Intro to Macroeconomics Essay

Exam
Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The process by which resources are transformed into useful forms is
A) consumption.
B) capitalization.
C) production.

D) allocation.

1)

Answer: C
2) Outputs in the production process are
A) goods and services of value to households.
B) money.
C) pollution.
D) resources.

2)

Answer: A
3) Which of the following is NOT a resource as the term is used by economists?
A) buildings
B) labor
C) land

D) money

3)

Answer: D
4) Which of the following would an economist classify as capital?
A) a guitar used by a musician
B) a post office employee
C) a corporate bond
D) a $50 bill

4)

Answer: A
5) Capital, as economists use the term,
A) refers to the process by which resources are transformed into useful forms.
B) is the money the firm spends to hire resources.
C) is money the firm raises from selling stock.
D) refers to things that have already been produced that are in turn used to produce other goods and services.

5)

Answer: D
6) The concept of opportunity cost is based on the principle of
A) scarcity.
B) profit.
C) need.

D) consumption.

6)

Answer: A
7) The concept of trade-offs would become irrelevant if
A) capital was eliminated.
B) poverty was eliminated.
C) scarcity was eliminated.
D) we were dealing with a very simple, one-person economy.

7)

Answer: C
8) Suppose you are deciding whether to spend your tax rebate check on a new iPod player or a new digital camera. You are dealing with the concept of
A) comparative advantage.
B) opportunity costs.
C) diminishing marginal returns.
D) the fallacy of composition.
Answer: B

1

8)

9) According to the theory of comparative advantage, specialization and free trade will benefit
A) only that trading party that has an absolute advantage in the production of all goods.
B) only that trading party that has both an absolute advantage and a comparative advantage in the production of all goods.
C) only that trading party that has a comparative advantage in the production of all goods.
D) all trading parties, even when some are absolutely more efficient producers than others.

9)

Answer: D
Refer to the information provided in Table 2.1 below to answer the questions that follow.
Table 2.1
Krystal
8
2

Writing Poems
Writing TV Commercials

Mark
12
4

10) Refer to Table 2.1. For Krystal, the opportunity cost of writing one TV commercial is
A) 1/4 of a poem.
B) 2 poems.
C) 4 poems.
D) 6 poems.

10)

Answer: C
11) Refer to Table 2.1. For Mark, the opportunity cost of writing one TV commercial is
A) 1/3 of a poem.
B) 2 poems.
C) 3 poems.
D) 8 poems.

11)

Answer: C
12) Refer to Table 2.1. Which of the following statements is TRUE?
A) Mark has a comparative advantage in both writing TV commercials and writing poems.
B) Mark has a comparative advantage in writing TV commercials and Krystal has a comparative advantage in writing poems.
C) Krystal has a comparative advantage in writing TV commercials and Mark has a comparative advantage in writing poems.
D) Krystal has a comparative advantage in both writing TV commercials and writing poems.

12)

Answer: B
13) Refer to Table 2.1. To maximize total production,
A) Mark should specialize in writing TV commercials and Krystal should specialize in writing poems. B) Krystal and Mark should both split their time between writing poems and writing TV commercials. C) Krystal should specialize in writing TV commercials and Mark should specialize in writing poems. D) Krystal should write poems and write TV commercials, but Mark should only write poems.

13)

Answer: A
14) Refer to Table 2.1. For Mark, the opportunity cost of writing six TV commercials is ________ poems made. A) 2
B) 18
C) 24
D) an indeterminate number of
Answer: B

2

14)

15)

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