Deck 2: Economic Tools and Economics Systems

Question 1

The Sultan of Brunei,one of the world's richest people,does not face the problem of scarcity.

Answer 1

False

Question 2

If you enjoy playing golf,the opportunity cost of cleaning your room

A) is the same on sunny days as it is on rainy days
B) is greater on sunny days than it is on rainy days
C) is smaller on sunny days than it is on rainy days
D) does not change with the weather conditions
E) is equal to the opportunity cost of any other chore you have to do that day

Answer 2

B

Question 3

Opportunity cost is objective;therefore,its value does not change as circumstances change.

Answer 3

False

Question 4

Your opportunity cost of choosing a particular activity

A) can be easily and accurately calculated
B) cannot even be estimated
C) does not change over time
D) varies,depending on time and circumstances
E) is measured by the money you spend on the activity

Question 5

Which economic concept does the expression "time is money" reflect?

A) opportunity cost
B) specialization
C) market exchange
D) comparative advantage
E) efficiency

Question 6

Suppose you have an hour before your next class starts.You can either read a book,get something to eat,or take a nap.The opportunity cost of getting something to eat is

A) the cost of what you eat
B) the value of reading and sleeping
C) the loss of value from not reading or sleeping
D) the net benefit of sleeping for another hour
E) impossible to determine because the most preferred alternative is not known

Question 7

A rational decision maker engages in an activity if that activity is more attractive than the best alternative.

Question 8

Opportunity cost is always measured in dollar terms,rather than in terms of real goods and services.

Question 9

Melissa is a self-employed lawyer who chooses a higher-priced restaurant 2 miles from home over a cheaper restaurant 15 miles from home.Which of the following is the most likely explanation for her behavior?

A) The opportunity cost of her time is very low.
B) She doesn't take travel time into consideration.
C) She doesn't like to cook or doesn't know how.
D) The prices at the more expensive restaurant understate the opportunity cost of eating there.
E) The higher monetary cost of the more expensive restaurant is offset by the higher opportunity cost of the lower-priced restaurant.

Question 10

Opportunity cost exists because

A) technology is fixed at any point in time
B) the law of comparative advantage is working
C) resources are scarce but wants are unlimited
D) the value of lost opportunities varies from person to person
E) efficiency is measured by the monetary cost of an activity

Question 11

The opportunity cost of an activity is best measured

A) only by the monetary costs
B) by the number of alternative activities that were forgone
C) by the cost difference between the chosen activity and the next best alternative
D) by the value expected from the best alternative that is forgone
E) as the time wasted choosing among various activities

Question 12

Opportunity cost is defined

A) only in terms of money spent
B) as the value of all alternatives not chosen
C) as the value of the best alternative not chosen
D) as the difference between the benefits from a choice and the benefits from the next best alternative
E) as the difference between the benefits from a choice and the costs of that choice

Question 13

Congratulations,you have been admitted to the Blue-and-Blue College.Your annual expenses are as follows: $19,000 for tuition,$1,000 for fees and books,and $4,000 for room and board.You are also receiving a scholarship of $7,500.The next best alternative to going to college is to get a full-time job that pays $24,000 a year (after taxes).What is your opportunity cost of going to college?

A) $40,500
B) $44,000
C) $32,500
D) $36,500
E) I don't have enough information to calculate the opportunity cost of going to college.

Question 14

The term opportunity cost suggests that

A) in any exchange situation where one person gains,someone else must lose
B) not all individuals make the most of life's opportunities
C) executives do not always recognize opportunities for profit as quickly as they should
D) the only factor that is important in decision making is cost
E) because goods are scarce,in order to get some good you must give up some other good in return

Question 15

Opportunity cost is the difference between the benefits and the costs of a choice.

Question 16

A test was scheduled for Monday morning,but you went to a party on Saturday night.If you hadn't attended the party,you could have studied for the test or gone to a movie.Which of the following is true?

