Basic Economic Concepts Post-Test
Question 1
1 out of 1 points
Mike and Sandy are two woodworkers who both make tables and chairs. In one
month, Mike can make 4 tables or 20 chairs, while Sandy can make 6 tables or 18
chairs. Given this, we know that:
Selected Answer:
b.
Mike has an absolute advantage in chairs.
Correct Answer:
b.
Mike has an absolute advantage in chairs.
Response RATIONALE: The firm that can produce the good with a smaller
Feedback quantity of economic resources (e.g., labor, land, capital) is said to
:
have an absolute advantage in producing the good. In one month,
Mike can produce more chairs with the same amount of labor. For
more information, see lesson on Topic 4: Comparative Advantage and
Specialization; subtopic The Benefits of Trading.
Question 2
1 out of 1 points
TABLE A*
Minutes Needed to Make 1
Bushel of
Wheat
Pound of
Beef
Andia
20
12
Zardia
15
10
* Assume that Andia and Zardia can switch between producing wheat and producing beef
at a constant rate.
Refer to Table A. Assume that Andia and Zardia each has 360 minutes available.
If each person divides his time equally between the production of wheat and
beef, then total production is:
Selected Answer:
c.
21 bushels of wheat and 33 pounds of beef.
Correct Answer:
c.
21 bushels of wheat and 33 pounds of beef.
Response RATIONALE: In 360 minutes, Andia can produce 9 bushels of wheat
Feedback and 15 pounds of beef. Zardia can produce 12 bushels of wheat and
:
18 pounds of beef. The total production of both individuals is 21
bushels of wheat and 33 pounds of beef. For more information, see
lesson on Topic 4: Comparative Advantage and Specialization;
subtopic The Benefits of Trading.
Question 3
1 out of 1 points
FIGURE 1
Refer to Figure 1. If the production possibilities frontiers shown are each for one
day of production, then which of the following combinations of tacos and burritos
could Arturo and Dina together produce in a given day?
Selected Answer:
b.
600 tacos and 150 burritos
Correct Answer:
b.
600 tacos and 150 burritos
Response RATIONALE: Dina could make 400 tacos if she spent all day focused
Feedback on taco production. Arturo could split his day between tasks, making
:
200 tacos and 150 burritos. Together, they could make 600 tacos and
150 burritos. For more information, see lesson on Topic 4:
Comparative Advantage and Specialization; subtopic The Benefits of
Trading.
Question 4
1 out of 1 points
As a student, Anne spends 40 hours per week writing term papers and
completing homework assignments. On one axis of her production possibilities
frontier is the number of term papers written per week. On the other axis is the
number of homework assignments completed per week. Annes production
possibilities frontier is a straight line if:
Selected
Answer:
a.
she can switch between writing term papers and completing
homework assignments at a constant rate.
Correct
Answer:
a.
she can switch between writing term papers and completing
homework assignments at a constant rate.
Response
Feedback:
RATIONALE: The PPF is a straight line if the production of one good as
opposed to another is at a constant rate. For more information, see
lesson on Topic 4: Comparative Advantage and Specialization;
subtopic The Benefits of Trading.
Question 5
1 out of 1 points
The degree of government involvement in the economy is greatest in a _____
economy.
Selected Answer:
a.
command
Correct Answer:
a.
command
Response RATIONALE: In command economies, resource allocation is
Feedback determined by central planners rather than in the market. Decisions
:
about what is produced are largely determined by a government
official or a committee associated with the central planning
organization. For more information, see lesson on Topic 2: Economic
Systems, subtopic Market Economies versus Central Planning.
Question 6
1 out of 1 points
In most societies, dollar price acts as the main rationing device. If dollar price
were not the main rationing device, would there still be a need for some
rationing device to take its place?
Selected
Answer:
b.
Yes, because there is a need for a rationing device as long as
scarcity exists.
Correct
Answer:
b.
Yes, because there is a need for a rationing device as long as
scarcity exists.
Response RATIONALE: Scarcity creates the need for a rationing device, or a
Feedback means to decide who gets what of the resources available. Examples
:
of other rationing devices are distributing equal shares, first-comefirst-served, or even by age. For more information, see Lesson on
Topic 1: Scarcity and Opportunity Cost; subtopic Decisions and Their
Costs.
