Econ Ch2

In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon

The division of labor

A product produced in a foreign country and purchased by residents of the home country is called

an import

In the circular flow model of the economy, __________ are the suppliers of goods and services

firms

The​ knowledge, skills, and education a worker has is known as

human capital

In the diagram to the​ right, point Upper F indicates an

inefficient result

According to Adam​ Smith, which of the following is necessary for the proper functioning of the market​ system According to Adam​ Smith, which of the following is the instrument the invisible hand uses to direct economic​ activity

For markets to​ work, people must be free to pursue their​ self-interest prices

In the above graph, which of the following combinations of pies and cakes is unattainable given the existing resources

Four cakes and seven pies

The primary difference between absolute and comparative advantage is

absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost

According to the theory of comparative advantage, specialization and free trade will benefit

all trading partners who specialize in goods where they have comparative advantage

Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that

both bear an opportunity cost since they could have done other things instead of see the movie

Steve and Karen decide to attend the same concert when they are each given free tickets to it. We know that

both bear an opportunity cost that depends on what each person is giving up to attend the concert.

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

few; few

What is the outcome of enforcing contracts and property rights in a market​ system If a market system functions​ well, which of the following is necessary for the enforcement of contracts and property​ rights

increased economic activity an independent court system

Contracts, insurance, patents and accounting rules are

inventions that make a market work better

Adam Smith observed that people pursuing their own self-interest in a free market will actually result in the best interest of society as if these actions were guided by a(n):

invisible hand

Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

Absolute advantage is the ability of an​ individual, a​ firm, or a country to If a country has a comparative advantage in the production of a​ good, then that country

produce more of a good or service than competitors using the same amount of resources has a lower opportunity cost in the production of that good

Farmer McDonald has 100 acres of land on which he can grow soybeans or corn. An acre of land yields 200 bushels of soybeans or 100 bushels of corn or some combination of both. The accompanying figure refers to farmer​ McDonald's

production possibilities curve

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

smaller

The people of a previously quiet and peaceful country have come to recognize the need to expand and improve their security forces after a wave of terroristic threats and acts. Considering their resource​ limitations, the extent to which security is enhanced will most likely be determined by

society's willingness to forego other goods and​ services, both public and private

The role of the entrepreneur always involves

taking risks

A freelance​ singer-songwriter is planning the restoration of a recently purchased civil​ war-era farmhouse. While he professes an enjoyment​ of, and talent in the construction​ trades, the theory of comparative advantage implies that

the income lost while away from music will likely exceed the savings realized by doing the work​ himself, thus, he should hire professionals to do the restoration work.

Jennie is buying something for dinner. She can choose between chicken​, steak​, and salmon. She​ doesn't like salmon​, and after some​ thought, she chooses chicken. What is the opportunity cost of this​ choice

the steak

Bill Bonecrusher graduates from college with a choice of playing professional football at​ $2 million a year or coaching for​ $50,000 a year. He decides to play​ football, but eight years later he quits football to make movies for​ $3 million a year. His opportunity cost at graduation was​ ________ and eight years later was​ ________

$50,000; $2 million

Which of the following events would create economic​ growth, that​ is, shift the production possibilities frontier​ outward

-An increase in the available labor. -An increase in technology that affects the production of both goods. -An increase in the available natural resources

In the previous circular flow diagram, which arrow shows the flow of goods and services

B

In what type of economy does the government decide how most economic resources will be allocated

Centrally planned economy

In the above graph, which of the following combinations is unattainable with the current resources available in this country

Combination G

In the graphs shown, which country has a comparative advantage in the production of shirts

Country B

If you and your neighbor both grow oranges and grapefruits and you are better than your neighbor at picking both oranges and​ grapefruits, there can be no advantage to you in specializing in growing only one type of fruit and trading with your neighbor for the other

False

Refer to the previous graph. Which of the following best represents the situation in which BMW must face a trade-off between producing SUVs and producing hybrids

Moving from point B to point C

What is the name given to the highest-valued alternative that must be given up to engage in any activity

Opportunity cost

Which of the following statements is FALSE about opportunity​ cost

Opportunity cost exists only for goods with monetary values

In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered

Product markets

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?

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

What happens if a country produces a combination of goods that efficiently uses all of the resources available in the​ economy Refer to the graph to the right. What is the opportunity cost of moving from point B to point​ C

The country is operating on its production possibilities frontier 20 sedans

The basis for trade is comparative​ advantage, not absolute advantage

True

The outward shift of the production possibilities frontier from point A to point B in the above graph would most likely be caused by

a technological advance that affects both the production of automobiles and aircraft carriers

Ms. Boulware is the best lawyer and the best secretary in town. She has

an absolute advantage in both jobs

In the United States, property rights

are guaranteed by two amendments to the U.S. Constitution

If a country has a comparative advantage in the production of a good, then that country

has a lower opportunity cost in the production of that good

When nations specialize in their comparative advantage and engage in trade

overall standards of living increase

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

smaller

A student has a job that pays a wage rate of​ $10 per hour. The night before an economics​ exam, the student has set aside four hours to study for the​ exam, estimating that for each hour spent​ studying, her grade will rise by 5 points. That​ night, she gets a call from her employer to come to work for a wage rate of​ $15 per hour for that night. She decides to work for three hours and earn an extra​ $45.00. The next day she takes the test and gets a grade of 75. The opportunity cost for her work is

the 15 extra points she estimates that she could have earned on the exam if she had studied the extra three hours

Opportunity cost is

the highest valued alternative that must be given up to engage in an activity.

Using information in the previous table, what is country A's opportunity cost of producing 1 unit of clothing

2 units of food

Which of the following are the two key groups of participants in the circular flow of​ income In a simple​ circular-flow model, there are flows of​ _________ and flows of​ _________

households and firms -factors of​ production; goods and services -funds received from the sale of factors of​ production; spending on final goods and services

The production possibilities frontiers depicted in the diagram to the right illustrate

technological advances in the tank industry.

When a firm can produce more output from the same level of inputs it is due​ to

technological change

For every choice a person makes it can be assumed that

some opportunity cost was involved.

What is the role of an​ entrepreneur

-to operate a business that produces a good or service -to bring together the factors of productionlong dash—​labor, ​capital, and natural resources -to take risks

The graph shows a production possibilities curve for a student who currently spends 8 hours a week studying. How could the student get a B in both​ classes?

The student could study more than 8 hours a week

Suppose that your grade point average and academic record are the most important thing to you. What is the opportunity cost of spending 2 hours studying for a biology​ exam

Time spent studying for one of your other classes

Which of the following is critical to the success of the market system

To allow individuals or firms to have exclusive use of their property

What are copyrights designed to accomplish

Protect intellectual property rights

Opportunity cost

is the value of the next best alternative as a result of choosing some given alternative