ECONO 2202 CH 2
In economic terminology, the inputs used to make goods and services are referred to as A. factors of production. Your answer is correct. B. real output. C. intangibles. D. durables and nondurables.
factors of production.
Vocab
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free market
A market with few government restrictions on how a good or service can be produced or sold or on how a factor of production can be employed.
Factor market
Factor market A market for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability.
absolute advantage
The ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources.
Market A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade
market
For market mechanism to work in response to changes in consumers' wants _______________
prices must be flexible.
The primary difference between product markets and factor markets is that A. product markets are markets for factors of production—labor, capital, natural resources, and entrepreneurial ability, while factor markets are markets for goods and services. B. product markets are generally after factor markets in the distribution chain. C. 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. D. product markets are markets for goods, while factor markets are markets for factors of production—labor, capital, natural resources, and entrepreneurial ability.
product markets are markets for goods, while factor markets are markets for factors of production—labor, capital, natural resources, and entrepreneurial ability.
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. smaller Your answer is correct. B. greater C. more instant D. more proportional
smaller
trade
the act of buying and selling
Product market
Product market A market for goods—such as computers—or services—such as medical treatment.
relative price
The price of a specific good or service in comparison to the prices of other goods and services.
Which of the following are examples of intellectual property? (Check all that apply.) A. Books and films Your answer is correct. B. All non-natural resources C. Pure air and water D. Software Your answer is correct. E. Ideas for new products or new production techniques Your answer is correct. The government seeks to protect intellectual property rights by granting A. patents. B. copyrights. C. franchises. D. All of the above. E. A and B only.
A. Books and films Your answer is correct. D. Software Your answer is correct. E. Ideas for new products or new production techniques Your answer is correct. A and B only
[Related to the Chapter Opener] In addition to making cars, Tesla planned to open a new factory in Nevada in 2016 to make batteries, including home storage battery packs. Source: Mike Ramsey and Anne Steele, "Tesla Loss Widens as Spending Jumps," Wall Street Journal, May 6, 2015. The opportunity cost of Tesla's investment in a new battery factory in Nevada is A. measured in terms of the competition Telsa will present to exisiting firms. B. equal to the cost of inventory for the new battery factory. C. what the company considered to be the best foregone option to the factory. Your answer is correct. D. indeterminate since their plans are not detailed well enough.
what the company considered to be the best foregone option to the factory.
Entrepreneur
Someone who operates a business, bringing together the factors of production—labor, capital, and natural resources—to produce goods and services.
circular flow diagram
A model that illustrates how participants in markets are linked.
Production possibilities frontier (PPF)
Production possibilities frontier (PPF) A curve showing the maximum attainable combinations of two goods that can be produced with available resources and current technology.
According to Adam Smith, which of the following is necessary for the proper functioning of the market system? A. For markets to work, people and the government need to coordinate their decisions. B. For markets to work, the government should help citizens make the right decisions. C. For markets to work, people should take into account how their decisions affect society as a whole. D. For markets to work, people must be free to pursue their self-interest. Your answer is correct. According to Adam Smith, which of the following is the instrument the invisible hand uses to direct economic activity? A. government regulations B. costs C. prices Your answer is correct. D. financial markets
For markets to work, people must be free to pursue their self-interest. prices
What is the outcome of enforcing contracts and property rights in a market system? A. no effect on economic activity B. an unpredictable but definite effect on economic activity C. increased economic activity Your answer is correct. D. decreased economic activity 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. an independent court system Your answer is correct. C. powerful political connections D. All of the above.
increased economic activity an independent court system
Two neighbors, countries A and B, produce books and blankets, among other goods and services. However, Country A produces more of both goods than country B. A student of economics, Maya, also notes that in both countries, these industries individually employ 30 percent of the population. She concludes that country A has an absolute advantage in the production of books and blankets over country B. Maya's conclusion is flawed because A. she assumes that country A's population is no larger than country B's. Your answer is correct. B. she assumes that both countries have linear production possibilities frontiers. C. she assumes that country A has more liberal trade policies than country B. D. she assumes that country A does not face increasing marginal opportunity cost when shifting resources from one industry to the other. E. she assumes that the productivity of workers in both countries is identical.
she assumes that country A's population is no larger than country B's.
What is a free market? A. A free market is one without property rights. B. A free market is one with perfect equality. C. A free market is one where the government restricts how a factor of production can be employed. D. A free market is one where the government does not control the production of goods and services. Your answer is correct. E. A free market is one where the government restricts how a good or service can be produced. In what ways does a free market economy differ from a centrally planned economy? Unlike a free market economy, A. centrally planned economies have no government. B. centrally planned economies have no government restrictions. C. centrally planned economies do not trade internationally. D. centrally planned economies have extensive government controls. Your answer is correct. E. centrally planned economies do not use money.
A free market is one where the government does not control the production of goods and services. centrally planned economies have extensive government controls.
Comparative advantage
Comparative advantage The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors.
In a famous essay on the market system, the economist Leonard Read discussed how a pencil sold by the U.S. firm Eberhard Faber Pencil Company (now owned by Paper Mate) was made. He noted that logging companies in California and Oregon grew the cedar wood used in the pencil. The wood was milled into pencil-width slats at a factory in San Leandro, California. The graphite for the pencil was mined in Sri Lanka and mixed with clay purchased from a firm in Mississippi and wax from a firm in Mexico. The rubber was purchased from a firm in Indonesia. Source: Leonard E. Read, I, Pencil: My Family Tree as told to Leonard E. Read, Irvington-on-Hudson, NY: The Foundation for Economic Education, Inc. December 1958. Which of the following statements is true? A. As long as the CEO of the Eberhard Faber Company had this knowledge about the components, that is sufficient. B. Each of the managers of all of the firms that participated in the making of the pencils had to know how the components they produced were used to make pencils. C. According to Adam Smith's "circular flow" metaphor, only the managers need to know this information. D. It was not necessary for the managers of any of firms that participated in the making of the pencils to know how the components they produced were used to make pencils.
It was not necessary for the managers of any of firms that participated in the making of the pencils to know how the components they produced were used to make pencils.
What is the circular-flow diagram and what does it illustrate? A. The circular-flow diagram shows the maximum attainable combinations of two products that may be produced with available resources and current technology. B. The circular-flow diagram shows how households and firms are linked through product and factor markets. Your answer is correct. C. The circular-flow diagram shows how households and firms are linked through product markets. D. The circular-flow diagram shows how firms are linked through product and factor markets. E. The circular-flow diagram shows the government's role in markets through taxes and transfer payments.
