Q&A Hero

Q: In the circular flow model, households demand resources such as labor services in the factor market.

Q: The payment received by suppliers of entrepreneurial skills is called wages.

Q: Each person goes about her daily business seeking to maximize her own self interests. In doing so, she contributes to the welfare of society at large. This is the idea underlying Adam Smith's "invisible hand."

Q: Crude oil is not an example of a factor of production, but when crude oil is processed into gasoline, it is a factor of production.

Q: In a free market there are virtually no restrictions, or at best few restrictions on how factors of production can be employed.

Q: Entrepreneurs bring together the factors of production to produce goods and services.

Q: In the circular flow model, households supply resources such as labor services in the factor market.

Q: The payment received by suppliers of entrepreneurial skills is called interest.

Q: Because the copyright on the L. Frank Baum book The Wonderful Wizard of Oz expired many years ago, the actual written words from the book are in the public domain. Publishers who now choose to sell their own versions of the book A) can claim copyright of Baum's words if they are the first to publish the book after the original copyright expired. B) can claim copyright of Baum's words no matter how many versions are published, since the original is in the public domain. C) can not claim copyright of Baum's words since they are in the public domain, but can claim copyright on any new design or illustrations created for the book. D) can not claim copyright of Baum's words, or on any new design or illustrations created for the book, since the original written words are in the public domain.

Q: Article Summary Since 2008, the United States has been involved in trade negotiations over the Trans-Pacific Partnership (TPP), a free trade agreement with 11 other countries on both sides of the Pacific Ocean. One area of the negotiations involves patents and intellectual property rights in the pharmaceutical industry. A number of developing countries have ignored international agreements concerning patents and intellectual property rights as a way to benefit their domestic pharmaceutical industries, to the detriment of those companies which have spent considerable time and money developing new medicines. For every 5,000 to 10,000 experimental drugs contemplated, only one will typically gain FDA approval, and this occurs only after up to 15 years of research at an average cost of more than $1 billion. Also, 30 percent of the U.S. workforce is either directly or indirectly employed in the pharmaceutical industry, so protection of these intellectual property rights is very important for the U.S. economy. Source: Doug Schoen, "Intellectual Property Rights Matter," Forbes, September 24, 2013. Refer to the Article Summary. If more developing countries began abiding by international agreements which protect intellectual property rights, all of the following would most likely occur except A) pharmaceutical companies would increase investment in the development of more experimental drugs. B) pharmaceutical companies would consider expanding operations to these developing countries. C) more patents would be issued to pharmaceutical companies. D) fewer dollars would be spent on the development of new medicines.

Q: All of the following are examples of spending on goods and services in the circular flow model except A) Giovani buys a new cell phone to replace the one he flushed down the toilet. B) Amir buys a new humidor for his cigar shop. C) Isabella buys the sushi plate for lunch at the Turning Japanese Sushi Bar. D) Vijay buys a new minivan for his family's cross-country vacation.

Q: Which of the following is an examples of spending on factors of production in the circular flow model? A) Orson buys a package of beef jerky at a convenience store. B) Bernadette gets a manicure and pedicure before attending her parents' anniversary party. C) Landon pays $100 for a season pass to a water park. D) The "Suds Bucket" car wash buys new squeegees for all its employees.

Q: When you purchase a new set of spurs you do so in the A) resource market. B) product market. C) input market. D) factor market.

Q: If a brewery wants to raise funds to purchase a new fermenting vat, it does so in the A) factor market. B) output market. C) product market. D) alcoholic beverages market.

Q: An example of a factor of production is A) a bottle of wine produced by a vineyard. B) a vintner hired by a vineyard. C) a loan granted to a vineyard. D) the wine exported by a vineyard.

Q: Which of the following is a factor of production? A) a necklace produced by a jewelry manufacturer B) 50 shares of Google stock C) the security guard at the local bank D) $1,000 in casino chips

Q: If a nation changes its laws to more actively enforce intellectual property rights, all of the following will most likely take place except A) more software companies will choose to export their products to that country. B) more film makers will choose to do business in that country. C) the black market for intellectual property will become more prosperous in in that country. D) foreign investment in that country will increase.

Q: Stricter laws and regulations to protect intellectual property rights A) will help to create a more successful market system. B) will only benefit those companies whose intellectual property rights have in the past been ignored. C) will tend to have little impact on an economy since intellectual property is not tangible. D) will create a stronger and more successful black market for intellectual property.

