Happy Company produces hula hoops. Happy Company has the following sales projections for the upcoming​ year:

Happy Company produces hula hoops. Happy Company has the following sales projections for the upcoming​ year:

First quarter budgeted hula hoop sales in units	24 comma 00024,000
Second quarter budgeted hula hoop sales in units	60 comma 00060,000
Third quarter budgeted hula hoop sales in units	25 comma 00025,000
Fourth quarter budgeted hula hoop sales in units	25 comma 00025,000

Happy Company wants to have

1010​%

of the next​ quarter's sales in units on hand at the end of each quarter. Inventory at the beginning of the year was

3 comma 7003,700

hula hoops. How many hula hoops should Happy Company produce during the first​ quarter?

A.

20 comma 30020,300

B.

24 comma 00024,000

C.

33 comma 70033,700

D.

26 comma 300

Which one of the following shows how to calculate​ 'direct materials to​ purchase' on a direct materials​ budget?

A.

quantity needed for production​ + desired end inventory of DM

minus−

beginning inventory of DM.

Your answer is correct.

B.

quantity needed for production

minus−

desired end inventory of DM​ + beginning inventory DM.

C.

units to be produced

minus−

desired end inventory of DM​ + beginning inventory of DM.

D.

units to be produced​ + desired end inventory of DM

minus−

beginning inventory of DM.

​A(n) ________ is a carefully predetermined cost that is usually expressed on a per unit basis.

A.

allocated cost

B.

flexible cost

C.

applied cost

D.

standard cost

When preparing components of the master​ budget, which of the following alternatives represents the proper​ order?

1. Production budget

2. Sales budget

3. Direct materials budget

A.

​1, 3, 2

B.

​2, 1, 3

Your answer is correct.

C.

​2, 3, 1

D.

​3, 1, 2

If a worker drops the raw material during production and that raw material must be​ discarded, then which of the following is directly​ impacted?

A.

Direct materials quantity variance

Your answer is correct.

B.

Direct labor efficiency variance

C.

Direct labor rate variance

D.

Direct materials price variance

Separate sections for fixed and variable costs are usually shown under which of the following​ budgets?

A.

Direct materials and manufacturing overhead budget

B.

Operating expenses budget and manufacturing overhead budget

Your answer is correct.

C.

Production budget and manufacturing overhead budget

D.

Manufacturing overhead budget and production budget

The following information describes a​ company's usage of direct labor in a recent​ period:

Actual direct labor hours used	35 comma 00035,000
Actual rate per hour	$ 22.00$22.00
Standard rate per hour	$ 11.00$11.00
Standard hours for units produced	25 comma 00025,000

How much is the direct labor rate​ variance?

A.

$ 385 comma 000$385,000

favorable

B.

$ 275 comma 000$275,000

favorable

C.

$ 385 comma 000$385,000

unfavorable

Your answer is correct.

D.

$ 275 comma 000$275,000

unfavorable

Which of the following is the type of standard that provides allowances for normal amounts of waste and inefficiency in the production​ process?

A.

practical standard.

Your answer is correct.

B.

perfection standard.

C.

ideal standard.

D.

realistic standard.

Which of the following best represents how the Standard Quantity​ (SQ) of direct materials is​ computed?

A.

the number of units actually made times the direct materials price standard.

B.

the Standard Quantity​ (SQ) of input per unit times the number of units actually made.

Your answer is correct.

C.

the Standard Quantity​ (SQ) of input per unit times the number of units budgeted.

D.

the budgeted quantity of units less the Standard Quantity​ (SQ) of units.

An advantage to an organization that implements a budget is that...

A.

budgets help managers improve their

decisionminus−making

processes in an organization.

B.

bdgets help the manager improve the motivation of employees in the workplace.

C.

budgets help managers focus their attention on the future needs in an organization.

D.

All of the above

Which statement best describes an advantage of​ zero-based budgeting?

A.

Zerominus−based

budgeting forces managers to justify each dollar in the budget to ensure that some expenses are lower in a current year compared to what they were in previous years.

Your answer is correct.

B.

Zerominus−based

budgeting is time consuming.

C.