The circular-flow diagram shows how households and firms are linked through product and factor markets.
During the 1928 presidential election campaign, Herbert Hoover, the Republican candidate, argued that the United States should only import those products that could not be produced here. Do you believe that this would be a good policy? Explain. A. This is not a good policy because it does not necessarily result in countries producing those goods for which they have a comparative advantage. Your answer is correct. B. This is a good policy because countries would only produce those goods that cannot be made elsewhere. C. This is a good policy because countries would only produce those goods that they can make at lower opportunity cost than other countries. D. This is not a good policy because it does not necessarily result in countries producing those goods for which they have an absolute advantage. E. This is not a good policy because it does not allow countries to import those goods that are scarce.
This is not a good policy because it does not necessarily result in countries producing those goods for which they have a comparative advantage.
After Russia seized what had formerly been the Ukrainian territory of Crimea in February 2014, the United States and many other countries imposed economic sanctions that reduced the ability of Russia to engage in international trade. A columnist writing in the New York Times noted that, "If sanctions push Russia onto a path of greater self-reliance, its manufacturing and service industries will surely grow faster...." Source: Anatole Kaletsky, "Reasons to Welcome a Ukraine Deal," New York Times, September 18, 2014. If the columnist is correct about the effect of the sanctions, then, in the long run, the sanctions will A. decrease the economic well-being of the average Russian because Russia will have to produce some goods and services at a higher cost than its trading partners. Your answer is correct. B. increase the economic well-being of the average Russian because there will more employment to meet the needs of the growing manufacturing sector. C. decrease the economic well-being of the average Russian because there will be lost markets. D. increase the economic well-being of the average Russian because its manufacturing and service industries will surely grow faster.
decrease the economic well-being of the average Russian because Russia will have to produce some goods and services at a higher cost than its trading partners.
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. A. True B. False
false
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. Your answer is correct. B. Selfishness. C. Equity. D. Government sanctions. E. Both a and b.
financial reward
Part 2 of 2 Which of the following are the two key groups of participants in the circular flow of income? A. government and financial institutions B. domestic residents and foreign residents C. savers and borrowers D. households and firms Your answer is correct. In a simple circular-flow model, there are flows of _________ and flows of _________. A. factors of production; goods and services B. funds received from the sale of factors of production; spending on final goods and services C. Both (a) and (b) are correct. Your answer is correct. D. None of the above; there are no flows in the circular flow of income.
households and firms Both (a) and (b) are correct.
In the court case over whether anyone could use Doyle's character of Sherlock Holmes without paying a fee, Judge Posner argued that the first Sherlock Holmes story was written in 1887, so allowing the author's descendants to continue to claim a copyright to the character raised the possibility of "perpetual, or at least nearly perpetual, copyright." The judge also noted that the U.S. Constitution had only given Congress the authority to grant copyright for a limited time. Source: Leslie S. Kling v. Conan Doyle Estate, Ltd (7th Cir. 2014), media.ca7.uscourts.gov. Allowing an author and his or her descendants to have a copyright forever on a book or character has disadvantages including: A. the reduction of new books, movies, and television series based on existing characters that results from copyright periods. Your answer is correct. B. the inability to track the heirs and descendants to pay the copyright. C. the problems associated with terminating the copyright after so many years have passed. D. lost revenue from competing authors. Allowing an author and his or her descendants to have a copyright forever on a book or character has advantages including: A. revenue that generates tax payments. B. decreased payments to some authors using other authors' characters to produce new books. C. incentives that it provides for writers to write books that they might not have written. Your answer is correct. D. a more fully developed cast of characters that can be used in future books.
the reduction of new books, movies, and television series based on existing characters that results from copyright periods. Incentives that it provides for writers to write books that they might not have written.
Suppose the economy whose PPF is shown on the right experiences economic growth. 1.) Use the 3-point curved line drawing tool to show how growth affects the trade-offs the country faces between producing ships and food. 2.) Use the point drawing tool to draw and label a point on the new PPF that shows the economy producing more of both goods. Label this point 'B'. Carefully follow the instructions above and only draw the required objects. Which of the following may have caused the shift you have drawn? (Check all that apply.) A. Balanced production between ships and food. B. A larger labor force. Your answer is correct. C. The achievement of full employment. D. An increase in the capital stock. Your answer is correct. E. Advances in technology.
B. A larger labor force. Your answer is correct. D. An increase in the capital stock. Your answer is correct. E. Advances in technology.
State government Medicaid programs provide medical insurance to poor and disabled people. Under federal law, the programs must provide reimbursements to people who use any prescription drug that has been approved as effective by the U.S. Food and Drug Administration (FDA). In recent years, pharmaceutical firms have developed new prescription drugs that cost as much as $1,000 per pill to treat Hepatitis C, a liver disease. A news story notes that, "State Medicaid programs are particularly sensitive to annual cost increases...[because] coverage is paid for, in part, out of state budgets, which have to be balanced every year." Source: Joseph Walker, "Expensive Hepatitis C Medications Drive Prescription-Drug Spending," Wall Street Journal, March, 10, 2015; and Margot Sanger-Katz, "$1,000 Hepatitis Pill Shows Why Fixing Health Costs Is So Hard," New York Times, August 2, 2014. When new prescription drugs are introduced with much higher prices than existing drugs, state governments face a trade-off between A. a reduction in spending on another worthwhile program or an increase in taxes. Your answer is correct. B. those with Medicaid and those without Medicaid. C. the death of individuals from one type of illness compared to another. D. funding pharmaceutical firms and funding other firms. Do you agree with the federal law requiring that Medicaid programs must cover every drug that has FDA approval? A. No, because such spending is definitively not the best use of state governments' scarce resources. B. This is a positive economic issue that people will often disagree about. C. Yes, because such spending is definitively the best use of state governments' scarce resources. D. This is a normative economic issue that people will often disagree about.
a reduction in spending on another worthwhile program or an increase in taxes. This is a normative economic issue that people will often disagree about.
The primary difference between absolute and comparative advantage is A. 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. Your answer is correct. B. absolute advantage can never change while comparative advantage depends on the relative cost of a good's resources. C. absolute advantage is a concept that was utilized in communist countries and comparative advantage is a capitalist idea. D. absolute advantage refers to the ability to produce a good or service at a lower opportunity cost and comparative advantage refers to the ability to produce more of a good or service using the same amount of resources.
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.