Q: In 18th century Europe, governments gave guilds legal authority to limit production of goods. Did this authority obstruct or improve the market mechanism and how? A) It improved the market mechanism by making it more efficient because the guilds were able to quickly identify and rectify any market shortages and surpluses. B) It improved the market mechanism because the government's actions provided the correct set of signals to the market so that producers can adjust their output to better meet the needs of consumers. C) It obstructed the market mechanism because the guild's actions prevented the forces of demand and supply from coordinating the self-interested decisions of producers and consumers. D) It obstructed the market mechanism because with one more party having to coordinate activities (the guilds) there were delays in getting the products to consumers.

Q: An organization of producers that limits the amount of a good produced is known as a A) free market organization. B) guild. C) collective. D) co-op.

Q: Consider the following items: a. the album "21" by Adele b. a Dutch horticulturalist's new method for cultivating hybrid tulips c. Rolls Royce's "Spirit of Ecstasy" hood ornament design d. the sale of Tumi luggage at a Macy's department store Which of the items listed is an example of intellectual property? A) a and b only B) a, b, and c C) a and d only D) all of the items listed

Q: Consider the following items: a. the novel "The DaVinci Code" by Dan Brown b. the "The Spirited Shipper," an innovative wine shipping box c. a Swiss chef's award-winning recipe d. an original fabric design, for example, the fabric used for "Coach" bags and luggage Which of the items listed is an example of intellectual property? A) a and b only B) a, b, and c C) a and d only D) all of the items listed

Q: A successful market economy requires A) a government-controlled banking system and government price controls. B) well-defined property rights and an independent court system to adjudicate disputes based on the law. C) generous unemployment benefits and paid medical leave for everyone in the labor force. D) an equitable distribution of income and limits on immigration.

Q: A major factor contributing to the slow growth rate of less developed economies is A) the lack of well-defined and enforceable property rights. B) the lack of natural resources. C) the lack of workers. D) the high rate of illiteracy.

Q: The primary purpose of ________ is to encourage the expenditure of funds on research and development to create new products. A) centrally planned economies B) government-run health care C) nationalizing oil companies D) patents and copyrights

Q: The term "property rights" refers to A) the physical possession of a house or any other property which the owner legally purchased. B) the ability to exercise control over one's own resources within the confines of the law. C) the government's right to appropriate land from wealthy land owners to redistribute to peasants. D) the right of a business not to have its assets confiscated by the government in the event that the business is accused of committing fraud.

Q: All of the following are critical functions of the government in facilitating the operation of a market economy except A) protecting private property. B) enforcing property rights. C) ensuring an equal distribution of income to all citizens. D) enforcing contracts.

Q: Adam Smith's invisible hand refers to A) the government's unobtrusive role in ensuring that the economy functions efficiently. B) property ownership laws and the rule of the court system. C) the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole. D) the laws of nature that influence economics decisions.

Q: All of the following countries come close to the free market benchmark except A) Canada. B) North Korea. C) Germany. D) Singapore.

Q: Adam Smith's behavioral assumption about humans was that people A) typically act irrationally. B) usually act in a rational, self-interested way. C) are consistently greedy. D) typically act randomly.

Q: Figure 2-14 Refer to Figure 2-14. Which two arrows in the diagram depict the following transaction: Myrna earns $450 for working at HempHill's Drug Store. A) J and M B) K and G C) K and M D) J and G

Q: Figure 2-14 Refer to Figure 2-14. Which two arrows in the diagram depict the following transaction: Barney earns $250 for selling scissors and razors to Floyd's Barber Shop. A) J and M B) K and G C) K and M D) J and G

Q: Figure 2-14 Refer to Figure 2-14. Which two arrows in the diagram depict the following transaction: Dorian Gray hires "Wild Oscar," a professional portrait artist, to paint his picture. A) J and M B) K and G C) K and M D) J and G

Q: Figure 2-14 Refer to Figure 2-14. Which two arrows in the diagram depict the following transaction: LaDonna sells 20 pairs of sunglasses at the Oakley store. A) J and M B) J and G C) K and M D) K and G

Q: "An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776 was written by A) John Maynard Keynes. B) Karl Marx. C) Alfred Marshall. D) Adam Smith.

Q: Which of the following is an example of spending on goods and services in the circular flow model? A) Belinda purchases a new computer for her tax-preparation business. B) Javier buys 800 square feet of wood flooring for his vacation home. C) Celeste buys fresh herbs at the farmers' market to use in her restaurant. D) Timmy purchases a new examination table for use in his veterinary clinic.

Q: Which of the following is an example of spending on factors of production in the circular flow model? A) Carolina has her nails done before her 20th high school class reunion. B) Giorgio buys snow cones for his youth soccer team after each game. C) Stevie trades in his old cell phone for a newer model. D) Arlisha purchases a cotton candy machine for her concession stand at the state fair.

