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Ch02 Economic Tools and Economic Systems
Stanford University
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TRUE/FALSE
1 : Opportunity cost is the difference between the benefits and the costs of a choice. A : true B : false
Correct Answer : B
2 : Opportunity cost is measured in dollar terms, rather than in terms of real goods and services. A : true B : false
Correct Answer : B
3 : The opportunity cost of going to college consists of more than just the tuition. A : true B : false
Correct Answer : B
4 : A rational decision maker engages in an activity if that activity is more attractive than the best alternative. A : true B : false
Correct Answer : A
5 : The opportunity cost of going to college is the same for all students who receive full-tuition scholarships. A : true B : false
Correct Answer : B
6 : Opportunity cost is objective; therefore, its value does not change as circumstances change. A : true B : false
Correct Answer : B
7 : The Sultan of Brunei, one of the worlds richest people, does not face the problem of scarcity. A : true B : false
Correct Answer : B
8 : A university should not disband its football team since it has already paid for the stadium. A : true B : false
Correct Answer : B
9 : A person who can produce more of a good than another person is said to possess a comparative advantage. A : true B : false
Correct Answer : B
10 : Absolute advantage is based on opportunity cost. A : true B : false
Correct Answer : B
11 : It is possible for one person to have a comparative advantage in the production of all products. A : true B : false
Correct Answer : B
12 : Comparative advantage is based on opportunity costs. A : true B : false
Correct Answer : A
13 : It is possible for one person to have an absolute advantage in two tasks and a comparative advantage in only one. A : true B : false
Correct Answer : A
14 : It is possible for one person to have an absolute advantage in something even if she has no comparative advantage in anything. A : true B : false
Correct Answer : B
15 : If people specialize in producing those goods for which they possess a comparative advantage, then an economy as a whole can produce a greater quantity of goods. A : true B : false
Correct Answer : A
16 : Specialization often leads to gains in productivity for society as a whole. A : true B : false
Correct Answer : A
25 : A production possibilities frontier will shift inward if there is an increase in the size of the labor force. A : true B : false
Correct Answer : B
26 : The economic question of what to produce is often referred to as the distribution question. A : true B : false
Correct Answer : B
27 : A command economic system does not need to be concerned with what goods and services to produce, how to produce these goods and services, or who will get the goods and services produced. A : true B : false
Correct Answer : B
28 : Of the various types of economic systems, pure market capitalism involves the greatest government interference and control over the economy. A : true B : false
Correct Answer : B
29 : One flaw of pure capitalism is that a person who owns no resources could starve. A : true B : false
Correct Answer : A
30 : Inefficiency is a flaw of a command economy because there is less incentive for resources to flow to their highest-valued uses. A : true B : false
Correct Answer : A
31 : The primary differences in economic structure among different countries relate to the ownership of resources and the manner in which economic activities are coordinated. A : true B : false
Correct Answer : A
MULTIPLE CHOICE
32 : Outside of economics, the total cost of an item is measured as _____
A : the dollar cost of the item. B : the time spent obtaining the item. C : what you gave up to get the item. D : the opportunity cost of the item. E : the sunk cost of the item.
Correct Answer : A
33 : In economics, the total cost of an item is measured as _____ A : the dollar cost of the item. B : the time spent obtaining the item. C : what you gave up to get the item. D : the implicit cost of the item. E : the explicit cost of the item.
Correct Answer : C
34 : _____ is the value of the best alternative forgone when an item or activity is chosen. A : The choice cost B : The opportunity cost C : The direct cost D : The implicit cost E : The explicit cost
Correct Answer : B
35 : What is the term for giving up one choice for another opportunity? A : choice cost B : opportunity cost C : direct cost D : implicit cost E : explicit cost
Correct Answer : B
36 : Opportunity cost can also be thought of as _____ A : an opportunity lost. B : an opportunity gained. C : a dollar expenditure. D : the overhead spent. E : a waste of time.