The production possibilities frontiers depicted in the diagram to the right illustrate A. both the labor force and capital stock decreasing. B. the likely result of a ground war. C. both the labor force and capital stock increasing. Your answer is correct. D. technological advances in the tank industry.
both the labor force and capital stock increasing.
What is the basis for trade? A. Economic growth. B. Available resources. C. Comparative advantage. Your answer is correct. D. Absolute advantage. E. Efficiency. How can a country gain from specialization and trade? A. A country can specialize in producing that for which it has an absolute advantage and then trade for other needed goods and services. B. A country can specialize in producing that which is most scarce and then trade for other needed goods and services. C. A country can specialize by using all available resources to invest in capital goods to promote economic growth. D. A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services. Your answer is correct. E. A country can specialize by using all available resources to produce goods and services to avoid trading with other countries.
comparative advantage A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.
The Scottish philosopher Adam Smith argued in 1776 that A. unions would do a better job of coordinating the activities of buyers and sellers than prices could. B. prices would do a better job of coordinating the activities of buyers and sellers than guilds could. Your answer is correct. C. prices would do a better job of coordinating the activities of buyers and sellers than markets could. D. guilds would do a better job of coordinating the activities of buyers and sellers than prices could.
prices would do a better job of coordinating the activities of buyers and sellers than guilds could.
The basis for trade is comparative advantage.
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Alzania produces and consumes 500,000 tons of cotton during a year. Reports indicate that Alzania's neighbor, which also employs the same number of people in the cotton industry, consumed 400,000 tons of cotton. This led industry experts to believe that Alzania had an absolute advantage in the production of cotton over its neighbor. Which of the following, if true, could weaken this view? A. Workers in Alzania have higher productivity due to better education and training. B. Alzania's neighbor exported half its production of cotton that year. Your answer is correct. C. Alzania is a closed economy. D. The cotton industry in Alzania is heavily regulated by the government. E. Alzania's neighbor has been producing cotton longer than Alzania.
Alzania's neighbor exported half its production of cotton that year.
What is the role of an entrepreneur? A. to operate a business that produces a good or service B. to take risks C. to bring together the factors of production—labor, capital, and natural resources D. All of the above.
all of the above
The British historian Thomas Macaulay once remarked that copyrights are "a tax on readers." Copyrights are a 'tax' on readers in the sense that the government collects the tax progressively to promote fairness in the tax code. securing a new copyright requires the payment of a fee to the government by the artist. copyrights limit of the supply of related creative work which results in higher prices. Your answer is correct. the government explicitly adds a sales tax on creative works to cover the copyright. If copyrights are a 'tax' on readers, governments provide a legal framework to enforce them because A. the government collects a large amount of revenue from the tax. B. copyrights provide needed protection for authors and creators of movies or other artistic works. Your answer is correct. C. the government likes to tax the people any chance it gets. D. the government needs to solve its debt problem by enacting new taxes.
copyrights limit of the supply of related creative work which results in higher prices. B. copyrights provide needed protection for authors and creators of movies or other artistic works.
In economics, the term capital refers to A. goods used to produce other goods. Your answer is correct. B. the difference between a firm's assets and its liabilities. C. financial resources used by businesses to hire resources. D. the process of raising funds through the sale of stocks and bonds.
goods used to produce other goods.
Using the same amount of resources, suppose that Nicaragua can produce twice as much wheat as Colombia. Nevertheless, Colombia could still have the comparative advantage in producing wheat if A. its currency is more than double the value of Nicaragua's currency. B. its productivity in sugar is twice the productivity Nicaragua possesses in sugar. C. it negotiates trade agreements that assign it the comparative advantage in wheat. D. it is even less efficient than Nicaragua in the production of goods other than wheat.
it is even less efficient than Nicaragua in the production of goods other than wheat.
The late Nobel Prize-winning economist Kenneth Arrow of Stanford University once wrote that the argument that the outcomes in a market system, "may be very different from, and even opposed to, intentions is surely the most important intellectual contribution that economic thought has made." Source: Kenneth J. Arrow, "Economic Equilibrium," Encyclopedia of the Social Sciences, 1968. Encyclopedia.com. (May 23, 2015). It is possible for the outcomes in a market system to be different from what firms and consumers intended them to be because A. both firms and consumers are directly interested in increasing economic efficiency and the standard of living of the average person. B. most firms and consumers do not really understand the market system. C. neither firms nor consumers are directly interested in increasing economic efficiency or the standard of living of the average person. Your answer is correct. D. firms and consumers do not directly communicate. This idea is an important intellectual contribution because A. the interaction of firms and consumers in markets produces outcomes that are economically efficient and that promote the economic growth that results in rising living standards. Your answer is correct. B. if it were not for the interaction of firms and consumers in markets, a central planning body would have to organize the market. C. without the interaction of firms and consumers in markets, there would be few goods and services produced. D. most consumers and firms have the same objective, which is to increase economic efficiency and the standard of living of the average person.
neither firms nor consumers are directly interested in increasing economic efficiency or the standard of living of the average person. the interaction of firms and consumers in markets produces outcomes that are economically efficient and that promote the economic growth that results in rising living standards.
A number of political leaders have expressed concern about the nation's decline as a major steel producer. Many have advocated policies to restrict imports and promote domestic production. These individuals would see their position weakened most by the knowledge that A. the government has historically shown limited ability to promote the production of any good. B. the substitution of domestic steel for foreign steel absorbs resources that would otherwise produce goods of greater value. Your answer is correct. C. foreign governments have generally not supported/subsidized production in their countries. D. many products using steel can be produced with aluminum instead. E. steel production is a high-pollution activity.
the substitution of domestic steel for foreign steel absorbs resources that would otherwise produce goods of greater value.
The chapter mentions that in 1965 married women with children worked an average of 32 hours per week while men worked an average of only 4 hours on housework—a total of 36 hours of housework. In 2016, the estimated average weekly hours of housework for women declined to 15.7, while the hours worked by men increased to about 9.7—a total of 25.4 hours of housework. Source: U.S. Bureau of Labor Statistics, "American Time Use—2016," June 27, 2017. Does the decrease in the total number of hours of housework—from 36 to 25.4—mean that families are willing to live in messier homes? A. No, because there are more labor saving devices so less time is required. Your answer is correct. B. Yes, because families are too busy now to worry about a clean house. C. No, because women have just decided to let men do more work. D. Yes, because homes are larger now and would require more hours of housework to keep a home clean.
No, because there are more labor saving devices so less time is required.