Q: All of the following are examples of spending on factors of production in the circular flow model except A) Bima hires two students to work at his ice-cream store. B) "Get Fit Together" purchases 3 new treadmills for its gym. C) Iris buys a dozen roses for her mother's birthday. D) The Banyan Tree rents a much larger property so that it can add a restaurant to its facilities.

Q: Figure 2-13 Refer to Figure 2-13. One segment of the circular flow diagram in the figure shows the flow of funds from economic agents E to marketF. Who are economic agents E and what is market F? A) E = households; F = product markets B) E = firms; F = product markets C) E = households ; F = factor markets D) E = firms; F = factor markets

Q: Figure 2-12 Refer to Figure 2-12. One segment of the circular flow diagram in the figure shows the flow of goods and services from market C to economic agents A. What is market C and who are economic agents A? A) C = factor markets; A = households B) C = product markets; A = households C) C = factor markets; A = firms D) C= product markets; A = firms

Q: Which of the following statements about a simple circular flow model is false? A) Producers are buyers in the factor market and sellers in the product market. B) Households are neither buyers nor sellers in the input market. C) Producers are buyers in the factor market. D) Households are sellers in the product market.

Q: Which of the following are separate flows in the circular flow model? A) the flow of goods and the flow of services B) the flow of costs and the flow of revenue C) the flow of income earned from the sale of resources and the flow of expenditures on goods and services. D) the flow of income received by households and the flow of tax revenues paid by households

Q: Figure 2-11 Refer to Figure 2-11. One segment of the circular flow diagram in the figure shows the flow of wages and salaries from market K to economic agents M. What is market K and who are economic agents M? A) K = factor markets; M = households B) K = product markets; M = households C) K = factor markets; M = firms D) K = product markets; M = firms

Q: Figure 2-11 Refer to Figure 2-11. One segment of the circular flow diagram in the figure shows the flow of labor services from market K to economic agents J. What is market K and who are economic agents J? A) K = factor markets; J = households B) K = product markets; J = households C) K = factor markets; J = firms D) K = product markets; J = firms

Q: Which of the following is a flow in the circular flow model? A) the flow of goods and services from households to firms B) the flow of profit and the flow of revenue C) the flow of income earned by firms and the flow of expenditures earned by households D) the flow of revenue received by firms and the flow of payments to resource owners

Q: In the circular flow model, producers A) sell goods and services in the input market. B) and households spend earnings from resource sales on goods and services in the factor market. C) hire resources sold by households in the factor market. D) spend earnings from resource sales on goods and services in the product market.

Q: Households ________ final goods and services in the ________ market. A) purchase; factor B) purchase; product C) sell; factor D) sell; product

Q: Households A) have no influence on the circular flow in a market economy. B) purchase resources in the factor market. C) sell goods in the product market. D) sell resources in the factor market.

Q: The ________ demonstrates the roles played by households and firms in the market system. A) production possibilities frontier B) circular flow model C) theory of comparative advantage D) business cycle

Q: Which of the following statements about an entrepreneur is false? A) organizes the other factors of production into a working unit B) develops the vision for the firm and funds the producing unit C) sells his entrepreneurial services in the output market D) risks the personal funds provided

Q: The resource income earned by those who supply ________ is called wages. A) labor B) capital C) natural resources D) entrepreneurship

Q: When you purchase a new pair of jeans you do so in the A) factor market. B) input market. C) product market. D) resource market.

Q: The natural resources used in production are made available in the A) goods and services market. B) product market. C) government market. D) factor market.

Q: If a commercial dairy farm wants to raise funds to purchase feeding troughs, it does so in the A) output market. B) product market. C) factor market. D) dairy products market.

Q: An example of a factor of production is A) stock issued by Dell. B) the computers exported by Dell. C) a computer produced by an Dell. D) a worker hired by Dell.

Q: Which of the following is a factor of production? A) an oven in a bakery B) a share of General Motors' stock C) a credit card D) a $500 Treasury bond

Q: Which of the following is not a factor of production? A) an acre of farmland B) a drill press in a machine shop C) the manager of the local tire shop D) $1,000 in cash

Q: Table 2-12Digital CameraWheat (bushels)China100 hours5 hoursSouth Korea90 hours3 hoursRefer to Table 2-12. This table shows the number of labor hours required to produce a digital cameras and a bushel of wheat in China and South Korea.a. Which country has an absolute advantage in the production of digital cameras?b. Which country has an absolute advantage in the production of wheat?c. What is China's opportunity cost of producing one digital camera?d. What is South Korea's opportunity cost of producing one digital camera?e. What is China's opportunity cost of producing one pound of wheat?f. What is South Korea's opportunity cost of producing one pound of what?g. If each country specializes in the production of the product in which it has a comparative advantage, who should produce digital cameras?h. If each country specializes in the production of the product in which it has a comparative advantage, who should produce wheat?