Zerominus−based

budgeting is labor intensive.

D.

All of the above are advantages.

Bruner Stores wants to have

500500

shovels in ending inventory on December 31. Budgeted sales for December are

2 comma 3002,300

shovels. The November 30 inventory was

350350

shovels. How many shovels should Benson Stores purchase for​ December?

A.

2 comma 1502,150

B.

2 comma 4502,450

Your answer is correct.

C.

2 comma 8002,800

D.

3 comma 150

Umpire Industries reported the following results from its most recent​ quarter:

Actual direct material used	15 comma 90015,900
Actual direct material cost per pound	$ 5.25$5.25
Standard direct material cost per pound	$ 7.25$7.25
Standard direct material quantity	14 comma 80014,800
Direct material purchases	21 comma 00021,000

What is​ Umpire's direct material quantity​ variance?

A.

$ 5 comma 775.00$5,775.00

unfavorable

B.

$ 5 comma 775.00$5,775.00

favorable

C.

$ 7 comma 975.00$7,975.00

unfavorable

Your answer is correct.

D.

$ 7 comma 975.00$7,975.00

favorable

OK Toys Company manufactures and sells​ children's skateboards. Each skateboard requires four bearings. For​ September, OK Toys Company has budgeted skateboard sales of

510510

​skateboards, while

560560

skateboards are scheduled to be produced. OK Toys Company will begin September with

220220

bearings in its beginning​ inventory, and estimates ending inventory for September to be

420420

bearings. How many bearings should OK Toys Company purchase in​ September?

A.

2 comma 4602,460

B.

2 comma 2402,240

C.

290290

D.

2 comma 4402,440

Which of the following statements explains why managers may intentionally build slack into the​ budget?

A.

to make their performance look worse.

B.

to gain the resources they need in the event of budget cuts.

Your answer is correct.

C.

because they are certain about the future.

D.

to accomplish all of the above.

Of the following​ budgets, which one is stated only in​ units, not​ dollars?

A.

manufacturing overhead

B.

direct materials

C.

production

Your answer is correct.

D.

sales

Q

Forty Winks Corporation manufactures night stands. The production budget shows that Forty Winks Corporation plans to produce

1 comma 7001,700

night stands in March and

1 comma 1001,100

night stands in April. Each night stand requires

0.50.5

direct labor hours in its production. Forty Winks Corporation has a direct labor rate of

$ 11.00$11.00

per direct labor hour. What is the total combined direct labor cost that Forty Winks Corporation should budget in March and​ April?

A.

15 comma 40015,400

Your answer is correct.

B.

6 comma 0506,050

C.

30 comma 80030,800

D.

AZ Corporation collects​ 30% in the second month following​ sale, 60% in the month following sale and​ 10% of a​ month's sales in the month of sale. Budgeted sales for the upcoming four months​ are:

April budgeted sales	​$90,000
May budgeted sales	​$140,000
June budgeted sales	​$230,000
July budgeted sales	​$200,000

The amount of cash that will be collected in July is budgeted to be

A.

​$212,000

B.

​$20,000

C.

​$200,000

Your answer is correct.

D.

​$180,000

The following information describes a​ company's usage of direct labor in a recent​ period:

Actual direct labor hours used	34 comma 00034,000
Actual rate per hour	$ 23.00$23.00
Standard rate per hour	$ 11.00$11.00
Standard hours for units produced	28 comma 00028,000

How much is the direct labor efficiency​ variance?

A.

$ 138 comma 000$138,000

favorable

B.

$ 138 comma 000$138,000

unfavorable

C.

$ 66 comma 000$66,000

favorable

D.

$ 66 comma 000$66,000

unfavorable

Which of the following is true about a rolling​ budget?

A.

is executed by upper management.

B.

is continuously​ updated, so that the next 12 months of operations are always budgeted.

Your answer is correct.

C.

begins with zero for each​ expense, and then amounts are added in.

D.

extends

5minus−10

years into the future.

Coy Company wants to have an ending inventory of

9 comma 0009,000

units. Coy Company has beginning inventory of

14 comma 00014,000

units and expects to sell

33 comma 00033,000

units. How many units should Coy Company​ produce?