Use the following production possibilities frontier for a country to answer the following questions. Which point(s) are unattainable? Briefly explain why. Points W, X, and Y because they are on the production possibilities frontier. Point Z because it is inside the production possibilities frontier. All the points because the production of each has an opportunity cost. Point V because it is outside the production possibilities frontier. Your answer is correct. None of the points because they all are feasible. Which point(s) are efficient? Briefly explain why. Points Z, W, X, and Y because they are attainable. Point W because it is where the most resources are used to produce capital goods. Point Z because it is inside the production possibilities frontier. Points W, X, and Y because this is where maximum output is produced with available resources. Your answer is correct. Point V because it is where the most capital and consumption goods combined are produced. Which point(s) are inefficient? Briefly explain why. A. Point Z because production there is not using all available resources. Your answer is correct. B. Points W, X, Y, and V because they are unattainable. C. Point V because it is unattainable. D. Points W, X, and Y because they are on the production possibilities frontier. E. Points Z, W, X, and Y because they are attainable. At which point is the country's future growth rate likely to be the highest? Briefly explain why. A. Point X because it is an efficient point where a mix of capital and consumption goods are produced. B. Point Y because it is where the most resources are used to produce consumption goods. C. Point Z because it is where resources are saved for investments. D. Point W because it is where the most resources are used to produce capital goods. Your answer is correct. E. Point V because it is where the production possibilities frontier will shift with growth.
1. Point V because it is outside the production possibilities frontier. 2. Points W, X, and Y because this is where maximum output is produced with available resources. 3. Point Z because production there is not using all available resources. 4. Point W because it is where the most resources are used to produce capital goods.
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.
All of the above.
Suppose the president is attempting to decide whether the federal government should spend more on research to find a cure for heart disease. What is the opportunity cost of spending more money to find a cure for heart disease? A. The reduction in future health-related costs of heart disease. B. The reduction in funding for research to cure other diseases. Your answer is correct. C. The cost of the Medicare/Medicaid program. D. The monetary value of a human life. E. The total explicit cost of the research to cure heart disease. How should policymakers determine the amount of money that should be allocated for research curing heart disease? They should base their decision on A. 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. Your answer is correct. B. the value of the total benefit of the research on heart disease. C. the number of people who die from heart disease compared to the number of people who die from other diseases. D. the value of the total benefit of research on curing other diseases. E. the number of people who have heart disease compared to the number of people who have other diseases.
B. The reduction in funding for research to cure other diseases. Your answer is correct. 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.
Suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods. Capital goods, such as machinery, equipment, and computers, are goods used to produce other goods. Is it likely that the production possibilities frontierLOADING... in this situation would be a straight line: LOADING... click on the icon for an example or bowed out: LOADING... click on the icon for an example? A. The production possibilities frontier would likely be a straight line because not all resources are equally well suited to produce both consumption and capital goods. B. The production possibilities frontier would likely be bowed out because resources are likely equally well suited to produce both consumption and capital goods. C. The production possibilities frontier would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods. Your answer is correct. D. The production possibilities frontier would likely be a straight line because resources are likely equally well suited to produce both consumption and capital goods.
C. The production possibilities frontier would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods.
Choco Dream is a firm that produces both dark chocolates as well as liquor chocolates. During a given month, the firm uses its resources to produce both varieties. Initially, the firm produced 5,000 bars of dark chocolates and 4,000 bars of liquor chocolates in a month. In order to increase production of the latter to 4,500, they had to reduce production of dark chocolates by 800 bars. When demand for liquor chocolates increased further, Choco Dream produced 5,000 bars of liquor chocolates and 3,200 bars of dark chocolates per month. Which of the following inferences can be drawn from the given information? A. Resources are equally productive in the production of both types of chocolates. B. Both types of chocolates sold by Choco Dream are equally popular among consumers. C. The company is operating at one end of the PPF. D. Choco Dream faces increasing marginal opportunity cost in the production of liquor chocolates. Your answer is correct. E. Choco Dream's production possibilities frontier is linear.
Choco Dream faces increasing marginal opportunity cost in the production of liquor chocolates.
Factors of production
The inputs used to make goods and services.
Economic growth
Economic growth The ability of the economy to increase the production of goods and services.
Two neighbors, countries A and B, produce books and blankets, among other goods and services. However, Country A produces more of both goods than country B. A student of economics, Maya, also notes that in both countries, these industries individually employ 30 percent of the population. She concludes that country A has an absolute advantage in the production of books and blankets over country B. Which of the following, if true, would weaken Maya's conclusion? A. Country A has more productive resources than country B. B. Country A has a lower opportunity cost of producing books while country B has a lower opportunity cost of producing blankets. C. Country A is an open economy while country B is a closed economy. D. Country A employs more capital per unit of labor in all industries than country B. Your answer is correct. E. Country A has a linear production possibilities frontier.
Country A employs more capital per unit of labor in all industries than country B.
What do economists mean by scarcity? A. Economists mean that the economy is unable to produce increasing quantities of goods and services. B. Economists mean that trade is not possible. C. Economists mean that unlimited wants exceed limited resources. Your answer is correct. D. Economists mean that production is inefficient. E. Economists mean that people are not employed. Which of the following is not scarce according to the economic definition? A. Healthcare services. B. Time. C. Workers. D. Gas. E. None of the above.
Economists mean that unlimited wants exceed limited resources. None of the above.
What is an entrepreneur? A. Entrepreneurs are policymakers in the government. B. Entrepreneurs manage households that consume goods and services. C. Entrepreneurs manage the free market. D. Entrepreneurs operate businesses that produce goods and services. Your answer is correct. E. Entrepreneurs regulate profits. Why do entrepreneurs play a key role in a market system? A. They influence income distribution through taxes and transfer payments. B. They supply labor as a factor of production. C. They bring together factors of production. Your answer is correct. D. They determine what goods and services are produced. E. They determine who will receive goods and services.
Entrepreneurs operate businesses that produce goods and services. They bring together factors of production.
What are the two main categories of participants in markets? A. Firms and banks. B. Firms and households. Your answer is correct. C. Households and the government. D. Domestic participants and international participants. E. Households and entrepreneurs. Which participants are of greatest importance in determining what goods and services are produced? A. The financial sector. B. Entrepreneurs. C. Households. Your answer is correct. D. The government. E. Firms.
Firms and households. Households.
