Multiple Choice Quiz

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1		The two main themes of this book are
			A)	specialization and exchange.
			B)	wealth and efficiency.
			C)	motivation and strategy.
			D)	coordination and motivation.
2		Someone has an absolute advantage when (s)he
			A)	has a relative advantage in all products.
			B)	enjoys buying products / services at prices lower than the reservation price.
			C)	can produce a good or service more productively than another person.
			D)	can produce a good or service more productively than another person.
3		Suppose a secretary of a professor incurs a cost of €100 for learning new software with mathematical symbols. Thirty percent of this experience is worthless in other jobs. The opportunity costs of this investment are
			A)	€100.
			B)	€70.
			C)	€30.
			D)	€0.
4		The law of comparative advantages states that
			A)	everybody is unique in a relative sense.
			B)	competition between countries is attractive.
			C)	total output is highest when everybody produces according to the lowest opportunity costs.
			D)	swings in productivity are to be expected.
5		The essence of the diamond – water paradox is
			A)	that demand-supply analysis is flawed.
			B)	that wealth is unequally distributed in the world.
			C)	the distinction between value in use and value in exchange.
			D)	that markets do not work well.
6		Suppose that the opportunity costs of buying a product are 1 and 2 for the buyers and that the opportunity costs of selling a product are 3 and 4 for the sellers. How many units will be exchanged?
			A)	0.
			B)	1.
			C)	2.
			D)	3.
7		Institutions are
			A)	changed frequently.
			B)	embedded in organizations.
			C)	often very bureaucratic.
			D)	the broad overarching framework of rules and constraints that govern interactions.
8		Autarky is to be expected (according to Becker and Murphy) when the
			A)	costs of specialization are constant and the benefits are constant.
			B)	costs of specialization are rising and the benefits are constant.
			C)	costs of specialization are constant and the benefits are rising.
			D)	costs of specialization are rising and the benefits are rising.
9		The famous pin-factory citation from ‘The Wealth of Nations’ is (according to Becker and Murphy) reflected by a situation in which the
			A)	costs of specialization are constant and the benefits are constant.
			B)	costs of specialization are rising and the benefits are constant.
			C)	costs of specialization are constant and the benefits are rising.
			D)	costs of specialization are rising and the benefits are rising.
10		The degree of specialization is (according to Becker and Murphy) limited by
			A)	coordination and motivation problems.
			B)	specialization and exchange.
			C)	relative advantages rather than absolute advantages.
			D)	value in use being higher than value in exchange.