A.

28 comma 00028,000

Your answer is correct.

B.

38 comma 00038,000

C.

56 comma 00056,000

D.

42 comma 000

Which of the following might indicate a favorable direct materials price variance and an unfavorable direct materials quantity​ variance?

A.

More​ expensive, superior materials requiring less than the standard amount were used in production.

B.

Less​ expensive, inferior materials requiring less than the standard amount were used in production.

C.

Less​ expensive, inferior materials requiring more than the standard amount were used in production.

Your answer is correct.

D.

More​ expensive, superior materials requiring more than the standard amount were used in production.

Which of the following is a possible indication of a favorable direct labor efficiency​ variance?

A.

higher skilled workers were used that performed the task faster than expected.

Your answer is correct.

B.

higher skilled workers were used that performed the task slower than expected.

C.

lower skilled workers were paid a lower wage than expected.

D.

lower skilled workers were paid a higher wage than expected.

Weave Inc. gathered the following actual results for the current​ month:

Actual​ amounts:
Units produced	​5,200
Direct materials purchased and used​ (7,300 lbs.)	​$29,200

Budgeted production and standard costs​ were:

Budgeted production	​4,800 units
Direct materials	1.5​ lbs/unit at​ $3/lb.

What is the direct materials price​ variance?

A.

​$7,300 favorable

B.

​$5,200 unfavorable

C.

​$5,200 favorable

D.

​$7,300 unfavorable

Karp Company produces and sells a shelf for

$ 10$10

each. The beginning inventory is

1 comma 8001,800

​shelves, and the desired ending inventory is

2 comma 2002,200

shelves. If budgeted production is

10 comma 50010,500

​shelves, what is the forecasted sales revenue from the​ shelves?

A.

$ 101 comma 000$101,000

Your answer is correct.

B.

$ 105 comma 000$105,000

C.

$ 65 comma 000$65,000

D.

$ 145 comma 000

The purchasing department of a company negotiates all of the purchasing contracts for raw materials. In assessing the performance of the purchasing​ department, which variance is the most​ useful?

A.

Direct materials quantity variance

B.

Direct labor efficiency variance

C.

Direct labor rate variance

D.

Direct materials price variance

Twist Enterprises has collected the following data for one of its​ products:

Direct materials standard​ (4 pounds per unit​ @ $0.41/lb.)	​$1.64 per finished good
Actual direct materials purchased	​32,000 pounds
Actual Direct Materials Used​ (AQU)	​29,000 pounds
Actual Price​ (AP) paid per pound	​$0.50

How much is the direct materials price​ variance?

A.

​$2,880 favorable

B.

​$2,610 unfavorable

C.

​$2,610 favorable

D.

​$2,880 unfavorable

The Porch Cushion Company manufactures foam cushions. The number of cushions to be produced in the upcoming three months​ follows:

Number of foam cushions to be produced in July	13 comma 00013,000
Number of foam cushions to be produced in August	10 comma 00010,000
Number of foam cushions to be produced in September	13 comma 00013,000

Each cushion requires

22

pounds of the foam used as stuffing. The company has a policy that the ending inventory of foam each month must be equal to

1515​%

of the following​ month's expected production needs. How many pounds of foam does The Porch Cushion Company need to purchase in​ August?

A.

23 comma 90023,900

B.

23 comma 00023,000

C.

20 comma 90020,900

Your answer is correct.

D.

17 comma 000

The​ ________ variance​ "measures how well the business keeps prices of direct labor inputs within​ standards."

A.

direct labor efficiency

B.

direct labor production volume

C.

direct labor overhead flexible budget

D.

direct labor rate

The actual cost of direct materials is

$ 12.00$12.00

per pound. The standard cost per pound is

$ 9.00$9.00.

During the current​ period,

8 comma 1008,100

pounds of direct materials were used in production and

18 comma 40018,400

pounds were purchased. The standard quantity of direct materials for actual units produced is

16 comma 80016,800

pounds. How much is the direct materials quantity​ variance?

A.

$ 78 comma 300$78,300

favorable

Your answer is correct.

