Question 1

Figure 2-10 
-Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?
A) 50 baseballs
B) 100 baseballs
C) 100 bananas
D) 300 bananas

Accepted Answer

The answer of Figure 2-10 
-Refer to Figure 2-10. What...

Question 2

A department store buys a wool coat for $120 and sets its retail price at $300. The coat costs $85 to produce. When the coat doesn't sell, the store marks the price down to $200, then $100, and finally $70. At $70, Amy buys the coat. What was the coat's true value? Why?

Accepted Answer

The answer of A department store buys a wool coat...

Question 3

A popular video program used to teach economics to primary school children defines opportunity cost as "what you give up to get something." In light of your understanding of opportunity cost, how would you modify this definition?

Accepted Answer

The answer of A popular video program used to teach...

Question 4

It can be said that, ultimately, consumers are the driving force in answering the three basic economic questions. Explain the consumer's role in providing these answers.

Accepted Answer

The answer of It can be said that, ultimately, consumers...

Question 5

After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. Use the production possibilities curve to demonstrate how this might affect the production of other goods in the United States.

Accepted Answer

The answer of After the terrorist attacks on September 11,...

Question 6

Which of the following is not a basic question that each economy must answer?
A) Which resources are scarce?
B) For whom shall the goods be produced?
C) How shall goods be produced?
D) What goods shall be produced?

Accepted Answer

The basic economic questions every economy must answer are: what to produce, how to produce, and for whom to produce. Identifying scarce resources is part of understanding the constraints, not a fundamental economic question.

Question 7

Mark and John are 10-year-old twins who do not get along. They have opened separate lemonade stands and are competing with each other, selling lemonade on their block. Their mother observes that Mark is very good at making lemonade and John is an excellent young salesman. She suggests they both could make more money if they worked together. John counters that two stands will always make more money than one. Who is right? Why?

Accepted Answer

The answer of Mark and John are 10-year-old twins who...

Question 8

An economics professor points to a student in the front row and announces that "sitting in class is the thing you value most during this time period." Is the professor correct? Why or why not?

Accepted Answer

The answer of An economics professor points to a student...

Question 9

Figure 2-10 
-Refer to Figure 2-10. A movement from point C to point D could be caused by
A) unemployment.
B) a decrease in society's preference for bananas.
C) fewer resources available for production of bananas.
D) All of the above are correct.

Accepted Answer

The answer of Figure 2-10 
-Refer to Figure 2-10. A...

Question 10

The president of a large public university proclaims, "If we can get the state government to fund our new football stadium, it will not cost us anything." Evaluate this view from an economic perspective.

Accepted Answer

The answer of The president of a large public university...

Question 11

Figure 2-10 
-Refer to Figure 2-10. If this economy put all available resources into the production of bananas, it could produce
A) 200 bananas and also 150 baseballs.
B) 300 bananas and also 100 baseballs.
C) 400 bananas and no baseballs.
D) It is impossible to know unless we know the quantity of resources available.

Accepted Answer

The production possibilities frontier (PPF) shows the maximum possible output combinations of two goods that can be produced with available resources. If all resources are allocated to bananas, the economy can produce the maximum number of bananas, which is 400, with no resources left for baseballs.

Question 12

Even countries that depend primarily on market forces to resolve the basic economic questions will usually rely on the collective decision-making process to
A) determine the prices of goods and resources.
B) allocate goods that are essential to life.
C) determine the distribution of income among citizens.
D) define and enforce private-property rights and designate the acceptable forms of competitive economic behavior.

Accepted Answer

Even in market economies, the government plays a role in defining and enforcing private property rights and designating acceptable forms of competitive economic behavior.

Question 13

Market economies are often criticized for how they answer the basic question, "For whom are goods produced?" This criticism usually comes from people who believe that the distribution of income is not "fair." Is there some way to separate production from distribution so that we can leave production just as it is but make the distribution of income "fairer"?

Accepted Answer

The answer of Market economies are often criticized for how...

Question 14

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,
A) the role of markets will be replaced by political decision making.
B) centralized decision making in all areas is inevitable.
C) the preferences of individuals are of no importance.
D) economic efficiency will be assured.