Correct Answer : A
37 : Opportunity costs exist because _____ A : technology is fixed. B : of comparative advantage. C : resources are scarce but wants are unlimited. D : the value of lost opportunities varies. E : efficiency is measured by the monetary cost of an activity
Correct Answer : C
Correct Answer : B
44 : Attending summer school costs $2,200. If you worked, you could earn $7,000. What is the opportunity cost of attending summer school? A : $2,200. B : $7,000. C : $8,000. D : $9,200. E : $10,200.
Correct Answer : D
45 : A test is scheduled for Monday morning, and you went to a party on Sunday night. If you hadnt attended the party, you could have studied for the test or gone to a movie. Which of the following is true of your opportunity cost? A : The opportunity cost of going to the movie is zero. B : The opportunity cost of going to the party is the difference between the costs of the movie and the party. C : The opportunity cost of going to the party is the total amount spent on transport to go to the party. D : The opportunity cost of going to the party is the cost of the movie ticket. E : From the above information, its not possible to determine the opportunity cost of attending the party.
Correct Answer : E
46 : The term opportunity cost suggests that _____ A : one person must lose when someone else gains in an exchange situation. B : not all individuals make the most of lifes opportunities. C : executives do not always recognize opportunities for profit as quickly as they should. D : the only factor that is important in decision making is cost. E : a good must be given up to get some other good in return as resources are scarce.
Correct Answer : E
47 : If you enjoy playing golf, the opportunity cost of cleaning your room _____ A : is greater on sunny days than it is on rainy days. B : is the same on sunny days as it is on rainy days. C : is smaller on sunny days than it is on rainy days. D : does not change with weather conditions. E : is equal to the opportunity cost of any other chore you have to do that day.
Correct Answer : A
48 : Melissa is a self-employed lawyer who chooses a higher-priced restaurant that is 2 miles away from her home over a cheaper restaurant that is 15 miles away from her home. Which of the following is the most likely explanation for her behavior? A : The opportunity cost of her time is very low. B : She does not take the time taken to travel to the restaurants into consideration. C : She does not like to cook. D : The prices at the more expensive restaurant understate the opportunity cost of eating there. E : The higher cost of the more expensive restaurant is offset by the higher opportunity cost of the cheaper restaurant.
Correct Answer : E
49 : The opportunity cost of an activity is best measured _____ A : in terms of the monetary costs of the activity. B : by the number of alternative activities that are forgone by choosing this activity. C : by the difference between the costs of the chosen activity and the next best alternative. D : by the value expected from the best alternative that is forgone. E : by the time wasted choosing among various activities.
Correct Answer : D
50 : The opportunity cost of an activity is best measured _____ A : $ B : $ C : $ D : $ E : $
Correct Answer : E
51 : The opportunity cost of an activity is best measured _____ A : $ B : $ C : $ D : $ E : $
Correct Answer : E
52 : The opportunity cost of an activity is best measured _____ A : $ B : $ C : $ D : $ E : $
Correct Answer : E
53 : The opportunity cost of an activity is best measured _____ A : $ B : $ C : $ D : $ E : $
Correct Answer : E
54 : The opportunity cost of an activity is best measured _____ A : $10 in terms of movies B : $10 in terms of restaurant C : $20 in terms of movies and $20 in terms of restaurant D : $40 because you managed to do both
D : the total value of all the options taken together E : the value of none of options if B were chosen
Correct Answer : C
61 : The opportunity cost of an activity is best measured _____ A : $ B : $15 in terms of D C : $50 in terms in terms of B D : the total value of all the options taken together E : the value of none of options if B was chosen
Correct Answer : C
62 : A cost that has already been incurred and cannot be recovered is known as a(n)_____ A : sunk cost. B : opportunity cost. C : direct cost. D : implicit cost. E : explicit cost.
Correct Answer : A
63 : A sunk cost _____ A : can only be measured in monetary terms. B : is a cost that has already been incurred and cannot be recovered. C : should influence a persons choice if that person is a marginal decision maker. D : lowers the efficiency of production. E : should not be considered when making economic decisions.
Correct Answer : B
64 : Sunk costs _____ A : can only be measured in monetary terms. B : are opportunity costs. C : are marginal costs. D : lower the efficiency of production. E : should not be considered when making economic decisions.