B.

$ 104 comma 400$104,400

favorable

C.

$ 78 comma 300$78,300

unfavorable

D.

$ 104 comma 400$104,400

unfavorable

Payments by check or EFT represent an important internal control.

The primary way that fraud is detected, prevented, or corrected is through a proper system of internal control.

A. True
B. False

Answer
True

Payments by check or EFT represent an important internal control.

A. True
B. False
Answer
True

The two most common types of fraud impacting financial statements are misappropriation of assets and fraudulent financial reporting.

A. True
B. False

Answer
True

How are outstanding checks handled in a bank reconciliation?

A. Deducted from the bank balance

B. Added to the bank balance

C. Deducted from the book balance

D. Added to the book balance

Answer
A. Deducted from the bank balance

How is interest revenue handled in a bank reconciliation?

A. Deducted from the book balance
B. Deducted from the bank balance
C. Added to the book balance
D. Added to the bank balance
Answer
C. Added to the book balance

When a company receives customers' checks by mail:

A. the mailroom sends all customer checks to the accounting department.
B. the bank deposit is prepared by the mailroom.
C. all incoming mail containing checks from customers should be opened by the mailroom.
D. the remittance advices go to the treasurer for deposit.
Answer
C. all incoming mail containing checks from customers should be opened by the mailroom.

Which of the following items is not an objective of an internal control system?

A. Ensure maximum profitability
B. Safeguard assets
C. Encourage employees to follow company policies
D. Promote operational efficiency
E. Comply with legal requirements
Answer
A. Ensure maximum profitability

Which of the following terms is not part of the fraud triangle?

A.
Opportunity

B.
Motive

C.
Rationalization

D.
Conspiracy

Answer
D.
Conspiracy

The 'WHAT goods and services does the US produce' question can best be answered using data about which of the following?

Productivity

Multiple Choice
Rises when the ratio of output to input increases.
Falls when factors of production cost more.
Rises when the value of output rises relative to the cost of inputs.
Falls when the value of output rises relative to the cost of inputs.
Answer
Rises when the ratio of output to input increases.
Explanation
The amount we can produce with our inputs in a given time frame is what productivity is measuring. It measures how much output can be produced with a certain amount of inputs.

Whenever technology advances, an economy can produce more output with

Multiple Choice
Fewer resources.
No resources.
More resources.
Current resources.
Answer
Current resources.
Explanation
Technological advances are one of the forces that keeps shifting resources from one industry to another; shifting the production possibilities curve outward.

Outsourcing leads to

Multiple Choice
Increases in productivity and increases in total output.
Increases in productivity and decreases in total output.
Decreases in productivity and decreases in total output.
Decreases in productivity and increases in total output.
Answer
Increases in productivity and increases in total output.
Explanation
Outsourcing allows U.S workers to pursue their comparative advantage, leading to an increase in productivity and total output capabilities which increases living standards.

Which of the following is an indicator of how much output the average person would get if all output were divided up evenly among the population?

Multiple Choice
Economic growth.
GDP.
Per capita GDP.
Real GDP.
Answer
Per capita GDP.
Explanation
Per capita GDP is an important measure of living standards.

The government establishes the rules of the game for economic transactions in order to

Multiple Choice
Encourage spillover costs.
Legitimatize and enforce contracts.
Discourage the ownership of property.
Discourage the production of capital.
Answer
Legitimatize and enforce contracts.
Explanation
Without guarantees from both buyer and seller as established in contracts, many market activities would cease to exist, thereby harming the economy.

Per capita GDP will rise if GDP

Multiple Choice
Increases more slowly than the population increases.
Increases more rapidly than the population increases.
Decreases and the population increases.
Increases at the same rate as the population increases.
Answer
Increases more rapidly than the population increases.
Explanation
As long as the growth in GDP outpaces population growth, living standards will rise.

Per capita GDP will definitely rise if

Multiple Choice
The rate of economic growth is less than the rate of population growth.
There is a decrease in the size of the working population.
The population falls and GDP does not fall.
The rate of economic growth falls.
Answer
The population falls and GDP does not fall.
Explanation
Low population growth rates coupled with higher rates of economic growth make per capita GDP rise.