What does increasing marginal opportunity costs mean? A. Increasing the production of a good requires smaller and smaller decreases in the production of another good. B. Production is not occurring on the production possibilities frontier. C. The economy is unable to produce increasing quantities of goods and services. D. Increasing the production of a good requires decreases in the production of another good. E. Increasing the production of a good requires larger and larger decreases in the production of another good. Your answer is correct. What are the implications of this idea for the shape of the production possibilities frontier? A. The production possibilities frontier will have a positive slope. B. The production possibilities frontier will be bowed outward. Your answer is correct. C. The production possibilities frontier will have a negative slope. D. The production possibilities frontier will be a straight line. E. The production possibilities frontier will be bowed inward.
Increasing the production of a good requires larger and larger decreases in the production of another good. The production possibilities frontier will be bowed outward.
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. Obtaining a part-time job. B. Aggressively pursuing loans, grants, and benefactors. C. Forming a student lobbying group to protest the budget cuts. D. Taking fewer classes per semester or classes with lower associated expenses. E. Reducing your consumption of goods and services not essential to your education.
Reducing your consumption of goods and services not essential to your education.
What is absolute advantage? A. The ability to use all available resources to produce output. B. The gain from selling a product for more than it costs to produce that product. C. 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. Your answer is correct. E. The ability to produce a good or service at a lower opportunity cost than other producers. What is comparative advantage? A. The ability to use all available resources to produce output. B. The gain from consuming a product whose benefit is greater than its cost. C. The ability to produce more of a good or service than competitors using the same amount of resources. D. The gain from selling a product for more than it costs to produce that product. E. The ability to produce a good or service at a lower opportunity cost than other producers. Your answer is correct. 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 devotes more resources toward that good's production. B. will not have a comparative advantage because it has fewer resources. C. will have a comparative advantage if it produces more efficiently. D. will have a comparative advantage if it has a lower opportunity cost of producing that good. Your answer is correct. E. will have a comparative advantage if it is able to produce that good at a low total cost.
The ability to produce more of a good or service than competitors using the same amount of resources. The ability to produce a good or service at a lower opportunity cost than other producers. Your answer is correct. will have a comparative advantage if it has a lower opportunity cost of producing that good.
Suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods. Capital goods, such as machinery, equipment, and computers, are goods used to produce other goods. Is it likely that the production possibilities frontierLOADING... in this situation would be a straight line: LOADING... click on the icon for an example or bowed out: LOADING... click on the icon for an example? A. The production possibilities frontier would likely be a straight line because resources are likely equally well suited to produce both consumption and capital goods. B. The production possibilities frontier would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods. Your answer is correct. C. The production possibilities frontier would likely be bowed out because resources are likely equally well suited to produce both consumption and capital goods. D. The production possibilities frontier would likely be a straight line because not all resources are equally well suited to produce both consumption and capital goods.
The production possibilities frontier would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods.
XYZ firm, the leading producer of leather goods in its country is planning to expand its business. Industry experts identify Asia as a potential target market. They report that substitute products, particularly in India, are highly priced. Darren, the operational head, feels that exporting their product to India is a good idea. According to him, their price advantage alone will ensure good sales. However, his colleague, Mark, who is also the head of product development, feels that Darren is too optimistic, and that this venture may not turn out to be as profitable as Darren expects it to be. Darren's view is based on which of the following assumptions? A. The quality of the domestically produced substitutes is not as good as XYZ's product. B. India has high import tariffs. C. Consumers in India are extremely loyal to national brands. D. Imports in India usually exceed exports from the country. E. XYZ's product is a close substitute for the locally available goods.
XYZ's product is a close substitute for the locally available goods.
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 illustrates the demand of two goods for the average consumer. C. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology. Your answer is correct. D. a curve that shows the potential productive capabilities of the frontier (defined as the area outside of cities) of a developing economy.
a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.
increasing marginal opportunity costs video
as the economy moves down the ppf, it experiences increasing marginal oopportunity costs why? because some workers, machines, and other resources are better suited to one use than another **The more resources already devoted to an activity, the smaller the payoff to devoting additional resources to that activity
If country ABC can produce a unit of good 1 by sacrificing fewer units of good 2 than can country XYZ, it is correct to say that country ABC A. has an absolute advantage in producing good 1. B. will import good 1. C. has a comparative advantage in producing good 1. D. will not wish to trade good 1 with country XYZ.
has a comparative advantage in producing good 1. A country has an absolute advantage in producing a good if it does so with fewer resources compared to other countries.
Suppose an increasing number of school districts across the country find themselves with too few teachers at a time of rising enrollments and calls for improved outcomes in terms of student performance. A market-based remedy for this emerging mismatch between the availability of teachers and school districts' needs would likely emphasize A. a relaxation of state-imposed teacher certification requirements for individuals who lack the credential of a formal degree in education but nevertheless possess knowledge and experience that qualifies them to teach. B. renegotiating contracts with teachers' unions to increase the productivity (workload) of teachers. C. enhancements to the financial support (scholarships, grants, loans) undergraduates receive for pursuing degrees in education. D. higher compensation to elicit both a larger quantity of teacher services and a greater reliance by districts on non-traditional instruction methods.
higher compensation to elicit both a larger quantity of teacher services and a greater reliance by districts on non-traditional instruction methods.
In the circular-flow diagram showing how a market system works, A. firms and households are both suppliers in product markets. B. income flows to firms and the government through factor markets. C. income flows to households through factor markets. Your answer is correct. D. households purchase output produced by firms in product and factor markets. E. households are demanders and firms are suppliers in factor markets.
income flows to households through factor markets. Your answer is correct.
On the diagram to the right, movement along the curve from points A to B to C illustrates A. increasing marginal opportunity costs. Your answer is correct. B. constant marginal opportunity costs. C. reflexive marginal opportunity costs. D. decreasing marginal opportunity costs.
increasing marginal opportunity costs.
In the diagram to the right, point F indicates an A. efficient result. B. unattainable result. C. inefficient result.
inefficient result.
Whether carried out by an individual or a country, production beyond the production possibilities frontier A. is not physically possible. Your answer is correct. B. can occur by acquiring more productive resources. C. is possible only through trade. D. happens as a result of forced saving. With respect to consumption, individuals and countries A. can, by choosing not to save for the future, consume beyond their production possibilities frontiers. B. can consume beyond their production possibilities frontiers only during periods of economic prosperity. C. can, through trade, consume beyond their production possibilities frontiers. Your answer is correct. D. are contrained to consume on or inside their production possibilities frontiers.
is not physically possible. can, through trade, consume beyond their production possibilities frontiers.