A) The opportunity cost of going to the movie is studying for the test.
B) The opportunity cost of going to the party is the movie.
C) The opportunity cost of going to the party is both the movie and the study time.
D) Because you could go to the party only that night but could go to a movie any time,the opportunity cost of the party is the study time.
E) From the above information,it's not possible to determine the opportunity cost of attending the party.

Question 17

The opportunity cost of an activity is

A) zero if you choose the activity voluntarily
B) the amount of money spent on the activity
C) the value of the best alternative not chosen
D) the sum of benefits from all of the sacrificed alternatives
E) the difference between the benefits and the costs of that activity

Question 18

The opportunity cost of a particular activity

A) must be the same for everyone
B) is the value of all alternative activities that are forgone
C) has a maximum value equal to the minimum wage
D) varies from person to person
E) can usually be known with certainty

Question 19

The opportunity cost of an activity

A) depends on the individual's subjective values and opinions
B) is the same for everyone
C) must be calculated and known before undertaking that activity
D) is irrelevant to decision making
E) is not related to time

Question 20

You can either go to see a movie with your friends or go to the library and study for tomorrow's Economics test.Usually,you enjoy going at the movies just as much as you enjoy studying for Economics.However,tomorrow's test will determine your final grade and you need an A for the class,otherwise you'll be losing your scholarship.Which of the following is correct?

A) The opportunity cost of studying is high because if you study you'll get an A for the class.
B) The opportunity cost of going to see the movie is high because if you don't study you'll fail the class and lose your scholarship.
C) The opportunity cost of studying is low because you like going at the movies.
D) The opportunity cost of going to see the movie is low because if you don't study you'll fail the class and lose your scholarship.
E) The opportunity cost of studying is low because if you don't study you'll fail the class and lose your scholarship.

Question 21

A university should not disband its football team if it has already paid for the stadium.

Question 22

Suppose you have purchased a non-refundable plane ticket and,at the last moment,you cannot take the trip.You can,however,sell the ticket.If you paid $700 for the ticket,the cost of sending the ticket to someone through overnight mail is $20,and you spend $10 on a courier to get the ticket to the post office for overnight delivery,what is the minimum you should accept for the ticket?

A) $700 because that is what the ticket cost.
B) $720 because that is the cost of the ticket and of getting it to the buyer.
C) $730 because that is the total cost of the ticket and getting it to the buyer.
D) More than $730,so that you can make a profit.
E) $30 because the $700 is a sunk cost.

Question 23

Jim spent $165 on concert tickets for Saturday night.One day before the concert,Jim finds out he cannot go to the concert.Since he cannot return the tickets,he tries to sell them on e-Bay.Jim has to pay $30 to send the ticket to someone through overnight mail.What is the minimum Jim should accept for the tickets?

A) $165 because that's how much he paid for them
B) $30 because the $165 is a sunk cost
C) $195 because that it the cost of the ticket and getting it to the buyer
D) More than $165 because Jim wants to make a profit
E) More than $195 to cover all the costs and make a profit

Question 24

Sunk costs

A) can only be measured in monetary terms
B) are opportunity costs
C) should influence a person's choice if that person is a marginal decision maker
D) lower the efficiency of production
E) should not be considered when making economic decisions

Question 25

It is possible for one person to have a comparative advantage in the production of all products?

Question 26

The law of comparative advantage says that a person should produce a good if she

A) has the greatest desire to consume that good
B) has the lowest opportunity cost of producing that good
C) has an absolute advantage in a related activity
D) has a comparative advantage in a related activity
E) is equally good at producing this good as someone else is

Question 27

The law of comparative advantage says that

A) the individual with the lowest opportunity cost of producing a particular good should produce it
B) comparative advantage exists only when one person has an absolute advantage in the production of two goods
C) whoever has a comparative advantage in producing a good also has an absolute advantage in producing that good
D) whoever has an absolute advantage in producing a good also has a comparative advantage in producing that good
E) gains from trade are possible only when one person has the comparative advantage in producing both goods

Question 28

It is possible for one person to have an absolute advantage in two tasks and a comparative advantage in only one.

Question 29

It is possible for one person to have an absolute advantage in something even if she has no comparative advantage in anything.

