chapter_2 - ,9eTB1(Case/Fair/Oster Chapter2 1 The Economic...

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Principles of Macroeconomics, 9e - TB1 (Case/Fair/Oster) Chapter 2 The Economic Problem: Scarcity and Choice 2.1 Scarcity, Choice, and Opportunity Cost 1 Multiple Choice 1) The process by which resources are transformed into useful forms is A) capitalization. B) consumption. C) production. D) allocation. Answer: C Diff: 2 Topic : Scarcity, Choice, and Opportunity Cost Skill: Definition 2) Outputs in the production process are A) pollution. B) 1
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money. C) good and services of value to households. D) resources. Answer: C Diff: 2 Topic : Scarcity, Choice, and Opportunity Cost Skill: Definition 3) Which of the following is NOT a resource as the term is used by economists? A) land B) labor C) buildings D) money Answer: D Diff: 1 Topic : Scarcity, Choice, and Opportunity Cost Skill: Fact 4) Which of the following would an economist classify as capital? A) 2
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a $50 bill B) a corporate bond C) a post office employee D) a guitar used by a musician Answer: D Diff: 2 Topic : Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 3
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5) Capital, as economists use the term, A) is the money the firm spends to hire resources. B) is money the firm raises from selling stock. C) refers to the process by which resources are transformed into useful forms. D) refers to things that have already been produced that are in turn used to produce other goods and services. Answer: D Diff: 3 Topic : Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 6) The concept of opportunity cost is based on the principle of A) need. B) consumption. C) scarcity. D) profit. Answer: C Diff: 2 4
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Topic : Scarcity, Choice, and Opportunity Cost Skill: Conceptual 7) The concept of trade-offs would become irrelevant if A) we were dealing with a very simple, one-person economy. B) poverty was eliminated. C) scarcity was eliminated. D) capital was eliminated. Answer: C Diff: 2 Topic : Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 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) diminishing marginal returns. B) comparative advantage. C) opportunity costs. 5
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D) the fallacy of composition. Answer: C Diff: 2 Topic : Scarcity, Choice, and Opportunity Cost Skill: Conceptual AACSB: Reflective Thinking 6
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9) According to the theory of comparative advantage, specialization and free trade will benefit A) only that trading party that has both an absolute advantage and a comparative advantage in the production of all goods. B) all trading parties, even when some are absolutely more efficient producers than others. C) only that trading party that has an absolute advantage in the production of all goods. D) only that trading party that has a comparative advantage in the production of all goods.
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