The late Nobel Prize-winning economist Kenneth Arrow of Stanford University once wrote that the argument that the outcomes in a market system, "may be very different from, and even opposed to, intentions is surely the most important intellectual contribution that economic thought has made." Source: Kenneth J. Arrow, "Economic Equilibrium," Encyclopedia of the Social Sciences, 1968. Encyclopedia.com. (May 23, 2015). It is possible for the outcomes in a market system to be different from what firms and consumers intended them to be because A. neither firms nor consumers are directly interested in increasing economic efficiency or the standard of living of the average person. Your answer is correct. B. both firms and consumers are directly interested in increasing economic efficiency and the standard of living of the average person. C. firms and consumers do not directly communicate. D. most firms and consumers do not really understand the market system. This idea is an important intellectual contribution because A. most consumers and firms have the same objective, which is to increase economic efficiency and the standard of living of the average person. B. if it were not for the interaction of firms and consumers in markets, a central planning body would have to organize the market. C. the interaction of firms and consumers in markets produces outcomes that are economically efficient and that promote the economic growth that results in rising living standards. Your answer is correct. D. without the interaction of firms and consumers in markets, there would be few goods and services produced.
neither firms nor consumers are directly interested in increasing economic efficiency or the standard of living of the average person. without the interaction of firms and consumers in markets, there would be few goods and services produced.
Some economists have been puzzled that although entrepreneurs take on the risk of losing time and money by starting new businesses, on average their incomes are lower than those of people with similar characteristics who go to work at large firms. William Baumol believes part of the explanation for this puzzle may be that entrepreneurs are like people who buy lottery tickets. On average, people who don't buy lottery tickets are left with more money than people who buy tickets because lotteries take in more money than they give out. Baumol argues that "the masses of purchasers who grab up the [lottery] tickets are not irrational if they receive an adequate payment in another currency: psychic rewards." Source: William J. Baumol, The Microtheory of Innovative Entrepreneurship, Princeton, NJ: Princeton University Press, 2011. The term "psychic rewards" refers to A. gains attained by "out psyching" one's foes. B. financial payments that boost one's psyche. C. rewards that accrue from the use of psychic powers. D. nonmonetary forms of remuneration that are psychologically uplifting. Your answer is correct. Psychic rewards that an entrepreneur might receive include (check all that apply): A. the pride of self-accomplishment. Your answer is correct. B. being one's own boss. Your answer is correct. C. stock options. D. status within the community.
nonmonetary forms of remuneration that are psychologically uplifting. A. the pride of self-accomplishment. Your answer is correct. B. being one's own boss. Your answer is correct. D. status within the community.
The production possibilities frontiers depicted in the diagram to the right illustrate A. increases in both the labor force and capital stock. B. technological advances in the tank industry. Your answer is correct. C. technological advances in the automobile industry. D. technological advances in both the tank and automobile industries.
technological advances in the tank industry.
One of the great benefits of trade is A. that it makes it possible for society to become better off if individuals, firms, and countries specialize in producing goods and services for which they have an absolute advantage. B. that it makes it possible for society to become better off by increasing its consumption. Your answer is correct. C. that it makes it possible for society to become better off by increasing its production but not its consumption. D. that it provides society what it desires most in life even if it does not enhance the means for achieving its goals.
that it makes it possible for society to become better off by increasing its consumption.
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. the longer you choose to study will result in an increase in the number and value of foregone activities. Your answer is correct. C. evenings are a less productive time to study compared to daylight hours. D. studying productivity declines sharply as the effort extends through the evening.
the longer you choose to study will result in an increase in the number and value of foregone activities.
In colonial America, the population was spread thinly over a large area, and transportation costs were very high because it was difficult to ship products by road for more than short distances. As a result, most of the free population lived on small farms where they not only grew their own food but also usually made their own clothes and very rarely bought or sold anything for money. Why were the incomes of these farmers likely to rise as transportation costs fell? As transportation costs fell, A. the farmers gained access to new markets and customers. Using absolute advantage, the farmers produced those goods that they could make the most of. As they traded for other goods, their incomes and living standards increased. B. the farmers gained access to new markets and customers. Using comparative advantage, the farmers specialized, producing those goods for which they had lower opportunity cost. As they traded for other goods, their incomes and living standards increased. Your answer is correct. C. production costs decreased. The farmers then were able to produce more of everything, often selling excess goods in the market for money. With income from trade, living standards increased. D. the farmers gained access to new markets and customers. Examining shortages, the farmers produced those goods that were most scarce. As they traded for other goods, their incomes and living standards increased. E. production costs decreased. Using comparative advantage, the farmers then were able to specialize, producing more of those goods for which they had higher opportunity cost, selling excess goods in the market for money. With income from trade, living standards increased.
the farmers gained access to new markets and customers. Using comparative advantage, the farmers specialized, producing those goods for which they had lower opportunity cost. As they traded for other goods, their incomes and living standards increased.
A production possibilities frontier: A. shows the act of buying and selling. B. shows how participants in the market are linked. C. shows the market for a good or service. D. shows the maximum attainable combinations of two goods that may be produced with available resources. Your answer is correct. E. shows how unlimited wants exceed the limited resources available to fulfill those wants. We can show economic efficiency: A. with points inside the production possibilities frontier. B. with points on the production possibilities frontier. Your answer is correct. C. with points on and outside the production possibilities frontier. D. with points outside the production possibilities frontier. E. with points inside and on the production possibilities frontier. We can show economic inefficiency: A. with points on the production possibilities frontier. B. with points inside and on the production possibilities frontier. C. with points inside the production possibilities frontier. Your answer is correct. D. with points outside the production possibilities frontier. E. with points on and outside the production possibilities frontier. The production possibilities frontier will shift outward A. if resources are used to produce consumption goods. B. if production occurs outside the production possibilities frontier. C. if resources are not used in production. D. if technological advances occur. Your answer is correct. E. if resources are not used to produce capital goods.
1. shows the maximum attainable combinations of two goods that may be produced with available resources. 2. with points on the production possibilities frontier. 3. with points inside the production possibilities frontier. 4. if technological advances occur
Lawrence Summers served as secretary of the treasury in the Clinton administration and as director of National Economic Council in the Obama administration. He has been quoted as giving the following moral defense of the economic approach. "There is nothing morally unattractive about saying: We need to analyze which way of spending money on health care will produce more benefit and which less, and using our money as efficiently as we can. I don't think there is anything immoral about seeking to achieve environmental benefits at the lowest possible costs." Source: David Wessel, "Precepts from Professor Summers," Wall Street Journal, October 17, 2002. It would be more moral to reduce pollution, A. not taking the cost into account because pollution is potentially harmful to our health. B. taking the cost into account because the total cost of reducing pollution is likely enormous. C. taking the cost into account because money spent on pollution reduction is not available for other worthy activities. Your answer is correct. D. not taking the cost into account because pollution reduction is typically associated with large benefits. E. taking the cost into account because reducing pollution often reduces economic growth.