Which of the following does not contribute to the high productivity of the U.S. economy?

Multiple Choice
Negative externalities.
The capital stock.
Factor mobility.
Technology.
Answer
Negative externalities.
Explanation
Negative externalities make the internal costs inexpensive in the short run, but cause higher 'fix-it' costs in the long run. Positive externalities usually created by government technology spillovers help productivity in the long run.

Differences in size of real GDP across countries are best explained by

Multiple Choice

Population growth.
Human capital.
Large farming sector.
None of the choices are correct.
Answer
Human capital.
Explanation
Real GDP growth is determined not by quantity of factors of production but by quality of factors of production such as human capital.

The 'WHAT goods and services does the US produce' question can best be answered using data about which of the following?

Multiple Choice
Per capita GDP.
The distribution of output in markets, specifically among manufacturing, services, and agricultural sectors.
The distribution of GDP among different income quintiles.
Productivity.
Answer
The distribution of output in markets, specifically among manufacturing, services, and agricultural sectors.
Explanation
Markets tell producers what the economy should produce. The composition of GDP and output reflects what country is producing.

One characteristic that has allowed the U.S. economy to change the mix of output in response to consumer demand is the

As of 2010, per capita GDP in the United States was approximately how many times the world average?

Multiple Choice

7.


9.


3.


5.

Answer
5.
Explanation
The United States produces five times the world average per capita GDP.

Per capita GDP will definitely rise if

Multiple Choice
The population falls and GDP does not fall.
There is a decrease in the size of the working population.
The rate of economic growth is less than the rate of population growth.
The rate of economic growth falls.
Answer
The population falls and GDP does not fall.

Explanation
Low population growth rates coupled with higher rates of economic growth make per capita GDP rise.

Per capita GDP will definitely fall if

Multiple Choice
The population falls.
The rate of economic growth falls.
The rate of economic growth is less than the rate of population growth.
There is a decrease in the size of the working population.
Answer
The rate of economic growth is less than the rate of population growth.
Explanation
In countries with high population growth rates, living standards will fall if GDP growth does not keep pace.

An example of human capital would be

Multiple Choice
A computer.
Carpentry skills.
A carpenter's saw.
All of the choices are correct.
Answer
Carpentry skills.
Explanation
Human capital represents the quality of labor, including skills and abilities.

Which of the following is considered a service in the calculation of GDP?

Multiple Choice
Manufacturing reclining chairs.
Constructing new homes.
Manufacturing automobiles.
Tax preparation.
Answer
Tax preparation.
Explanation
Any consumption spending on intangibles is for services.

One characteristic that has allowed the U.S. economy to change the mix of output in response to consumer demand is the

Multiple Choice

Labor-intensive production process.

Factor mobility which is the increased ease with which resources move from one industry to another.
Abundance of scarce resources.
Large number of proprietorships.
Answer
Factor mobility which is the increased ease with which resources move from one industry to another.
Explanation
Economies will be more responsive to change when resources can be easily reallocated to more productive uses.

The best definition of GDP is

Multiple Choice
The sum of the physical amounts of goods and services in the economy.
A measure of the per capita economic growth rate of the economy.
A dollar measure of final output produced during a given time period within a nation’s borders.
A physical measure of the capital stock of the economy.
Answer
A dollar measure of final output produced during a given time period within a nation’s borders.
Explanation
GDP is a measure of how well a nation is doing economically, especially in terms of its production of all final goods and services.

Which of the following contributes to the high productivity of American workers?

Multiple Choice
The low level of factor mobility.
The labor-intensive production process in the United States.
The decreasing investment in human capital.
The abundance of capital relative to labor.
Answer
The abundance of capital relative to labor.
Explanation
Ceteris paribus, the more capital a nation has relative to labor, the more productive its workers will be.

Outsourcing leads to

Multiple Choice
Decreases in total output, but with no changes in the number of domestic jobs available.
Increases in total output, but with temporary job losses for some domestic workers.
Increases in total output, but with permanent job losses for some domestic workers.
Decreases in total output, along with permanent job losses for some domestic workers.
Answer
Increases in total output, but with temporary job losses for some domestic workers.
Explanation
While outsourcing may eliminate some domestic jobs in the short run, it ultimately creates many more domestic jobs in the long run.