Question 30

Absolute advantage is based on opportunity cost.

Question 31

John can clean the house in 3 hours and paint the basement in 3 hours,whereas Mike can clean the house in 5 hours and paint the basement in 4 hours.Which of the following statements are correct?

A) John has absolute advantage only in painting the basement.
B) John has absolute advantage only in cleaning the house
C) Mike has absolute advantage in cleaning the house
D) Mike has absolute advantage in both cleaning the house and painting the basement
E) John has absolute advantage in both cleaning the house and painting the basement

Question 32

You can either spend your summer working for $10,800 or go in a European vacation.If you work,your expenses will be about $1,500.If you go to Europe,the airfare,hotel,food and miscellaneous expenses will total about $10,000.What's your opportunity cost of visiting Europe?

A) $19,300
B) $20,800
C) $12,300
D) $8,500
E) $22,300

Question 33

A person who can produce more of a good than another person is said to possess a comparative advantage.

Question 34

If people specialize in producing those goods for which they possess a comparative advantage,then the economy as a whole can produce a greater quantity of goods.

Question 35

Comparative advantage is

A) the ability of an individual to specialize and produce a greater amount of some good than can another individual
B) the number of units of one good given up in order to acquire something
C) the ability of an individual to produce a good at a lower opportunity cost than some other individual can
D) an expression for the amount of labor a particular individual needs to produce a fixed amount of capital goods
E) a reference to an individual having the greatest opportunity cost of producing the good and produces it with the fewest resources

Question 36

If you and I agree to exchange four ginger snaps for one chocolate chip cookie,then it must be true that

A) we are both at least as well off as we were before
B) I am better off than I was before,but you are not
C) you are better off than you were before,but I am not
D) we are both better off than before
E) we are both worse off than before

Question 37

Comparative advantage is based on opportunity costs.

Question 38

John can clean the house in 3 hours and paint the basement in 3 hours,whereas Mike can clean the house in 5 hours and paint the basement in 2 hours.Which of the following statements are correct?

A) John has absolute advantage in cleaning the house
B) John has absolute advantage in painting the basement.
C) Mike has absolute advantage in cleaning the house
D) Mike has absolute advantage in both cleaning the house and painting the basement
E) John has absolute advantage in both cleaning the house and painting the basement

Question 39

It is impossible for one person to have a comparative advantage in all tasks.

Question 40

The law of comparative advantage states that the person who should produce a good is the person who

A) has the lowest opportunity cost of producing that good
B) can produce that good using the fewest resources
C) will produce that good using the most expensive resources
D) has the most desire for that good
E) has produced that good in the past

Question 41

Don can produce 10 pens or 20 pencils in one hour while Bob can produce 5 pencils or 15 pens in one hour.Which of the following statements is correct?

A) Don has an absolute advantage over Bob in the production of pencils and Bob in the production of pens
B) Bob has an absolute advantage over Don in the production of pencils
C) Bob has a comparative advantage over Don in the production of pens
D) Don has a comparative advantage over Bob in the production of pens
E) Don does not have a comparative advantage in the production of either good

Question 42

If Jeremy has an absolute advantage in cooking and Margaret has an absolute advantage in cleaning,then

A) Jeremy has a comparative advantage in cooking,and Margaret has a comparative advantage in cleaning
B) Jeremy has a comparative advantage in cleaning,and Margaret has a comparative advantage in cooking
C) we can conclude nothing about comparative advantage
D) Jeremy has a comparative advantage in cooking,but we can conclude nothing about Margaret
E) Margaret has a comparative advantage in cleaning,but we can conclude nothing about Jeremy

Question 43

If one person has the absolute advantage in producing both of two goods,then that person

A) must also have a comparative advantage in both goods
B) cannot benefit from trade
C) cannot have a comparative advantage in either good
D) will have the comparative advantage in only one good
E) should specialize in the production of both goods

Question 44

Helen gives up the opportunity to bake 40 cakes for each room she paints;Josh can paint one room in the time it takes him to bake 60 cakes.The opportunity cost of a cake for Josh is

A) painting one room
B) painting 1/40 of a room
C) painting 1/60 of a room
D) painting 2/3 of a room
E) painting 3/2 of a room

Question 45

Exhibit 2-1

According to Exhibit 2-1,Hans' opportunity cost of doing a load of laundry is

A) 12 papers
B) 8 papers
C) 1 1/2 pages
D) 2/3 of a page
E) impossible to compute

Question 46

If Helen gives up the opportunity to bake 40 cakes for each room she paints and Josh can paint one room in the time it takes him to bake 60 cakes,which of the following is true?