C. taking the cost into account because money spent on pollution reduction is not available for other worthy activities.
Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety. Similarly, using all its resources in the production of liquor chocolates, the firm can produce 8,000 bars per month. However, during a given month, the firm produces both varieties. Which of the following, if true, would suggest that the firm is operating on its PPF? A. The opportunity cost of shifting resources from the production of liquor chocolates to dark chocolates is marginal. B. In an attempt to cut costs, the company is planning to fire its unproductive resources. C. Most domestic consumers prefer the better quality Swiss chocolates imported by the country. D. Even though the demand for both liquor and dark chocolates has increased, the company can increase the production of only one variety. Your answer is correct. E. Medical reports earlier this year indicated that higher chocolate consumption increases the risk of heart attack.
Even though the demand for both liquor and dark chocolates has increased, the company can increase the production of only one variety.
What does increasing marginal opportunity costs mean? A. The economy is unable to produce increasing quantities of goods and services. B. Increasing the production of a good requires decreases in the production of another good. C. Increasing the production of a good requires smaller and smaller decreases in the production of another good. D. Production is not occurring on the production possibilities frontier. E. Increasing the production of a good requires larger and larger decreases in the production of another good. Your answer is correct. What are the implications of this idea for the shape of the production possibilities frontier? A. The production possibilities frontier will have a negative slope. B. The production possibilities frontier will be bowed inward. C. The production possibilities frontier will have a positive slope. D. The production possibilities frontier will be a straight line. E. The production possibilities frontier will be bowed outward.
Increasing the production of a good requires larger and larger decreases in the production of another good. The production possibilities frontier will be bowed outward.
XYZ firm, the leading producer of leather goods in its country is planning to expand its business. Industry experts identify Asia as a potential target market. They report that substitute products, particularly in India, are highly priced. Darren, the operational head, feels that exporting their product to India is a good idea. According to him, their price advantage alone will ensure good sales. However, his colleague, Mark, who is also the head of product development, feels that Darren is too optimistic, and that this venture may not turn out to be as profitable as Darren expects it to be. Which of the following, if true, would support Mark's point of view? A. The producers of the local substitute goods have long been lobbying for subsidies, but to no effect. B. Indian producers of substitute goods are using their resources efficiently. C. High prices of the locally produced leather items have prevented many consumers from being able to access them. D. It is fairly easy to do business in India because of limited bureaucratic control. E. India has high import tariffs.
India has high import tariffs
XYZ firm, the leading producer of leather goods in its country is planning to expand its business. Industry experts identify Asia as a potential target market. They report that substitute products, particularly in India, are highly priced. Darren, the operational head, feels that exporting their product to India is a good idea. According to him, their price advantage alone will ensure good sales. However, his colleague, Mark, who is also the head of product development, feels that Darren is too optimistic, and that this venture may not turn out to be as profitable as Darren expects it to be. Which of the following, if true, will strengthen Darren's point of view? A. Foreign trade is heavily regulated by the Indian government. B. India is an emerging market and some of the foreign brands that have sold electronics in India have been doing extremely well. C. Indian producers do not have access to the technology that XYZ uses for producing leather goods. Your answer is correct. D. Indian consumers are loyal to their national brands. E. Consumers in India are becoming increasingly critical of manufacturing processes that involve animal cruelty.
Indian producers do not have access to the technology that XYZ uses for producing leather goods.
Suppose the United Kingdom and Norway both produce oil and fish oil, which are sold for the same prices in both countries. The following table shows combinations of both goods that each country can produce in a day, measured in thousands of barrels, using the same amounts of capital and labor: Who has the comparative advantageLOADING... in producing oil? A. Norway has a comparative advantage producing oil because it can produce more oil. B. Norway has a comparative advantage producing oil because its opportunity cost of producing oil is lower. C. Neither country has a comparative advantage producing oil because their opportunity costs of producing oil are equal. Your answer is correct. D. The United Kingdom has a comparative advantage producing oil because it can produce more oil. E. The United Kingdom has a comparative advantage producing oil because its opportunity cost of producing oil is lower. Can these two countries gain from trading oil and fish oil? A. These countries cannot gain from trade because neither has a comparative advantage producing either good. Your answer is correct. B. These countries can gain from trade because Norway has an absolute advantage producing oil. C. These countries cannot gain from trade because neither has an absolute advantage producing either good. D. These countries can gain from trade because their opportunity costs of producing each good are the same. E. These countries can gain from trade because The United Kingdom has an absolute advantage producing fish oil.
Neither country has a comparative advantage producing oil because their opportunity costs of producing oil are equal. These countries cannot gain from trade because neither has a comparative advantage producing either good.
Property rights
Property rights The rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.
Choco Fantasy is a firm that produces both dark chocolates as well as liquor chocolates. It can produce 10,000 bars of dark chocolate per month if all its resources are used to produce only this variety. Similarly, using all its resources in the production of liquor chocolates, the firm can produce 8,000 bars per month. However, during a given month, the firm produces both varieties. Which of the following, if true, would suggest that the firm is operating at a point inside its PPF? A. The firm is paying overtime to its workers as most of them are working extra hours to meet the peak season demand. B. All resources employed by Choco Fantasy are always put to their best use. C. The firm believes in maintaining a certain amount of excess capacity to meet unexpected changes in demand. Your answer is correct. D. Current demand for both varieties is so high that similar chocolates are being imported by the country. E. The firm is planning to hire more resources because of an anticipated increase in the demand for its chocolates.
The firm believes in maintaining a certain amount of excess capacity to meet unexpected changes in demand.