Correct Answer : E
65 : Suppose the line you are standing in at a grocery checkout counter has not moved for 10 minutes. You notice a cashier opening a new one and inviting you to check out. Do you switch to the new cashier or stay put because you have already waited for 10 minutes? A : stay, because you have already waited for 10 minutes B : decide to wait for another 5 minutes in case your line speeds up C : walk out of the store without buying anything because of the wait times D : be patient and read a magazine while you are waiting E : switch, because the 10 minutes you waited is a sunk cost
Correct Answer : E
66 : Suppose you have purchased a nonrefundable plane ticket. At the last moment, you cannot
take the trip but can still sell the ticket. The cost of sending the ticket to someone through overnight mail is $20, and you have to spend $10 on a courier to get the ticket to the post office for overnight delivery. If you paid $700 for the ticket, which of the following is the minimum amount you should accept for the ticket? A : $700, because that is what the ticket costs B : $720, because that is the sum of the cost of the ticket and the cost of sending it to the buyer C : $730, because that is the sum of the cost of the ticket and the cost of sending it to the buyer D : More than $730, so that you can make a profit E : $30, because the $700 is a sunk cost
Correct Answer : E
67 : The ability to make something using fewer resources than other producers use is known as
A : specialization. B : exchange C : arbitrage. D : absolute advantage. E : comparative advantage.
Correct Answer : D
68 : _____ is the ability to make something using fewer resources than other producers use. A : Specialization. B : Exchange. C : Arbitrage. D : Absolute advantage. E : Comparative advantage.
Correct Answer : D
69 : A country has an absolute advantage in the production of a good if that country _____ A : can produce the good using fewer resources than another country would require. B : has the lowest opportunity cost of producing the good and can sell it at the highest price. C : has the lowest opportunity cost of producing the good, regardless of whether it is produced using the fewest resources. D : has the greatest opportunity cost of producing the good, regardless of whether it is produced using the fewest resources. E : has the greatest opportunity cost of producing the good and can sell it at the highest price.
Correct Answer : A
70 : The law of comparative advantage says that a person should produce a good if he or she
A : has the greatest desire to consume the good. B : has the lowest opportunity cost of producing the good. C : has an absolute advantage in producing the good. D : receives the highest marginal benefit from the good. E : can produce the good at the same cost as another producer can.
Correct Answer : B
71 : You realize that total output would increase if you did all the typing and your roommate did
Correct Answer : C
77 : The law of comparative advantage states that the person who _____ should produce the good. A : has the lowest opportunity cost of producing a good B : can produce a good using the fewest resources C : can produce a good using the most expensive resources D : has the most desire for a good E : has produced a particular good in the past
Correct Answer : A
78 : _____ states that the person with the lowest opportunity cost should produce the good. A : Specialization B : Exchange C : Arbitrage D : Absolute advantage E : Comparative advantage
Correct Answer : E
79 : John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct? A : Harry has a comparative advantage in ironing. B : Harry has a comparative advantage in typing. C : Harry has an absolute advantage in typing. D : Harry has an absolute advantage in ironing. E : Neither can gain from specialization and exchange.
Correct Answer : A
80 : Don can produce 10 pens or 20 pencils in one hour, while Bob can produce 5 pencils or 15 pens in one hour. Which of the following statements is correct? A : Bob has an absolute advantage in the production of pencils. B : Bob has an absolute advantage in the production of pens. C : Bob has a comparative advantage in the production of pencils. D : Don has a comparative advantage in the production of pens. E : Don does not have a comparative advantage in the production of either good.
Correct Answer : B
81 : If Jason can wash a car in 20 minutes and wash a dog in 10 minutes and Megan can wash a car in 15 minutes and wash a dog in 15 minutes, which of the following statements is true? A : The opportunity cost of washing a car is greater for Megan. B : The opportunity cost of washing a car is one dog bath for Jason. C : Megan can wash two cars in the time it takes Jason to wash a dog. D : Jason has both a comparative and an absolute advantage in washing a dog. E : The opportunity cost of washing a dog is lower for Megan.
