Question 1

Economic freedom and economic prosperity are&#10;A)positively correlated.&#10;B)negatively correlated&#10;C)not correlated.&#10;D)inconsistent with human rights.

Accepted Answer

Economic freedom and economic prosperity are positively correlated, meaning that countries with more economic freedom tend to have higher levels of economic prosperity. This has been demonstrated through various economic studies and in real-world examples, such as Hong Kong and Singapore, which have high levels of economic freedom and strong economies.

Question 2

Trade between countries is based on&#10;A)absolute advantage only.&#10;B)monopoly power.&#10;C)comparative advantage.&#10;D)none of these choices.

Accepted Answer

Comparative advantage, where each country specializes in producing the goods or services that they can produce at a lower opportunity cost compared to other countries, is the basis of trade between countries. It allows countries to maximize their production and consumption possibilities through specialization and trade, resulting in increased efficiency and economic welfare. Absolute advantage and monopoly power do not fully explain the benefits of trade and are not the sole drivers of international trade.

Question 3

A brand name is a type of&#10;A)cost saving.&#10;B)buyback contract.&#10;C)monopoly power.&#10;D)entry requirement for a competitive market.

Accepted Answer

A brand name provides a company with monopoly power as it creates a unique identity and image for a product or service, making it difficult for competitors to replicate or substitute for it. This allows the company to charge a premium price and maintain a loyal customer base.

Question 4

In international trade the concept of 'relative opportunity cost' refers to&#10;A)absolute advantage.&#10;B)comparative advantage.&#10;C)technical costs.&#10;D)institutional advantage.

Accepted Answer

Relative opportunity cost is a measure of comparative advantage. It refers to the opportunity cost of producing one good in terms of the production of another good. A country has a comparative advantage in the production of the good for which it has a lower opportunity cost. This allows for gains from trade and specialization. Therefore, the concept of relative opportunity cost is closely related to the concept of comparative advantage.

Question 5

Property rights&#10;A)only need to be found in wealthy segments of the population.&#10;B)need to be universal.&#10;C)do not promote incentives.&#10;D)do not promote efficiency

Accepted Answer

Property rights need to be universal in order to ensure that individuals and businesses have the ability to own and control their property. This promotes incentives and efficiency by allowing individuals to invest in their property and reap the benefits of their efforts. Without universal property rights, individuals may not have the motivation or ability to invest in their property, leading to a less productive economy. Therefore, it is important for property rights to be universally recognized and protected.

Question 6

Property rights need to be secure&#10;A)to promote economic development.&#10;B)to encourage environmentalism.&#10;C)to promote an equal distribution of income.&#10;D)all of these choices.

Accepted Answer

Property rights that are secure promote economic development by providing individuals and businesses with the incentives to invest in and improve their property, knowing that they will reap the benefits of their actions. This leads to increased productivity and efficiency in the marketplace, which can drive economic growth. While secure property rights may indirectly encourage environmentalism and promote an equal distribution of income, these benefits are secondary to the primary goal of promoting economic development.

Question 7

The cost of a choice is&#10;A)the price of the product selected.&#10;B)the price of the product not selected.&#10;C)the next best opportunity.&#10;D)all of the opportunities given up.

Accepted Answer

The cost of a choice is the next best opportunity that is given up. This is known as the opportunity cost. Therefore, the best choice is the one that provides the highest value or benefit relative to its opportunity cost.

Question 8

Buying a product in one market and selling it in another is called&#10;A)competition.&#10;B)arbitrage.&#10;C)efficiency.&#10;D)comparative advantage.

Accepted Answer

Buying a product in one market and selling it in another for a profit is known as arbitrage. This takes advantage of price differences between markets and is a way of making money without adding value or creating something new. The other choices, competition, efficiency, and comparative advantage, do not accurately describe this situation.

Question 9

Without contracts, what type of transactions would occur?&#10;A)forward purchases.&#10;B)lateral purchases.&#10;C)spot transactions.&#10;D)side bars.

Accepted Answer

Without contracts, transactions that could occur are spot transactions where goods or services are immediately exchanged for cash or other forms of payment at the time of the transaction. Forward purchases, lateral purchases, and side bars all require some form of contractual agreement or arrangement.

Question 10

What incentive is created by a first-come first-serve allocation scheme?&#10;A)To engage in rent-seeking.&#10;B)To have the most income.&#10;C)To be first.&#10;D)To be elected.

Accepted Answer

A first-come first-serve allocation scheme incentivizes individuals to be first in line to receive a benefit or resource, regardless of whether it is necessary or valuable to them. This can lead to inefficient use of resources, as some individuals may take advantage of the system simply to be first, rather than because they truly need or want the item being allocated.