Accepted Answer

When collective decision making is used, political decision making often replaces market mechanisms to allocate resources, as decisions are made by groups or representatives rather than through supply and demand dynamics.

Question 15

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,
A) decentralized decision making is inevitable.
B) central planning and political bargaining will replace market forces.
C) individual preferences are of no importance.
D) economic equality will result.

Accepted Answer

When collective decision making is used, central planning and political bargaining often replace market forces in determining how resources are allocated.

Question 16

What are the three basic questions faced by every economy?
A) What, how, and for whom will goods be produced?
B) When, where, and how much will be produced?
C) Why, where, and when will goods be produced?
D) How, how much, and why will goods be produced?

Accepted Answer

Every economy must decide what goods and services to produce, how to produce them, and for whom they will be produced.

Question 17

Jim values his car at $2,000, and Kelly values it at $5,000. Can value be created in this situation? How? Suppose Jim refuses to sell for less than $6,000. Is value destroyed? Why or why not?

Accepted Answer

The answer of Jim values his car at $2,000, and...

Question 18

Explain the idea of capital investment by using the story of Robinson Crusoe. What is sacrificed, and what is gained?

Accepted Answer

The answer of Explain the idea of capital investment by...

Question 19

Figure 2-10 
-Refer to Figure 2-10. If the economy moves from point C to point B, then which of the following statements is correct?
A) The economy benefited from a technological advance in the production of baseballs.
B) The opportunity cost of each additional baseball is 2 bananas.
C) The opportunity cost of each additional banana is 2 baseballs.
D) The move involves no opportunity cost; it simply reflects the desires of the economy's citizens.

Accepted Answer

The answer of Figure 2-10 
-Refer to Figure 2-10. If...

Question 20

Three basic decisions must be made by all economies. What are they?
A) How much will be produced; when will it be produced; who will produce it?
B) What goods will be produced; how will goods be produced; for whom will goods be produced?
C) What will be consumed; how will goods be consumed; for whom will goods be consumed?
D) How will the opportunity cost principle be applied; if the law of comparative advantage will be utilized, how will it be utilized; will the production possibilities constraint apply?

Accepted Answer

The three basic economic questions every economy must answer are: What goods and services will be produced? How will these goods and services be produced? For whom will these goods and services be produced? These questions address the allocation of resources and distribution of goods in an economy.

Quiz 2: Some Tools of the Economist

Figure 2-10 -Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?

A department store buys a wool coat for $120 and sets its retail price at $300. The coat costs $85 to produce. When the coat doesn't sell, the store marks the price down to $200, then $100, and finally $70. At $70, Amy buys the coat. What was the coat's true value? Why?

A popular video program used to teach economics to primary school children defines opportunity cost as "what you give up to get something." In light of your understanding of opportunity cost, how would you modify this definition?

It can be said that, ultimately, consumers are the driving force in answering the three basic economic questions. Explain the consumer's role in providing these answers.

Which of the following is not a basic question that each economy must answer?

An economics professor points to a student in the front row and announces that "sitting in class is the thing you value most during this time period." Is the professor correct? Why or why not?

Figure 2-10 -Refer to Figure 2-10. A movement from point C to point D could be caused by

The president of a large public university proclaims, "If we can get the state government to fund our new football stadium, it will not cost us anything." Evaluate this view from an economic perspective.

Figure 2-10 -Refer to Figure 2-10. If this economy put all available resources into the production of bananas, it could produce

Even countries that depend primarily on market forces to resolve the basic economic questions will usually rely on the collective decision-making process to

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,

When collective decision making is utilized to resolve economic questions regarding the allocation of resources,

What are the three basic questions faced by every economy?

Jim values his car at $2,000, and Kelly values it at $5,000. Can value be created in this situation? How? Suppose Jim refuses to sell for less than $6,000. Is value destroyed? Why or why not?

Explain the idea of capital investment by using the story of Robinson Crusoe. What is sacrificed, and what is gained?

Figure 2-10 -Refer to Figure 2-10. If the economy moves from point C to point B, then which of the following statements is correct?

Three basic decisions must be made by all economies. What are they?