One characteristic that has allowed the U.S. economy to change the mix of output in response to consumer demand is the

Multiple Choice
Labor-intensive production process.
Factor mobility which is the increased ease with which resources move from one industry to another.
Large number of proprietorships.
Abundance of scarce resources.
Answer
Factor mobility which is the increased ease with which resources move from one industry to another.
Explanation
Economies will be more responsive to change when resources can be easily reallocated to more productive uses.

The investment in human capital through education and training can result in

Multiple Choice
Greater productivity.
Less capital-intensive production.
Low factor mobility.
Reduced output per labor hour.
Answer
Greater productivity.
Explanation
Human and physical capital both increase the productivity of workers.

Which of the following will contribute to accelerated growth for the U.S. economy?

Multiple Choice
A decrease in tax credits for research and development.
A decrease in factor mobility.
A decrease in government involvement in copyright laws.
Increased use of outsourcing for inputs and increased use of comparative advantage for trade in final goods and services.
Answer
Increased use of outsourcing for inputs and increased use of comparative advantage for trade in final goods and services.
Explanation
Outsourcing of inputs, as well as comparative advantage in selection of productive output, make a country more efficient in production and able to enjoy a higher standard of living.

In terms of an economy's production possibilities curve, a decrease in the level of human capital, ceteris paribus, will cause

Multiple Choice
An expansion of the curve.
An inward shift of the curve.
A movement along the curve.
A movement from the curve to a point inside the curve.
Answer
An inward shift of the curve.
Explanation
A decrease in any resource, including human capital, will decrease a nation's production possibilities curve.

When the government provides a legal framework,

Multiple Choice
Private market transactions suffer and government market transactions suffer.
Private market transactions suffer and government market transactions benefit.
Private market transactions benefit and government market transactions benefit.
None of the choices are correct.
Answer
Private market transactions benefit and government market transactions benefit.
Explanation
Without guarantees from both buyer and seller as established in contracts, many private market and government activities would suffer, thereby harming the economy.

Outsourcing leads to

Multiple Choice
Decreases in total output, along with permanent job losses for some domestic workers.
Decreases in total output, but with no changes in the number of domestic jobs available.
Increases in total output, but with temporary job losses for some domestic workers.
Increases in total output, but with permanent job losses for some domestic workers.
Answer
Increases in total output, but with temporary job losses for some domestic workers.
Explanation
While outsourcing may eliminate some domestic jobs in the short run, it ultimately creates many more domestic jobs in the long run.

Government intervention may achieve a more optimal outcome than the market mechanism when addressing

The role of the entrepreneur in an economy is to

Multiple Choice
Bring the factors of production together and assume the risk of production.
Work with government planners to determine what goods are produced.
Arrange bank financing for the owners of new businesses.
Ensure full employment of labor.

Answer
Bring the factors of production together and assume the risk of production.

The "guns versus butter" dilemma that all nations confront is that

Multiple Choice
Guns and butter can be produced using the same resources at the same time.
An increase in national defense implies more sacrifices of civilian goods and services.
An increase in national defense is possible only if we produce more butter.
All of the choices are correct.
Answer
An increase in national defense implies more sacrifices of civilian goods and services.

According to the law of increasing opportunity costs,

Multiple Choice

The more one is willing to pay for resources; the smaller will be the possible level of production.
Increasing the production of a particular good will cause the price of the good to remain constant.
In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.
None of the choices are correct.
Answer
In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.

Economic growth would best be represented by a

Multiple Choice
Shift outward of the production possibilities curve.
Shift inward of the production possibilities curve.
Movement from inside the production possibilities curve to a point on the production possibilities curve.
Movement from the production possibilities curve to a point inside the production possibilities curve.
Answer
Shift outward of the production possibilities curve.

The market mechanism may best be defined as

Multiple Choice
The use of market prices and sales to signal desired output.
The use of market signals and government directives to select economic outcomes.
The process by which the production possibilities curve shifts inward.
Price regulation by government.
Answer
The use of market prices and sales to signal desired output.