Question 11

People trade because&#10;A)they are able to take advantage of others.&#10;B)government regulates the market.&#10;C)the must do so.&#10;D)they make themselves better off.

Accepted Answer

The answer of People trade because&#10;A)they are able to take...

Question 12

Trade is promoted by&#10;A)having a self-interested population.&#10;B)proper incentives.&#10;C)the presence of property rights.&#10;D)all of these choices.

Accepted Answer

The answer of Trade is promoted by&#10;A)having a self-interested population.&#10;B)proper...

Question 13

Prior to 1840, most businesses were&#10;A)family-owned.&#10;B)corporate in structure.&#10;C)vertically integrated.&#10;D)collections of partnerships.

Accepted Answer

The answer of Prior to 1840, most businesses were&#10;A)family-owned.&#10;B)corporate in...

Question 14

Allocation schemes can be based on&#10;A)prices.&#10;B)randomness.&#10;C)government decisions.&#10;D)all of these choices.

Accepted Answer

The answer of Allocation schemes can be based on&#10;A)prices.&#10;B)randomness.&#10;C)government decisions.&#10;D)all...

Question 15

The fundamental economic problem faced by individuals is&#10;A)scarcity.&#10;B)comparative advantage.&#10;C)fair allocations of goods and services.&#10;D)randomness in the distribution of income.

Accepted Answer

The answer of The fundamental economic problem faced by individuals...

Question 16

Data suggest that which of the following are necessary for high rates of economic growth?&#10;A)private property rights.&#10;B)free markets.&#10;C)clear incentives.&#10;D)all of these choices.

Accepted Answer

The answer of Data suggest that which of the following...

Question 17

All the costs of a transaction are referred to as&#10;A)transfer costs.&#10;B)transactions costs.&#10;C)marketing expenditures.&#10;D)accounting costs.

Accepted Answer

The answer of All the costs of a transaction are...

Question 18

What motivates the actions of entrepreneurs in markets?&#10;A)profits.&#10;B)cost savings.&#10;C)revenue.&#10;D)prestige.

Accepted Answer

The answer of What motivates the actions of entrepreneurs in...

Question 19

With economies of scale came&#10;A)larger families.&#10;B)simpler business forms.&#10;C)the need for management structures beyond what a family could offer.&#10;D)fewer economies of scope.

Accepted Answer

The answer of With economies of scale came&#10;A)larger families.&#10;B)simpler business...

Question 20

Economists argue that which allocation scheme leads to the most efficiency?&#10;A)market based.&#10;B)government based.&#10;C)random.&#10;D)first-come, first-serve.

Accepted Answer

The answer of Economists argue that which allocation scheme leads...

Question 21

The ownership of property is not related to economic development.

Accepted Answer

The answer of The ownership of property is not related...

Question 22

Comparative advantage and relative opportunity costs are the same thing.

Accepted Answer

The answer of Comparative advantage and relative opportunity costs are...

Question 23

Monopoly is represented by a single seller.

Accepted Answer

The answer of Monopoly is represented by a single seller....

Question 24

Arbitrage creates profits but has no effect on prices.

Accepted Answer

The answer of Arbitrage creates profits but has no effect...

Question 25

Clearly defined property rights promote the efficient use of property.

Accepted Answer

The answer of Clearly defined property rights promote the efficient...

Question 26

First-come, first-serve allocation schemes promote efficiency.

Accepted Answer

The answer of First-come, first-serve allocation schemes promote efficiency....

Question 27

It is impossible to create a free market system that promotes economic efficiency.

Accepted Answer

The answer of It is impossible to create a free...

Question 28

Trade between countries is only based on absolute advantage.

Accepted Answer

The answer of Trade between countries is only based on...

Question 29

Creative destruction is one of the negative effects of market competition.

Accepted Answer

The answer of Creative destruction is one of the negative...

Question 30

Opportunity cost is defined monetary terms.

Accepted Answer

The answer of Opportunity cost is defined monetary terms....

Question 31

In Argentina, agricultural production is directly related to&#10;A)government subsidies.&#10;B)price controls.&#10;C)import tariffs.&#10;D)well-defined property rights..

Accepted Answer

The answer of In Argentina, agricultural production is directly related...

Question 32

Agriculture in Argentina became more efficient when ____ were introduced.&#10;A)subsidies.&#10;B)property rights.&#10;C)tariffs.&#10;D)regulations

Accepted Answer

The answer of Agriculture in Argentina became more efficient when...

Deck 2: The Power of Markets and the Wealth of Nations