Q: Table 2-17One MotorcycleOne GuitarIreland10 hours2.5 hoursScotland9 hours2 hours

Q: Table 2-16One MotorcycleOne GuitarIreland10 hours2.5 hoursScotland9 hours2 hoursRefer to Table 2-16. This table shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland.a. Which country has an absolute advantage in the production of motorcycles?b. Which country has an absolute advantage in the production of guitars?c. What is Ireland's opportunity cost of producing one motorcycle?d. What is Scotland's opportunity cost of producing one motorcycle?e. What is Ireland's opportunity cost of producing one guitar?f. What is Scotland's opportunity cost of producing one guitar?g. If each country specializes in the production of the product in which it has a comparative advantage, who should produce motorcycles?h. If each country specializes in the production of the product in which it has a comparative advantage, who should produce guitars?

Q: Table 2-12Digital CameraWheat (bushels)China100 hours5 hoursSouth Korea90 hours3 hoursh. Show the consumption points after trade on each country's production possibilities frontier. Label these points "B" for China and "J" for South Korea.i. Has trade made the two countries better off? Explain your answer.

Q: Suppose in the Germany, the opportunity cost of producing a gallon of beer is 5 gallons of wine. In Italy, the opportunity cost of producing a gallon of beer is 3 gallons of wine. a. What is the opportunity cost of producing a gallon of wine for Germany? b. What is the opportunity cost of producing a gallon of wine for Italy? c. Which country has a comparative advantage in the production of beer? d. Which country has a comparative advantage in the production of wine?

Q: Suppose in Belize, the opportunity cost of producing a sailboat is 5 hang gliders. In Honduras, the opportunity cost of producing a sailboat is 8 hang gliders. a. What is the opportunity cost of producing a hang glider for Belize? b. What is the opportunity cost of producing a hang glider for Honduras? c. Which country has a comparative advantage in the production of hang gliders? d. Which country has a comparative advantage in the production of sailboats?

Q: Is it possible for a firm to have an absolute advantage in producing something without having a comparative advantage? Why or why not?

Q: What is comparative advantage? What is absolute advantage?

Q: It is possible to have an absolute advantage in producing a good or service without having a comparative advantage.

Q: If the opportunity cost of producing more of one good remains the same as more of that good is produced, then the production method is inefficient.

Q: In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it must also have a comparative advantage in the production of both goods.

Q: If a country produces only two goods, then it is not possible to have an absolute advantage in the production of both those goods.

Q: If Tanisha can audit more tax returns in one hour than Libby, then Tanisha has an absolute advantage in auditing tax returns.

Q: It is possible to have a comparative advantage in producing a good or service without having an absolute advantage.

Q: For a person to have a comparative advantage in producing a product, she must be able to produce that product at a lower opportunity cost than her competitors.

Q: In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it cannot benefit by trading with the other country.

Q: If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods.

Q: The basis for trade is comparative advantage, not absolute advantage.

Q: If Sanjaya can shuck more oysters in one hour than Tatiana, then Sanjaya has a comparative advantage in shucking oysters.

Q: As women's wages have risen relative to men's wages, the opportunity cost to women of doing housework has ________ than has the opportunity cost to men. A) increased less B) increased more C) decreased more D) decreased less

Q: Refer to Table 2-11. If the two countries specialize and trade, who should export motorcycles? A) There is no basis for trade between the two countries. B) Ireland C) Scotland D) They should both be importing motorcycles.

Q: Table 2-11One MotorcycleOne GuitarIreland20 hours4 hoursScotland8 hours2 hoursTable 2-11 shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland.Refer to Table 2-11. If the two countries specialize and trade, who should export guitars?A) There is no basis for trade between the two countries.B) IrelandC) ScotlandD) They should both be exporting guitars.

Q: Table 2-11One MotorcycleOne GuitarIreland20 hours4 hoursScotland8 hours2 hoursTable 2-11 shows the number of labor hours required to produce a motorcycle and a guitar in Ireland and Scotland.Refer to Table 2-11. Scotland has a comparative advantage in the production ofA) both products.B) guitars.C) motorcycles.D) neither product.