A) The opportunity cost of painting is higher for Helen.
B) The opportunity cost of baking cakes is lower for Josh.
C) The opportunity cost of painting one room is 1/40 of a cake for Helen.
D) The opportunity cost of baking one cake is 60 rooms painted for Josh.
E) The opportunity cost of cakes cannot be computed.

Question 47

Eileen has a comparative advantage over Jan in piano tuning but not in shoe polishing.Therefore,

A) Jan must have an absolute advantage in piano tuning
B) Eileen must have an absolute advantage in shoe polishing
C) Jan must have a lower opportunity cost of shoe polishing
D) Eileen must have an absolute advantage in shoe polishing and in piano tuning
E) Eileen must have an absolute advantage in piano tuning

Question 48

Janis mows the lawn in 1 hour and types a paper in 1 hour.Kristen mows the lawn in 2 hours and types a paper in 1 hour.Which of the following statements is true?

A) Kristen has an absolute advantage in typing and a comparative advantage in mowing.
B) Janis has an absolute advantage in both activities and a comparative advantage in typing.
C) Janis has an absolute advantage in both activities and a comparative advantage in mowing.
D) The opportunity cost of mowing the lawn is greater for Kristen than it is for Janis.
E) Neither Janis nor Kristen would gain from specialization.

Question 49

Dacians and Romans are at war and they are both producing bows and arrows.The Dacian weapon-smith can make 10 arrows or 2 bows in one hour,whereas the Roman weapon-smith needs two hours to make 10 arrows,but he can make 3 bows in two hours.Which of the following is correct?

A) The Romans have absolute advantage in making bows
B) The Romans have absolute advantage in making arrows
C) The Dacians have comparative advantage in making bows
D) The Dacians have comparative advantage in making both arrows and bows
E) The Dacians have absolute advantage in making both arrows and bows

Question 50

Exhibit 2-1

According to Exhibit 2-1,Maria's opportunity cost of typing a page is

A) 4 loads of laundry
B) 6 loads of laundry
C) 2/3 of a load of laundry
D) 3/2 of a load of laundry
E) impossible to compute

Question 51

Exhibit 2-1

According to Exhibit 2-1,Hans' opportunity cost of typing one page is

A) 12 loads of laundry
B) 8 loads of laundry
C) 3/2 of a load of laundry
D) 2/3 of a load of laundry
E) impossible to compute

Question 52

If Jason can wash a car in 20 minutes and wash a dog in 10 minutes,and Megan can wash a car in 15 minutes and wash a dog in 15 minutes,which of the following statements is true?

A) The opportunity cost of washing a car is greater for Megan.
B) The opportunity cost of washing a car is one dog bath for Jason.
C) Megan could wash two cars in the time it takes to wash a dog.
D) Jason has both a comparative and an absolute advantage in washing a dog.
E) The opportunity cost of washing a dog is greater for Jason.

Question 53

Helen gives up the opportunity to bake 40 cakes for each room she paints;Josh can paint one room in the time it takes him to bake 60 cakes.The opportunity cost of a cake for Helen is

A) painting one room
B) painting 1/40 of a room
C) painting 1/60 of a room
D) painting 2/3 of a room
E) painting 3/2 of a room

Question 54

If Robin has an absolute advantage in both gardening and baking when compared to Robert,then

A) Robin cannot benefit by trading with Robert
B) Robin can benefit by specializing in gardening if Robert specializes in baking
C) Robin can benefit by specializing in baking if Robert specializes in gardening
D) Robin and Robert may benefit from trading,but there is insufficient information to determine who should specialize in what
E) neither Robin nor Robert can benefit from trading with the other