Question 7
1 out of 1 points
The opportunity cost of attending college:
Selected Answer:
d.
varies from person to person.
Correct Answer:
d.
varies from person to person.
Response RATIONALE: Opportunity costs vary from person to person. An
Feedback individual who decided to go to college instead of playing professional
:
basketball, for example, has a much higher opportunity cost than a
person who decided to go to college instead of being a dog groomer.
For more information, see Lesson on Topic 1: Scarcity and Opportunity
Cost; subtopic Decisions and Their Costs.
Question 8
1 out of 1 points
Both country 1 and country 2 are located on their respective production
possibilities frontiers (PPFs), but country 1 produces twice the output that
country 2 produces. It follows that:
Selected Answer:
a.
country 1's PPF lies further to the right than country 2's PPF.
Correct Answer:
a.
country 1's PPF lies further to the right than country 2's PPF.
Response RATIONALE: A country with a greater output would have a PPF further
Feedback: to the right of one with lower economic output. For more information,
see lesson on Topic 3: Production Possibilities Frontier; subtopic The
Production Possibilities Frontier (PPF), Efficiency, and Inefficiency.
Question 9
1 out of 1 points
The economy moves from point A, where it produces 100X and 200Y, to point B,
where it produces 200X and 150Y. It follows that:
Selected Answer:
d.
b and c
Correct Answer:
d.
b and c
Response
Feedback
:
RATIONALE: There is not enough information to determine whether
point A falls on the PPF, where the economy would be producing
efficiently. For more information, see lesson on Topic 3: Production
Possibilities Frontier; subtopic The Production Possibilities Frontier
(PPF), Efficiency, and Inefficiency.
Question 10
1 out of 1 points
Jose has one evening in which to prepare for two exams and can employ two
possible strategies:
Strategy
Score in Economics
Score in Statistics
94
79
77
90
The opportunity cost of receiving a 94 on the economics exam in terms of the
number of points on the statistics exam is:
Selected Answer:
c.
11.
Correct Answer:
c.
11.
Response RATIONALE: The opportunity cost of anything is what you must give
Feedback up to obtain it. Since Jose might have scored a 90 on his statistics
:
exam, he loses 11 points by choosing strategy A. For more
information, see lesson on Topic 3: Production Possibilities Frontier;
subtopic The Production Possibilities Frontier (PPF), Efficiency, and
Inefficiency.
Question 1
1 out of 1 points
FIGURE 2
Refer to Figure 2. Both Alice and Betty:
Selected
Answer:
a.
face a constant trade-off between producing pitchers of
lemonade and pizzas.
Correct
Answer:
a.
face a constant trade-off between producing pitchers of
lemonade and pizzas.
Response RATIONALE: Alice and Betty each have straight line PPFs, meaning
Feedback: they face a constant trade-off between the two choices of production.
For more information, see lesson on Topic 4: Comparative Advantage
and Specialization; subtopic The Benefits of Trading.
Question 2
1 out of 1 points
FIGURE 1
Refer to Figure 1. If Dina must work 0.25 hour to produce each taco, then her
production possibilities frontier is based on how many hours of work?
Selected Answer:
d.
100 hours
Correct Answer:
d.
100 hours
Response
Feedback:
RATIONALE: 400 tacos x 0.25 hour = 100 hours. The PPF represents
100 hours of Dinas labor. For more information, see lesson on Topic
4: Comparative Advantage and Specialization; subtopic The Benefits
of Trading.
Question 3
1 out of 1 points
FIGURE 1
Refer to Figure 1. If Arturo and Dina both spend all of their time producing tacos,
then total production is:
Selected Answer:
c.
800 tacos and 0 burritos.
Correct Answer:
c.
800 tacos and 0 burritos.
Response
Feedback:
RATIONALE: When focused soley on taco production, Arturo and Dina
can each make 400 tacos, or 800 total. For more information, see
lesson on Topic 4: Comparative Advantage and Specialization;
subtopic The Benefits of Trading.
Question 4
1 out of 1 points
FIGURE 1
Refer to Figure 1. If Arturo and Dina each divides his/her time equally between
the production of tacos and burritos, then total production is:
Selected Answer:
c.
400 tacos and 250 burritos.
Correct Answer:
c.
400 tacos and 250 burritos.
