Microeconomics Chapter 2

Which participants are of greatest importance in determining what goods and services are​ produced? A. Entrepreneurs. B. Households. C. The financial sector. D. Firms. E. The government.

B. Households.

On the diagram to the​ right, movement along the curve from points A to B to C illustrates A. increasing marginal opportunity costs. B. reflexive marginal opportunity costs. C. constant marginal opportunity costs. D. decreasing marginal opportunity costs.

A. increasing marginal opportunity costs.

The government seeks to protect intellectual property rights by granting A. copyrights. B. patents. C. franchises. D. All of the above. E. A and B only.

E. A and B only.

Which of the following are examples of intellectual​ property? ​(Check all that​ apply.) A.Pure air and water B. Software C. Ideas for new products or new production techniques D. Books and films E. All​ non-natural resources

B. Software C. Ideas for new products or new production techniques D. Books and films

What happens if a country produces a combination of goods that efficiently uses all of the resources available in the​ economy? A. The country is operating on its production possibilities frontier. B. The country has eliminated scarcity. C. The country is maximizing its opportunity cost. D. All of the above occur if a country uses all available resources.

A. The country is operating on its production possibilities frontier.

n economic​ terminology, the inputs used to make goods and services are referred to as A. real output. B. intangibles. C. factors of production. D. durables and nondurables.

C. factors of production.

The primary difference between product markets and factor markets is that A. product markets are markets for​ goods, while factor markets are markets for factors of production—​labor, ​capital, natural​ resources, and entrepreneurial ability. B. product markets produce goods for final sale while the output of factor markets is included in the purchase price of the good itself—factors are not sold. C. product markets are markets for factors of production—​labor, ​capital, natural​ resources, and entrepreneurial​ ability, while factor markets are markets for goods and services. D. product markets are generally after factor markets in the distribution chain.

A. product markets are markets for​ goods, while factor markets are markets for factors of production—​labor, ​capital, natural​ resources, and entrepreneurial ability.

Property rights are A. the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it. B. the rights individuals or firms have to the exclusive use of their property within individual culturally defined norms which are inconsistent in each area of the United States. C. the rights government has to the exclusive use of all​ property, including the right to buy or sell it. D. the rights individuals or firms have to the exclusive use of their​ property, excluding the right to buy or sell it.

A. the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it.

We can show economic​ efficiency: A. with points on the production possibilities frontier. B. with points inside and on the production possibilities frontier. C. with points on and outside the production possibilities frontier. D. with points inside the production possibilities frontier. E. with points outside the production possibilities frontier.

A. with points on the production possibilities frontier.

Writing in the New York Times​, Michael Lewis argued that ​"...a market economy is premised on a system of incentives designed to encourage an ignoble human​ trait: self-interest." ​Source: Michael​ Lewis, "In Defense of the​ Boom." New York​ Times, October​ 27, 2002. What incentives does a market system provide to encourage​ self-interest? A.Financial reward. B.Selfishness. C.Equity. D.Government sanctions. E.Both a and b.

A.Financial reward.

In what ways does a free market economy differ from a centrally planned​ economy? Unlike a free market​ economy, A.centrally planned economies have extensive government controls. B. centrally planned economies have no government. C. centrally planned economies do not use money. D. centrally planned economies do not trade internationally. E. centrally planned economies have no government restrictions.

A.centrally planned economies have extensive government controls.

Why do entrepreneurs play a key role in a market​ system? A. They influence income distribution through taxes and transfer payments. B. They bring together factors of production. C. They determine what goods and services are produced. D. They supply labor as a factor of production. E. They determine who will receive goods and services.

B. They bring together factors of production.

The production possibilities frontier will shift outward A. if technology declines. B. if production occurs outside the production possibilities frontier. C. if resources are used to produce capital goods. D. if resources are not used in production. E. if resources are used to produce consumption goods.

B. if production occurs outside the production possibilities frontier.

What is the outcome of enforcing contracts and property rights in a market​ system? A. an unpredictable but definite effect on economic activity B. increased economic activity C. no effect on economic activity D. decreased economic activity

B. increased economic activity

We can show economic​ inefficiency: A. with points inside and on the production possibilities frontier. B. with points inside the production possibilities frontier. C. with points on and outside the production possibilities frontier. D. with points on the production possibilities frontier. E. with points outside the production possibilities frontier.