In The Wonderful Wizard of Oz and his other books about the Land of Oz, L. Frank Baum observed that if people's wants were modest enough, most goods would not be scarceLOADING.... According to Baum, this was the case in Oz: "There were no poor people in the Land of Oz, because there was no such thing as money... Each person was given freely by his neighbors whatever he required for his use, which is as much as anyone may reasonably desire. Some tilled the lands and raised great crops of grain, which was divided equally among the whole population, so that all had enough. There were many tailors and dressmakers and shoemakers and the like, who made things that any who desired them might wear. Likewise there were jewelers who made ornaments for the person, which pleased and beautified the people, and these ornaments also were free to those who asked for them. Each man and woman, no matter what he or she produced for the good of the community, was supplied by the neighbors with food and clothing and a house and furniture and ornaments and games. If by chance the supply ever ran short, more was taken from the great storehouses of the Ruler, which were afterward filled up again when there was more of any article than people needed... You will know, by what I have told you here, that the Land of Oz was a remarkable country. I do not suppose such an arrangement would be practical with us. " Source: L. Frank Baum, The Emerald City of Oz, pp. 30-31, First edition published in 1910. Do you agree with Baum that the economic system in Oz wouldn't work in the contemporary United States? A. The system in Oz would work. There is no scarcity in Oz or in the United States. B. The system in Oz wouldn't work. Even without modest wants, goods are not scarce in the United States. C. The system in Oz would work. The United States has more resources than Oz to fulfill the people's wants. D. The system in Oz wouldn't work. The wants of people in the United States exceed the resources available to fulfill those wants. Your answer is correct. E. The system in Oz wouldn't work. People in the United States are less willing to give freely to their neighbors.
The system in Oz wouldn't work. The wants of people in the United States exceed the resources available to fulfill those wants.
Evaluate the following argument: "Adam Smith's analysis is based on a fundamental flaw: He assumes that people are motivated by self-interest. But this isn't true. I'm not selfish, and most people I know aren't selfish." A. This statement is based on the misconception that Smith's analysis applies to every aspect of life. B. This statement is based on the misconception that Smith's analysis provides no role for government guidance. C. This statement is based on the misconception that Smith's analysis applies to firms and households. D. This statement is based on the misconception that following your self-interest and being selfish are the same thing. Your answer is correct. E. This statement correctly identifies how Smith's analysis ignored charitable acts of giving and benevolence.
This statement is based on the misconception that following your self-interest and being selfish are the same thing. Your answer is correct.
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 A. the value of what he imports (in this case, professional contractor services) must equal the value of what he exports (songs). B. he should concentrate on the restoration work since his out-of-pocket costs will be much lower than if he hires professionals. C. self-sufficiency is advantageous, hence he should split his time between music and construction. D. he ought to do as much of the work himself as possible since imports (in this case, professional contractor services) should always be restricted to those things that cannot be done internally. E. 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.
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.
In a free market, the actions people take are largely determined by A. the "visible hand" of central planning. B. restrictions placed by the government. C. the motivation of equity. D. the motivation of financial reward. Your answer is correct. E. the guild system.
the motivation of financial reward.
What are private property rights? Private property rights are: A. the rights individuals and firms have to the exclusive use of intellectual property but not tangible, physical property. B. the rights individuals but not firms have to the exclusive use of tangible, physical property and intellectual property. C. the rights individuals and firms have to the exclusive use of tangible, physical property but not intellectual property. D. the rights individuals and firms have to the exclusive use of tangible, physical property and intellectual property. Your answer is correct. E. the rights individuals have to the exclusive use of intellectual property and firms have to the exclusive use of tangible, physical property. 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. determine what goods and services will be produced. D. are the basis for international trade. E. both a and b. Your answer is correct. Why are independent courts important for a well-functioning economy? Independence is necessary for courts: A. to make their decisions free of influence from people with powerful political connections. B. to make their decisions free of intimidation by criminal gangs. 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.
the rights individuals and firms have to the exclusive use of tangible, physical property and intellectual property. both a and b. all of the above.
Property rights are A. the rights government has to the exclusive use of all 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 individuals or firms have to the exclusive use of their property, excluding the right to buy or sell it. D. the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.
the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.
According to an article on Phillyburbs.com, some farmers in rural Pennsylvania are causing a "stink" by using pig manure for fertilizer. The farmers purchase the pig manure, which is an organic fertilizer, from a nearby pork processing plant and spread it across the fields where they grow corn and soybeans. The article asserts that the farmers switched to pig manure because of the skyrocketing price of chemical fertilizers. Some of the residents of Milford, however, have complained about the smell, but the "farmers are likely protected under Pennsylvania's Right to Farm Act, which allows farmers to engage in practices that are common to agriculture." Source: Amanda Cregan, "Milford Farmers Switch to Pig Manure Causing a Stink for Neighbors," Phillyburbs.com, March 6, 2013. In their switch to the organic pig manure fertilizer, farmers responded to A. the rising price of chemical fertilizers. Your answer is correct. B. rising incomes. C. rising prices of corn and soybeans. D. falling prices of pig manure. According to the Pennsylvania Right to Farm Act, do the farmers or the townspeople have the property rights to the smell of the air around the farms? (Some of the residents did ask the township to urge the farmers to plow-under the manure to reduce its stench.) According to the Pennsylvania Right to Farm Act, farmers have the property rights to the smell of the air around the farms because the Pennsylvania Right to Farm Act allows A. farmers to plow-under the manure to reduce its stench. B. farmers to engage in practices that are common to agriculture. Your answer is correct. C. townspeople to boycott the offending farmers. D. townspeople to complain
the rising price of chemical fertilizers. farmers to engage in practices that are common to agriculture. Your answer is correct.
Imagine that the next time the New England Patriots play the Miami Dolphins at Gillette Stadium in Foxborough, Massachusetts, Patriots star quarterback Tom Brady has a temporary lack of judgment and plans to sell Patriots memorabilia during the game because he realizes that he can sell five times more Patriots products than anyone in the stadium sports gear store. Likewise, imagine that you are a creative and effective manager at work and that you tell your employees that during the next six months, you plan to clean the offices because you can clean five times better than the cleaning staff. Both you and Tom are making an error in judgment by assuming that specialization should be based upon absolute advantage. You shouldn't necessarily do what you are better than anyone else at doing A. because it may not be your favorite activity. B. unless your advantage in that activity is greater than advantages you possess in other activities. Your answer is correct. C. because others may come to resent your superiority. D. because it detracts from your ability to become self-sufficient.
unless your advantage in that activity is greater than advantages you possess in other activities.
A free market exists A. only in fiction. There are no markets or economies which even come close to approaching the status of a free market. B. 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. Your answer is correct. C. 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. 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.
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.
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 A. funding availability. B. society's willingness to forego other goods and services, both public and private. Your answer is correct. C. the availability and expertise of trained anti-terror personnel. D. the willingness of those in power to restructure the current security apparatus, including the dismissal/reassignment of current security leadership. E. the public's tolerance of a potentially more intrusive state.
society's willingness to forego other goods and services, both public and private.