Response
Feedback
:
RATIONALE: Spending equal time on each, Arturo can produce 150
burritos and 200 tacos. Dina can produce 100 burritos and 200 tacos.
Their total production is 400 tacos and 250 burritos. For more
information, see lesson on Topic 4: Comparative Advantage and
Specialization; subtopic The Benefits of Trading.
Question 5
1 out of 1 points
Workers building railroads by hand in the 1800s was an example of a(n) ____
intensive form of production.
Selected Answer:
d.
labor
Correct Answer:
d.
labor
Response RATIONALE: Each nation tends to use the production processes that
Feedback conserve its relatively scarce (and thus relatively more expensive)
:
resources and use more of its relatively abundant resources. The best
method is the least-cost method. Labor-intensive methods will be
used where capital is relatively scarce, and capital-intensive methods
will be used where labor is relatively scarce. For more information, see
lesson on Topic 2: Economic Systems, subtopic Market Economies
versus Central Planning.
Question 6
1 out of 1 points
In most societies, dollar price acts as the main rationing device. If dollar price
were notthe main rationing device, would there still be a need for some rationing
device to take its place?
Selected
Answer:
b.
Yes, because there is a need for a rationing device as long as
scarcity exists.
Correct
Answer:
b.
Yes, because there is a need for a rationing device as long as
scarcity exists.
Response RATIONALE: Scarcity creates the need for a rationing device, or a
Feedback means to decide who gets what of the resources available. Examples
:
of other rationing devices are distributing equal shares, first-comefirst-served, or even by age. For more information, see Lesson on
Topic 1: Scarcity and Opportunity Cost; subtopic Decisions and Their
Costs.
Question 7
1 out of 1 points
The headline in the newspaper reads "County Supervisors Debate Building New
Schools." The headline relates closest to which economic concept?
Selected Answer:
d.
Choice
Correct Answer:
d.
Choice
Response RATIONALE: Because goods and services are scarce, people must
Feedback: make choices. Making decisions requires comparing the costs and
benefits of alternative choices. For more information, see Lesson on
Topic 1: Scarcity and Opportunity Cost; subtopic Decisions and Their
Costs.
Question 8
1 out of 1 points
In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of
butter. In an eight-hour day, John can produce either 8 loaves of bread or 8
pounds of butter. The opportunity cost of producing 1 pound of butter is:
Selected Answer:
c.
3 loaves of bread for Andy and 1 loaf of bread for John.
Correct Answer:
c.
3 loaves of bread for Andy and 1 loaf of bread for John.
Response RATIONALE: The opportunity cost of producing a good is what you
Feedback must give up to obtain it. To produce 1 pound of butter, Andy must
:
give up 3 loaves of bread (24 / 8 = 3). John must give up 1 loaf of
bread to produce 1 pound of butter. For more information, see lesson
on Topic 3: Production Possibilities Frontier; subtopic The Production
Possibilities Frontier (PPF), Efficiency, and Inefficiency.
Question 9
1 out of 1 points
Which one of the following is an illustration of the law of increasing opportunity
costs?
Selected
Answer:
a.
As more cars are produced, the opportunity cost of each additional
car is greater than for the preceding unit.
Correct
Answer:
a.
As more cars are produced, the opportunity cost of each additional
car is greater than for the preceding unit.
Response RATIONALE: The basic reason for increasing opportunity cost is that
Feedback some resources and skills cannot be easily adapted from their current
:
uses to alternative uses. Easily adaptable resources are soon
exhausted, and resources and workers that are less well suited or
appropriate (those with a relatively greater opportunity cost) must
then be employed to increase output further. For more information,
see lesson on Topic 3: Production Possibilities Frontier; subtopic The
Production Possibilities Frontier (PPF), Efficiency, and Inefficiency.
Question 10
1 out of 1 points
The economy moves from point A, where it produces 100X and 200Y, to point B,
where it produces 200X and 150Y. It follows that:
Selected Answer:
e.
b and c
Correct Answer:
e.
b and c
Response
Feedback
:
RATIONALE: There is not enough information to determine whether
point A falls on the PPF, where the economy would be producing
efficiently. For more information, see lesson on Topic 3: Production
Possibilities Frontier; subtopic The Production Possibilities Frontier
(PPF), Efficiency, and Inefficiency.