Government intervention may achieve a more optimal outcome than the market mechanism when addressing

Multiple Choice
Inefficient bureaucracy.
Consumption of cigarettes.
The supply of new hot dog stands.
None of the choices are correct.
Answer
Consumption of cigarettes.

The Latin phrase ceteris paribus means

Multiple Choice
The production possibilities curve never shifts.
Laissez faire.
Other things remain equal.
The invisible hand.
Answer
Other things remain equal.

Which of the following is true about the combination of televisions and smartphones represented by point F in Figure 1.4?

Multiple Choice
Point F is inefficient now.
Point F is unattainable even with advances in technology.
Point F will be more easily attainable if the government takes control of all privately run factories.
Point F can possibly be reached if more economic resources become available or technology improves.
Answer
Point F can possibly be reached if more economic resources become available or technology improves.

A movement from point C to point A in Figure 1.4 results in

Multiple Choice
More efficient production.
Permanent unemployment of workers producing plasma televisions.
A reallocation of resources from smartphone production to television production.
A reallocation of resources from television production to smartphone production.
Answer
A reallocation of resources from television production to smartphone production.

Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.

Table 1.2

Production Possibilities for Bombers

Refer to Table 1.2. In the production range of 20 to 35 B-1 bombers, the opportunity cost of producing 1 more B-1 bomber is

Multiple Choice
195/20 of Stealth bombers.
35/20 of Stealth bombers.
15 Stealth bombers.
1 Stealth bomber.
Answer
1 Stealth bomber.

In a market economy, the people who receive the goods and services that are produced are those who

The fundamental problem of economics is

Multiple Choice

The law of increasing opportunity costs.

The scarcity of resources relative to human wants.

How to get government to operate efficiently.


How to create employment for everyone.

Answer
The scarcity of resources relative to human wants.

In economics, scarcity means that

Multiple Choice

A shortage of a particular good will cause the price to fall.

A production possibilities curve cannot accurately represent the trade-off between two goods.

Society's desires exceed resources available.

The market mechanism has failed.

Answer
Society's desires exceed resources available.

The basic factors of production include

Multiple Choice
Land, labor, money, and capital.
Land, labor, money, and inputs.
Labor and money.
Land, labor, capital, and entrepreneurship.
Answer
Land, labor, capital, and entrepreneurship.

Which of the following is not a factor of production?

Multiple Choice

A psychiatrist.

$100,000 cash.

A bulldozer.

Six thousand acres of farmland.

Answer
$100,000 cash.

Which economist argued that free markets unleashed the "animal spirits" of entrepreneurs, propelling innovation, technology, and growth?

Multiple Choice

Lord Kelvin.


Kenneth Olsen.


Irving Fisher.


John Maynard Keynes.

Answer
John Maynard Keynes.

Opportunity cost may be defined as the

Multiple Choice

Goods or services that are forgone in order to obtain something else.
Dollar prices paid for final goods and services.
Dollar cost of producing a particular product.
Difference between wholesale and retail prices.

Answer
Goods or services that are forgone in order to obtain something else.

The production possibilities curve illustrates

Multiple Choice
The limitations that exist because of scarce resources.
That there is no limit to what an economy can produce.
That there is no limit to the level of output.
The existence of unlimited wants and resources.
Answer
The limitations that exist because of scarce resources.

In terms of the production possibilities curve, inefficiency is represented by

Multiple Choice
All points on the curve.
All points outside the curve.
All points inside the curve.
A rightward shift of the curve.
Answer
All points inside the curve.

In a market economy, the people who receive the goods and services that are produced are those who

Multiple Choice
Need the goods and services the most.
Have the most political power.
Want the goods and services the most.
Are willing to pay the highest price.
Answer
Are willing to pay the highest price.

Government intervention may achieve a more optimal outcome than the market mechanism when addressing

Multiple Choice
Inefficient bureaucracy.
Consumption of cigarettes.
The supply of new hot dog stands.
None of the choices are correct.
Answer
Consumption of cigarettes.