Question 55

A country has an absolute advantage in the production of a good if that country

A) can produce the good using fewer resources than another country would require
B) has the lowest opportunity cost of producing the good and can produce it with the fewest resources
C) has the lowest opportunity cost of producing the good regardless of whether it is produced with the fewest resources
D) has the greatest opportunity cost of producing the good regardless of whether it is produced with the fewest resources
E) has the greatest opportunity cost of producing the good and produces it with the fewest resources

Question 56

If Monica has a comparative advantage in baking and George has a comparative advantage in sewing,then

A) Monica must have an absolute advantage in baking
B) Monica must have an absolute advantage in sewing
C) George must have an absolute advantage in baking
D) George must have an absolute advantage in sewing
E) we can conclude nothing about absolute advantage

Question 57

If Sam can chop up more carrots per minute than Joe can,then

A) Joe has an absolute advantage in carrot chopping
B) Joe must have a comparative advantage in carrot chopping
C) Sam has an absolute advantage in carrot chopping
D) Sam must have a comparative advantage in carrot chopping
E) we can conclude nothing about absolute advantage

Question 58

If Evan has an absolute advantage in cleaning and bookkeeping when compared to Gloria,then

A) Evan must also have a comparative advantage in cleaning and bookkeeping
B) Evan must have a comparative advantage in cleaning
C) Evan must have a comparative advantage in bookkeeping
D) Gloria has a comparative advantage in neither activity
E) we can conclude nothing about comparative advantage

Question 59

If Daniel produces one pair of shoes in 4 hours and Sarah produces one pair of shoes in 3 hours,then

A) Sarah has a comparative advantage in shoemaking
B) Daniel has a comparative advantage in shoemaking
C) Sarah has an absolute and a comparative advantage in shoemaking
D) Daniel has an absolute and a comparative advantage in shoemaking
E) Sarah has an absolute advantage in shoemaking

Question 60

John takes 10 minutes to iron a shirt and 20 minutes to type a paper.Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper.Which of the following statements is correct?

A) Harry has a comparative advantage in ironing.
B) Harry has a comparative advantage in typing.
C) Harry has an absolute advantage in typing.
D) Harry has an absolute advantage in ironing.
E) Neither can gain from specialization and exchange.

Question 61

Money facilitates trade because

A) it eliminates the need for specialization
B) it prevents people from taking advantage of each other
C) it serves as a medium of exchange
D) division of labor allows money to be produced at a lower cost
E) people do not benefit from barter unless money is used

Question 62

Exhibit 2-1

According to Exhibit 2-1,Hans and Maria would be better off if

A) Hans specialized in typing and Maria in doing laundry
B) Hans specialized in doing laundry and Maria in typing
C) each did their own laundry and typing
D) Maria did all of the typing and all of the laundry
E) Hans did all of the typing and all of the laundry

Question 63

Exhibit 2-2

Given the information in Exhibit 2-2,which product should Friday (an individual) make?

A) fishhooks because he can make 30 more per day than Crusoe but only 8 more fishing poles
B) both because he is better at both
C) fishing poles because that is where his comparative advantage lies
D) neither because Crusoe is better at both
E) we cannot tell from the given information

Question 64

Exhibit 2-1

According to Exhibit 2-1,Maria's opportunity cost of doing a load of laundry is

A) 4 pages
B) 6 pages
C) 2/3 of a page
D) 3/2 of a page
E) impossible to compute

Question 65

In one week,Mohammed can knit 5 sweaters or bake 240 cookies.The opportunity cost per sweater for Mohammed is

A) $240
B) 240 cookies
C) 48 sweaters
D) 1/48 of a cookie
E) 48 cookies

Question 66

In one week,Mohammed can knit 5 sweaters or bake 240 cookies.The opportunity cost per cookie for Mohammed is

A) $5
B) 5 sweaters
C) 48 sweaters
D) 1/48 of a sweater
E) 48 cookies

Question 67

Exhibit 2-1

According to Exhibit 2-1,if Maria does one fewer load of laundry,how many pages can she type in the time saved on laundry?