B. with points inside the production possibilities frontier.

In​ economics, the term capital refers to A. the difference between a​ firm's assets and its liabilities. B. the process of raising funds through the sale of stocks and bonds. C. physical capital, such as machinery, that is used to produce other goods. D. financial resources used by businesses to hire resources.

C. physical capital, such as machinery, that is used to produce other goods.

What does increasing marginal opportunity costs​ mean? A. Production is not occurring on the production possibilities frontier. B. Increasing the production of a good requires decreases in the production of another good. C. Increasing the production of a good requires larger and larger decreases in the production of another good. D. The economy is unable to produce increasing quantities of goods and services. E. Increasing the production of a good requires smaller and smaller decreases in the production of another good.

C. Increasing the production of a good requires larger and larger decreases in the production of another good.

As part of their budget tightening​ process, many states are cutting aid to colleges and​ universities, with students being asked to pick up a bigger part of the escalating tab of higher education. Which of the following would do the most to enable you to cope with those higher expenses without impairing your progress toward a​ degree? A. Taking fewer classes per semester or classes with lower associated expenses. B. Obtaining a​ part-time job. C. Reducing your consumption of goods and services not essential to your education. D. Forming a student lobbying group to protest the budget cuts. E. Aggressively pursuing​ loans, grants, and benefactors.

C. Reducing your consumption of goods and services not essential to your education.

If a market system functions​ well, which of the following is necessary for the enforcement of contracts and property​ rights? A. action by government to prevent the exercise of certain property rights B. powerful political connections C. an independent court system D. All of the above.

C. an independent court system

Prepping for a​ next-day exam over the course of an evening​ (and possibly into the wee hours of test​ day) poses increasing costs since A. tutors charge higher rates after 7 p.m. B. studying productivity declines sharply as the effort extends through the evening. C. the longer you choose to study will result in an increase in the number and value of foregone activities. D. evenings are a less productive time to study compared to daylight hours.

C. the longer you choose to study will result in an increase in the number and value of foregone activities.

In a free​ market, the actions people take are largely determined by A. restrictions placed by the government. B. the​ "visible hand" of central planning. C. the motivation of financial reward. D. the guild system. E. the motivation of equity.

C. the motivation of financial reward.

A free market exists A. when the government places absolutely no restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed. B. only in fiction. There are no markets or economies which even come close to approaching the status of a free market. C. when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed. D. when the government places significant restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

C. when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.

Is it possible for a country to have a comparative advantage in producing a good without also having an absolute​ advantage? A country without an absolute advantage in producing a good A. will have a comparative advantage if it produces more efficiently. B. will have a comparative advantage if it devotes more resources toward that​ good's production. C. will have a comparative advantage if it has a lower opportunity cost of producing that good. D. will not have a comparative advantage because it has fewer resources. E. will have a comparative advantage if it is able to produce that good at a low total cost.

C. will have a comparative advantage if it has a lower opportunity cost of producing that good.

What is the role of an​ entrepreneur? A. to take risks B. to operate a business that produces a good or service C. to bring together the factors of production—​labor, ​capital, and natural resources D. All of the above.

D. All of the above.

Which of the following events would create economic​ growth, that​ is, shift the production possibilities frontier​ outward? A. An increase in technology that affects the production of both goods. B. An increase in the available natural resources. C. An increase in the available labor. D. All of the above.

D. All of the above.

What is an​ entrepreneur? A. Entrepreneurs manage the free market. B. Entrepreneurs manage households that consume goods and services. C. Entrepreneurs regulate profits. D. Entrepreneurs operate businesses that produce goods and services. E. Entrepreneurs are policymakers in the government.

D. Entrepreneurs operate businesses that produce goods and services.

What are the two main categories of participants in​ markets? A. Domestic participants and international participants. B.Households and the government. C. Firms and banks. D. Firms and households. E. Households and entrepreneurs.

D. Firms and households.

What is comparative​ advantage? A. The gain from consuming a product whose benefit is greater than its cost. B. The gain from selling a product for more than it costs to produce that product. C. The ability to use all available resources to produce output. D. The ability to produce a good or service at a lower opportunity cost than other producers. E. The ability to produce more of a good or service than competitors using the same amount of resources.

D. The ability to produce a good or service at a lower opportunity cost than other producers.

What is absolute​ advantage? A. The ability to use all available resources to produce output. B. The ability to produce a good or service at a lower opportunity cost than other producers. C. The gain from selling a product for more than it costs to produce that product. D. The ability to produce more of a good or service than competitors using the same amount of resources. E. The gain from consuming a product whose benefit is greater than its cost.