Correct Answer : D
82 : Janis mows a lawn in 1 hour and types a paper in 1 hour. Kristen mows a lawn in 2 hours and types a paper in 1 hour. Which of the following statements is true? A : Kristen has an absolute advantage in typing and a comparative advantage in mowing. B : Janis has an absolute advantage in both the activities and a comparative advantage in typing. C : Janis has an absolute advantage in both the activities and a comparative advantage in mowing. D : The opportunity cost of mowing the lawn is greater for Kristen than it is for Janis. E : Neither Janis nor Kristen would gain from specialization.
Correct Answer : D
83 : If Monica has a comparative advantage in baking and George has a comparative advantage in sewing, then _____ A : Monica must have an absolute advantage in baking. B : Monica must have an absolute advantage in sewing. C : George must have an absolute advantage in baking. D : George must have an absolute advantage in sewing. E : we can conclude nothing about absolute advantage.
Correct Answer : E
84 : If Evan has an absolute advantage in cleaning and bookkeeping when compared to Gloria, then _____ A : Evan must also have a comparative advantage in cleaning and bookkeeping. B : Evan must have a comparative advantage in cleaning. C : Evan must have a comparative advantage in bookkeeping. D : Gloria has a comparative advantage in neither activity. E : we can conclude nothing about comparative advantage.
Correct Answer : E
85 : If Jeremy has an absolute advantage in cooking and Margaret has an absolute advantage in cleaning, then _____ A : Jeremy has a comparative advantage in cooking and Margaret has a comparative advantage in cleaning. B : Jeremy has a comparative advantage in cleaning and Margaret has a comparative advantage in cooking. C : Margaret has a comparative advantage in cleaning, but we can conclude nothing about Jeremy. D : Jeremy has a comparative advantage in cooking, but we can conclude nothing about Margaret. E : we can conclude nothing about comparative advantage.
Correct Answer : E
86 : If Robin has an absolute advantage in both gardening and baking when compared to Robert, then _____ A : Robin cannot benefit by trading with Robert and should instead specialize in both gardening and baking. B : Robin can benefit by specializing in gardening if Robert specializes in baking. C : Robin can benefit by specializing in baking if Robert specializes in gardening. D : Robin and Robert may benefit from trading, but there is insufficient information to determine
Correct Answer : D
92 : Eileen has a comparative advantage over Jan in piano tuning, but not shoe polishing. Which of the following is correct? A : Jan must have an absolute advantage in piano tuning B : Eileen must have an absolute advantage in shoe polishing C : Jan must have a lower opportunity cost of shoe polishing D : Eileen must have an absolute advantage in shoe polishing and in piano tuning E : Eileen must have an absolute advantage only in piano tuning
Correct Answer : C
93 : If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, which of the following is correct? A : The opportunity cost of painting is higher for Helen. B : The opportunity cost of baking cakes is lower for Josh. C : Helens opportunity cost of painting one room is equal to 1/40 of a cake. D : Joshs opportunity cost of baking one cake is equal to painting 60 rooms. E : The opportunity cost of cakes cannot be computed.
Correct Answer : B
94 : If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, Helens opportunity cost of baking one cake is equal to _____ A : painting one room. B : painting 1/40 of a room. C : painting 1/60 of a room. D : painting 2/3 of a room. E : painting 3/2 of a room.
Correct Answer : B
95 : If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, Joshs opportunity cost of baking one cake is
A : painting one room. B : painting 1/40 of a room. C : painting 1/60 of a room. D : painting 2/3 of a room. E : painting 3/2 of a room.
Correct Answer : C
96 : Hans can do 4 loads of laundry and type 6 pages per hour. Heidi can do 12 loads of laundry and type 8 pages per hour. Hanss opportunity cost of doing one load of laundry is
A : equal to typing 12 papers. B : equal to typing 8 papers. C : equal to typing 1 1/2 pages. D : equal to typing 2/3 of a page. E : impossible to compute without additional information.
Correct Answer : C
97 : Hans can do 4 loads of laundry and type 6 pages per hour. Heidi can do 12 loads of laundry and type 8 pages per hour. Heidis opportunity cost of doing one load of laundry is
A : equal to typing 4 pages. B : equal to typing 6 pages. C : equal to typing 2/3 of a page. D : equal to typing 3/2 of a page. E : impossible to compute without additional information.