A) 4 pages
B) 6 pages
C) 2/3 of a page
D) 3/2 of a page
E) it cannot be determined

Question 68

Specialization can sometimes create problems such as boredom and repetitive motion injuries.

Question 69

In one week,Mohammed can knit 5 sweaters or bake 240 cookies.In one week,Tetah can knit 15 sweaters or bake 480 cookies.Mohammed and Tetah would produce the maximum quantities of cookies and sweaters if

A) Mohammed knitted and baked and Tetah did nothing
B) Tetah knitted and baked and Mohammed did nothing
C) Mohammed knitted and Tetah baked
D) Tetah knitted and Mohammed baked
E) Mohammed knitted and baked and Tetah just knitted

Question 70

In one week,Mohammed can knit 5 sweaters or bake 240 cookies.In one week,Tetah can knit 15 sweaters or bake 480 cookies.In this example,

A) Mohammed has the absolute and comparative advantage in both tasks
B) Tetah has the absolute and comparative advantage in both tasks
C) Mohammed has the absolute advantage in both tasks and the comparative advantage in knitting sweaters
D) Tetah has the absolute advantage in both tasks and the comparative advantage in knitting sweaters
E) Mohammed has the absolute advantage in both tasks and the comparative advantage in baking cookies

Question 71

Exhibit 2-1

According to Exhibit 2-1,if Hans types one fewer page,how many loads of laundry can he do in the time saved on typing?

A) 12 loads
B) 8 loads
C) 3/2 of a load
D) 2/3 of a load
E) it cannot be determined

Question 72

Dacians and Romans are at war and they are both producing bows and arrows.The Dacian weapon-smith can make 10 arrows or 2 bows in one hour,whereas the Roman weapon-smith needs two hours to make 10 arrows,but he can make 3 bows in two hours.Which of the following is correct?

A) The Dacians have comparative advantage in making both arrows and bows
B) The Romans have comparative advantage in making both arrows and bows
C) The Dacians have comparative advantage in making bows
D) The Romans have comparative advantage in making bows
E) The Romans have comparative advantage in making arrows

Question 73

Specialization often leads to gains in productivity for society as a whole.

Question 74

Exhibit 2-1

According to Exhibit 2-1,in any given amount of time,

A) Maria has an absolute and a comparative advantage in typing
B) Maria has an absolute and a comparative advantage in doing laundry
C) Maria has a comparative advantage in both typing and doing laundry
D) Hans has an absolute and a comparative advantage in typing
E) Hans has an absolute advantage in doing laundry

Question 75

In one week,Tetah can knit 15 sweaters or bake 480 cookies.The opportunity cost per cookie for Tetah is

A) $15
B) 15 sweaters
C) 32 sweaters
D) 1/32 of a sweater
E) 480 sweaters

Question 76

Barter occurs when

A) two people share everything
B) one product is exchanged directly for another product
C) money is used to buy goods
D) money is exchanged directly for other money
E) goods are used to buy money

Question 77

In one week,Tetah can knit 15 sweaters or bake 480 cookies.The opportunity cost per sweater for Tetah is

A) $480
B) 480 cookies
C) 32 cookies
D) 1/32 of a cookie
E) 15 cookies

Question 78

Exhibit 2-1

According to Exhibit 2-1,if Maria types one fewer page,how many loads of laundry can she do in the time saved on typing?

A) 4 loads
B) 6 loads
C) 2/3 of a load
D) 3/2 of a load
E) it cannot be determined

Question 79

Exhibit 2-1

According to Exhibit 2-1,if Hans does one fewer load of laundry,how many pages can he type in the time saved on laundry?

A) 12 pages
B) 8 pages
C) 3/2 of a page
D) 2/3 of a page
E) it cannot be determined

Question 80

If I trade a ginger snap for a chocolate chip cookie,I am engaging in

A) barter
B) comparative advantage
C) absolute advantage
D) privatization
E) division of labor