D. The ability to produce more of a good or service than competitors using the same amount of resources.

A production possibilities frontier​ (PPF) is A. a curve showing the generally attainable combinations of two products that may be produced with all planned or​ potential, yet undeveloped technology. B. a curve that shows the potential productive capabilities of the frontier​ (defined as the area outside of​ cities) of a developing economy. C. a curve that illustrates the demand of two goods for the average consumer. D. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.

D. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.

A free market is a market with​ ________ government restrictions on how a good or service can be produced or sold and with​ ________ government restrictions on how a factor of production can be employed. A. many; many B. ​few; many C. many; few D. few; few

D. few; few

A production possibilities​ frontier: A. shows how participants in the market are linked. B. shows how unlimited wants exceed the limited resources available to fulfill those wants. C. shows the act of buying and selling. D. shows the maximum attainable combinations of two goods that may be produced with available resources. E. shows the market for a good or service.

D. shows the maximum attainable combinations of two goods that may be produced with available resources.

The principle of increasing marginal opportunity cost states that the more resources devoted to any​ activity, the​ __________ the payoff to devoting additional resources to that activity. A.greater B.more instant C.more proportional D.smaller

D. smaller

What are private property​ rights? Private property rights​ are: A. the rights individuals and firms have to the exclusive use of​ tangible, physical property but not intellectual property. B. the rights individuals and firms have to the exclusive use of intellectual property but not​ tangible, physical property. C. the rights individuals have to the exclusive use of intellectual property and firms have to the exclusive use of​ tangible, physical property. D. the rights individuals and firms have to the exclusive use of​ tangible, physical property and intellectual property. E. the rights individuals but not firms have to the exclusive use of​ tangible, physical property and intellectual property.

D. the rights individuals and firms have to the exclusive use of​ tangible, physical property and intellectual property.

What is a free​ market? A. A free market is one where the government restricts how a factor of production can be employed. B. A free market is one where the government restricts how a good or service can be produced. C. A free market is one without property rights. D. A free market is one with perfect equality. E. A free market is one where the government does not control the production of goods and services.

E. A free market is one where the government does not control the production of goods and services.

What are the implications of this idea for the shape of the production possibilities​ frontier? A. The production possibilities frontier will be bowed inward. B. The production possibilities frontier will be a straight line. C. The production possibilities frontier will have a negative slope. D. The production possibilities frontier will have a positive slope. E. The production possibilities frontier will be bowed outward.

E. The production possibilities frontier will be bowed outward.

What is the opportunity cost of spending more money to find a cure for heart​ disease? A. The monetary value of a human life. B. The total explicit cost of the research to cure heart disease. C. The reduction in future​ health-related costs of heart disease. D. The cost of the​ Medicare/Medicaid program. E. The reduction in funding for research to cure other diseases.

E. The reduction in funding for research to cure other diseases.

Why are independent courts important for a​ well-functioning economy? Independence is necessary for​ courts: A. to make their decisions free of intimidation by criminal gangs. B. to make their decisions free of influence from people with powerful political connections. C. to make their decisions free of influence from other parts of the government. D. to make their decisions based on the law. E. all of the above.

E. all of the above.

What role do they play in the working of a market​ system? Private property​ rights: A. encourage a significant number of people to be willing to risk funds by investing them in business. B. encourage firms to spend money on research and development. C. are the basis for international trade. D. determine what goods and services will be produced. E. both a and b.

E. both a and b.

How should policymakers determine the amount of money that should be allocated for research curing heart​ disease? They should base their decision on A. the number of people who have heart disease compared to the number of people who have other diseases. B. the value of the total benefit of research on curing other diseases. C. the value of the total benefit of the research on heart disease. D. the number of people who die from heart disease compared to the number of people who die from other diseases. E. whether the last dollar devoted to research on heart disease results in more benefit than the last dollar spent on research for curing other diseases.

E. whether the last dollar devoted to research on heart disease results in more benefit than the last dollar spent on research for curing other diseases.

The basis for trade is ___________ advantage

comparative

A(n) ______________ is someone who operates a​ business, bringing together the factors of production—​labor, ​capital, and natural resources—to produce goods and services.

entrepreneur

Firms are likely to produce more of a good or service when its price __________ and less of a good or service when its price ______ .

rises, falls