Quiz 1 – Econ 202 – Fall ’12 KEY
1. The expression, "There's no such thing as a free lunch" implies that
costs are incurred when resources are used to produce goods and services.
2. The best example of decision making at the margin would be
observing the effect that a small change in income has on the amount of income tax owed and therefore upon after-tax income
3. The ____________ the opportunity cost of doing something, the ____________ likely it will be done
higher, less
4. Country C has an economic system that can be described as one with government ownership of factors of production, government allocation of resources, centralized decision making, and a major role for the government in economic activities. Which of the following classifications correctly labels the economic system of country C?
a command economy
5. Which of the following might be considered to be a characteristic of a planned/command economy?
There is no incentive for people to work hard
6. If an economy is operating at a point inside the production possibilities curve,
its resources are being wasted.
7. Does voluntary exchange create wealth (value)?
Yes, trade generally permits the trading partners to gain more of what they value; this is why they agree to the terms of the exchange.
8. When people develop expertise by dividing up the tasks encountered in major productive activities such as manufacturing a plane or making a movie, one of the most likely results is:
broadly distributed gains from specialized production and trade.
9. Which of the following will most likely occur under a system of clearly defined and enforced private property rights?
Resource owners will gain by discovering and employing their resources in ways that are highly valued by others.
10. Increasing opportunity cost while moving along a production possibility frontier is due to
the fact that resources are not equally productive in alternative uses.
11. The fundamental fact of scarcity implies that every decision involves:
opportunity costs.
12. Economic capital refers to:
buildings, machinery, and equipment.
13. The money payment made to owners of land, labor, capital, and entrepreneurial ability are
rent, wages, interest, and profits respectively.
14. The “coincidence of wants” problem associated with barter refers to the fact that
for exchange to occur each transactor must have a product which the other transactor wants.
15. Economics as an area of study broadly focuses on:
scarcity and decision making.
16. Along a production possibilities frontier, a society can produce more of a good only if:
it gives up some of some other good..
17. The graph in Figure 1 depicts the mythical country of Sandwichia’s production possibility frontier. Sandwichia would have to experience significant technological progress or massive saving and investment before it could feasibly choose to produce at:
point e.
18. From Figure 1, the opportunity cost of producing an extra jar of peanut butter in Sandwichia is highest at:
point d.
19. In the circular-flow diagram,
households are sellers in the resource market.