to begin working.
B) They’d rather continue straight into graduate school.
C) They expect a better job offer is right around the corner.
D) All of the above.
178) Which of the following increases the information available to prospective buyers?
A) The auto dealer that allows customers to test drive their cars
B) The grocer that packages its meat in cellophane
C) The college that organizes orientation sessions for potential students
D) The baker that gives customers free samples
E) All of the above.
179) A professor posts his course syllabi and past exams on the Internet. From the economic
point of view, the professor’s behavior
A) demonstrates the arrogance of the professor.
B) better informs prospective students.
C) is a costless use of scarce resources, because it avoids paper, ink, and mimeos.
D) is irrational.
180) From the economic point of view, what does a professor who posts her syllabus on the
Internet and a restaurant that posts its menu outside have in common?
A) They are attempting to exploit others.
B) They are reducing competition.
C) They are expanding the range of opportunities available to others.
D) They are solely in it for the money.
181) Which of the following expands the range of opportunities available to customers?
A) The bookstore that provides comfortable chairs and couches for book browsers
B) The used car dealer who posts prices on the windshields of the cars
C) The bank that advertises it will place ten dollars into any newly-opened savings account
D) All of the above.
E) None of the above.
182) iTunes offers samples of music downloads, and in doing so they
A) further inform customers.
B) further reduce customer search costs.
C) further expand the range of opportunities available to customers.
D) do all of the above.
183) “We offer the best deal in town. If somebody charges a lower price, bring in their ad and
we’ll beat it!” From the economic point of view, the firm promising to match its competitor’s low
prices is attempting to
A) lie.
B) cheat.
C) learn more about the market.
D) do nothing more than bait and switch their customers.
184) One well-established full-service stock brokerage charges $35 commissions per trade. A
new online brokerage charges $7.95 per trade. Yet, many people still elect to use the traditional,
full service broker. Why?
A) They’re fools.
B) They must not be aware of online brokers.
C) They might perceive the low commission to be a sign of low reliability.
D) They are failing to economize.
185) In economics as well as in social relations in general, clear and concise information
A) eliminates the need for cooperation.
B) guarantees effective cooperation.
C) makes cooperation easier to achieve.
D) makes cooperation more difficult to achieve.
186) The textbook defines a “well-organized” market as a market in which
A) all information available to sellers and buyers is also available to other parties to exchange
transactions.
B) bids and offers of buyers and sellers are brought together to establish a single price over a
wide area.
C) the government regulates maximum and minimum prices.
D) the terms of exchange between buyers and sellers are controlled by a professional marketing
association.
187) Fill in the blank: Your authors claim ________ has been the rule rather than the exception
through almost all of human history.
A) price stability
B) poverty
C) disinflation
D) wealth
188) How did Adam Smith explain the cause of the wealth of nations?
A) The growth of the middle class
B) The growth in the average level of prices
C) The growth of the division of labor
D) People’s unending urge to consume
189) If households were to switch production away from an equal division of chores (e.g., doing
dishes, mowing the lawn, etc.) to a system based on specialization and trade, the efficiency of
household production would probably ________ and leisure time would probably ________.
A) decrease; decrease
B) decrease; increase
C) increase; increase
D) increase; decrease
190) Which of the following economists rejected the notion that economic growth was caused by
the evolution of commercial society?
A) Adam Smith
B) Paul Heyne
C) Karl Marx
D) All of the above.
E) None of the above.
191) According to your authors, a necessary condition for the evolution of a successful
commercial society includes
A) stable interest rates.
B) reasonably secure property rights.
C) a superabundance of natural resources.
D) zero economic losses.
192) Fill in the blank: According to the text a commercial society cannot develop successfully in
the absence of ________.
A) the rule of law
B) low interest rates
C) central economic planning
D) massive government works projects
E) perfect and complete information
193) Market specialization and the rise of the division of labor
A) create important conditions for economic growth.
B) help explain why some nations are wealthier than others.
C) do both of the above.
D) do neither of the above.