Correct Answer : C
98 : Hans can do 4 loads of laundry and type 6 pages per hour. Heidi can do 12 loads of laundry and type 8 pages per hour. Hanss opportunity cost of typing one page is: A : equal to 12 loads of laundry. B : equal to 8 loads of laundry. C : equal to 3/2 of a load of laundry. D : equal to 2/3 of a load of laundry. E : impossible to compute without additional information.
Correct Answer : D
99 : Hans can do 4 loads of laundry and type 6 pages per hour. Heidi can do 12 loads of laundry and type 8 pages per hour. Heidis opportunity cost of typing one page is _____ A : equal to 4 loads of laundry. B : equal to 6 loads of laundry. C : equal to 3/2 of a load of laundry. D : equal to 2/3 of a load of laundry. E : impossible to compute without additional information.
Correct Answer : C
100 : In one week, Sami can knit 5 sweaters or bake 240 cookies. In one week, Leila can knit 15 sweaters or bake 480 cookies. Samis opportunity cost of knitting one sweater is _____ A : equal to 480 cookies. B : equal to 240 cookies. C : equal to 48 sweaters. D : equal to 1/48 of a cookie. E : equal to 48 cookies.
Correct Answer : E
101 : In one week, Sami can knit 5 sweaters or bake 240 cookies. In one week, Leila can knit 15 sweaters or bake 480 cookies. Samis opportunity cost of baking one cookie is _____ A : equal to 1 sweater. B : equal to 5 sweaters. C : equal to 48 sweaters. D : equal to 1/48 of a sweater. E : equal to 48 cookies.
Correct Answer : D
Refer to Exhibit 2, which shows the production for rice and T-shirts for two countries: Costa Rica and the United States. If the United States produces exactly half of its total production in each good, what will it produce? A : 100 T-shirts and 100 tons of rice B : 250 T-shirts and 250 tons of rice C : 500 T-shirts and 500 tons of rice D : 750 T-shirts and 750 tons of rice E : 1000 T-shirts and 1000 tons of rice
Correct Answer : C
106 : Exhibit 2.
Refer to Exhibit 2, which shows the production for rice and T-shirts for two countries: Costa Rica and the United States. In Costa Rica, the opportunity cost of 1 ton of rice is _____ A : equal to 1/2 of a T-shirt B : equal to 3/4 of a T-shirt C : equal to 1 T-shirt D : equal to 11/2 T-shirts E : equal to 2 T-shirts
Correct Answer : C
107 : Exhibit 2.
Refer to Exhibit 2 which shows the production for rice and T-shirts for two countries: Costa Rica and the United States. In the United States, the opportunity cost of 1 ton of rice is:For answer to be correct, for the United States, on the vertical axis, maximum T-shirt production should touch 1000 units. A : equal to 1/2 of a T-shirt. B : equal to 3/4 of a T-shirt. C : equal to 1 T-shirt. D : equal to 11/2 T-shirts. E : equal to 2 T-shirts.
Correct Answer : C
108 : Refer to Exhibit 2, which shows the production for rice and t-shirts for two countries: Costa Rica and the United States. Assume exactly country produces half of its total production in each good and they are the only producers of T-shirts and rice. What is the total production of T-shirts and rice? A : 1500 T-shirts and 1500 tons of rice. B : 1000 T-shirts and 1500 tons of rice. C : 1000 T-shirts and 500 tons of rice. D : 750 T-shirts and 750 tons of rice. E : 500 T-shirts and 1000 tons of rice.
Correct Answer : D
109 : Barter occurs when _____ A : two people share everything. B : one product is exchanged directly for another product. C : money is used to buy goods. D : money in different currencies is exchanged directly. E : goods are used to buy money.
Correct Answer : B
110 : Bill trades a gingersnap for a chocolate chip cookie. This is an example of _____ A : barter. B : a credit transaction. C : a monetary exchange. D : privatization. E : the division of labor.
Ch02 Economic Tools and Economic Systems
Course: Economic Analysis Iii (ECON 52)
University: Stanford University
