Chapter 2 The Economic Problem: Scarcity and Choice2.1 Scarcity, Choice, and Opportunity Cost 1 Multiple Choice 1) The process by which resources are
... [Show More] transformed into useful forms is A) capitalization. B) consumption. C) production. D) allocation. Answer: C Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Definition 2) Outputs in the production process are A) pollution. B) money. C) good and services of value to households. D) resources. Answer: C Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Definition 3) Which of the following is NOT a resource as the term is used by economists? A) land B) labor C) buildings D) money Answer: D Diff: 1 Topic: Scarcity, Choice, and Opportunity Cost Skill: Fact 4) Which of the following would an economist classify as capital? A) a $50 bill B) a corporate bond C) a post office employee D) a guitar used by a musician Answer: D Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 5) Capital, as economists use the term, A) is the money the firm spends to hire resources. B) is money the firm raises from selling stock. C) refers to the process by which resources are transformed into useful forms. D) refers to things that have already been produced that are in turn used to produce other goods and services. Answer: D Diff: 3 Topic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 28 Contact: [email protected] 6) The concept of opportunity cost is based on the principle of A) need. B) consumption. C) scarcity. D) profit. Answer: C Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual 7) The concept of trade-offs would become irrelevant if A) we were dealing with a very simple, one-person economy. B) poverty was eliminated. C) scarcity was eliminated. D) capital was eliminated. Answer: C Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 8) Suppose you are deciding whether to spend your tax rebate check on a new iPod player or a new digital camera. You are dealing with the concept of A) diminishing marginal returns. B) comparative advantage. C) opportunity costs. D) the fallacy of composition. Answer: C Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 9) According to the theory of comparative advantage, specialization and free trade will benefit A) only that trading party that has both an absolute advantage and a comparative advantage in the production of all goods. B) all trading parties, even when some are absolutely more efficient producers than others. C) only that trading party that has an absolute advantage in the production of all goods. D) only that trading party that has a comparative advantage in the production of all goods. Answer: B Diff: 3 Topic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 29 Refer to the information provided in Table 2.1 below to answer the following questions. ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Table 2.1 Krystal Mark Writing Poems 8 12 Writing TV Commercials 2 4 10) Refer to Table 2.1. For Krystal, the opportunity cost of writing one TV commercial is A) 1/4 of a poem. B) 2 poems. C) 4 poems. D) 6 poems. Answer: C Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Analytic AACSB: Analytic Skills 11) Refer to Table 2.1. For Mark, the opportunity cost of writing one TV commercial is A) 1/3 of a poem. B) 2 poems. C) 3 poems. D) 8 poems. Answer: C Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Analytic AACSB: Analytic Skills 12) Refer to Table 2.1. Which of the following statements is TRUE? A) Krystal has a comparative advantage in both writing TV commercials and writing poems. B) Mark has a comparative advantage in both writing TV commercials and writing poems. C) Krystal has a comparative advantage in writing TV commercials and Mark has a comparative advantage in writing poems. D) Mark has a comparative advantage in writing TV commercials and Krystal has a comparative advantage in writing poems. Answer: D Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Analytic AACSB: Analytic Skills 13) Refer to Table 2.1. To maximize total production, A) Krystal should specialize in writing TV commercials and Mark should specialize in writing poems. B) Mark should specialize in writing TV commercials and Krystal should specialize in writing poems. C) Krystal and Mark should both split their time between writing poems and writing TV commercials. D) Krystal should write poems and write TV commercials, but Mark should only write poems. Answer: B Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Analytic AACSB: Analytic Skills 30 14) Refer to Table 2.1. For Mark, the opportunity cost of writing six TV commercials is ________ poems made. A) 2 B) 18 C) 24 D) an indeterminate number of Answer: B Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Analytic AACSB: Analytic Skills 15) Refer to Table 2.1. For Krystal, the opportunity cost of writing four TV commercials is ________ poems. A) 2 B) 8 C) 16 D) 32 Answer: C Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Analytic AACSB: Analytic Skills 16) According to the theory of comparative advantage, ________ raise(s) productivity by lowering opportunity costs. A) trade and specialization B) investment in capital goods C) economic growth D) exchange and consumption Answer: A Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 17) When two people trade A) both of them expect to be made worse off by the exchange. B) they are trying to help out each other. C) they know one of them will get the better of the other. D) they both expect to be made better off by the exchange. Answer: D Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 18) Someone has a comparative advantage in producing a good if they can produce that good A) in greater quantities. B) at a lower opportunity cost. C) using more capital and less labor. D) without sunk costs. Answer: B Diff: 2 Topic: Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking [Show Less]