Reference no: EM13188160

1. If a production possibility frontier is a straight line, it tells us that the opportunity cost of producing one more unit of good X:
A) is an increasing amount of good Y.
B) is a decreasing amount of good Y.
C) is equal to the inverse of the amount of good Y.
D) is a constant amount of good Y.

2. The production possibility frontier is bowed out from the origin because:
A) resources are not equally suited for the production of both goods.
B) resources are scarce.
C) economic growth leads to inefficiency.
D) resources are inefficiently used.

3. If they produce only hamburgers, then in a single day Sarah can produce 10 hamburgers while Abe can produce 5 hamburgers. If they only make milkshakes, then in a single day Sarah can produce 10 milkshakes while Abe can produce 4 milkshakes. We then know that:
A) Sarah has an absolute advantage and a comparative advantage in making hamburgers.
B) Sarah has an absolute advantage and a comparative advantage in making milkshakes.
C) Abe has an absolute advantage and a comparative advantage in making hamburgers.
D) Abe has an absolute advantage and a comparative advantage in making milkshakes.

 

Scenario: Countries A and B
Two countries, A and B, currently produce two goods, wheat (W) and steel (S). They each have a linear production possibility frontier in both goods. For Country A, if it spends all of its available resources to produce wheat, it can produce 500 units of wheat and zero units of steel. If it uses all of its resources to produce steel it can produce 250 units of steel and zero units of wheat. For Country B, if it spends all of its available resources producing wheat, it can produce 400 units of wheat, and if it spends all of its resources on the production of steel, it can produce 400 units of steel.

4. (Scenario: Countries A and B) If each country devotes half of its resources towards the production of wheat, and half towards the production of steel, then their total production of wheat would be ________and their total production of steel would be ________.
A) 450; 325
B) 900; 650
C) 500; 250
D) 400; 400

 

5. (Table: Coffee and Salmon Production Possibilities) The table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. The opportunity cost of producing 1 unit of salmon for Alaska is:
A) 2 coffees.
B) 1/4 coffee.
C) 1 coffee.
D) 1/2 coffee.

6. If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has a(n):
A) zero slope.
B) constant, negative slope.
C) increasing, negative slope.
D) decreasing, negative slope.

 

7. (Table: Production of Good Z and Good X in Urbanville) If Urbanville is currently producing 5Z and 50X, then this is:
A) feasible, but inefficient.
B) feasible and efficient.
C) not feasible, but efficient.
D) neither feasible nor efficient.

8. If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. We know that:
A) Laurence has a comparative advantage in programs.
B) Laurence has a comparative advantage in both programs and sunglasses.
C) Carrie Anne has a comparative advantage in programs.
D) Carrie Anne has a comparative advantage in both programs and sunglasses.

 

Figure: Comparative Advantage
Eastland and Westland produce only two goods, peaches and oranges, and this figure shows each nation's production possibility frontier for the two goods.

9. (Figure: Comparative Advantage) The opportunity cost of producing 1 unit of peaches for Westland is:
A) 1 unit of oranges.
B) 1/4 unit of oranges.
C) 4 units of oranges.
D) 10 units of oranges.

10. Abe starts exercising regularly, and after a few months discovers he can now do twice as much of everything-in a single day Abe can now make 10 hamburgers or 8 milkshakes, rather than the 5 hamburgers and 4 milkshakes he made in the past. We now know that Abe's production possibility frontier:
A) has shifted right, but his opportunity costs of making milkshakes are unchanged.
B) has shifted right, but his opportunity costs of making milkshakes have decreased.
C) has not changed, but his opportunity costs of making milkshakes have increased.
D) has not changed, but his opportunity costs of making milkshakes have decreased.

 

11. (Figure: Consumer and Capital Goods) If the economy is operating at point Y and its relevant PPF is Curve 1, this means that:
A) the economy is at full employment and is efficient.
B) the economy is less than fully employed.
C) the economy is not efficient.
D) economic growth is not possible in the future.

12. In the simplest circular-flow model, households supply ________ and demand ________.
A) capital; barter
B) wages and income; capital markets
C) factors of production; goods and services
D) firms; markets

13. Consider a possible production possibility frontier for Iraq. If in 2008 Iraq's resources are not being fully utilized, Iraq will be somewhere ________ of its production possibility frontier.
A) inside
B) outside
C) near the bottom
D) near the top

14. In Kessy's old kitchen, he could bake 10 cookies or mix 15 glasses of lemonade in one day. Now Kessy has a larger oven and refrigerator. How does this impact his production possibility frontier?
A) It increases his production possibility frontier.
B) It decreases his production possibility frontier.
C) He will not be efficient.
D) He will not be able to produce as much as before.

15. (Figure: Wine and Wheat) What is the opportunity cost of moving from only producing wheat to producing at point D?
A) 3 tons of wheat
B) 6 tons of wheat
C) 9 tons of wheat
D) 15 tons of wheat

16. (Table: Production Possibilities Schedule I) The opportunity cost of producing the fourth unit of consumer goods is ________ units of capital goods.
A) 2
B) 4
C) 6
D) 8

17. Economists use models to explain real-life situations because:
A) such models tend to be exactly what is occurring in each situation.
B) assumptions found in such models tend to make the problem more difficult.
C) simplifications and assumptions often yield answers that can help to explain the more difficult real-life situations.
D) real-life situations are not relevant to the building of models.

18. Economic models often:
A) vary greatly in assumptions and simplifications.
B) are correct.
C) provide similar answers.
D) fail to explain any of the real-life scenarios they are supposed to help solve.

Scenario: Countries A and B
Two countries, A and B, currently produce two goods, wheat (W) and steel (S). They each have a linear production possibility frontier in both goods. For Country A, if it spends all of its available resources to produce wheat, it can produce 500 units of wheat and zero units of steel. If it uses all of its resources to produce steel it can produce 250 units of steel and zero units of wheat. For Country B, if it spends all of its available resources producing wheat, it can produce 400 units of wheat, and if it spends all of its resources on the production of steel, it can produce 400 units of steel.

19. (Scenario: Countries A and B) Given this information, Country ________ has a comparative advantage in the production of wheat and Country ________ has a comparative advantage in the production of steel.
A) A; A
B) A; B
C) B; B
D) B; A

20. Coworkers Yvonne and Rodney are trying to finish cleaning up the store by washing dishes and sweeping the floors. To finish both tasks as quickly as possible, they know that each of them should focus on just one task, but they don't know who should do what. To decide which coworker should wash dishes, Yvonne and Rodney should determine which one:
A) has the absolute advantage in dishwashing.
B) has the comparative advantage in dishwashing.
C) has the largest production possibility frontier in dishwashing.
D) can complete the dishwashing in the least amount of time.

21. When a nation experiences economic growth:
A) its production possibility frontier shifts outward.
B) its production possibility frontier shifts inward.
C) it has been able to reach full employment.
D) it has moved to a more consumer-oriented position on its production possibility frontier.

22. Which of the following would be a positive economic statement?
A) Government has grown too large and should be reduced.
B) There has been an increase in the rate of inflation.
C) Government should be subject to the same rules as all other institutions.
D) Women should be paid as much as men for the same work.

 

Scenario: Countries A and B
Two countries, A and B, currently produce two goods, wheat (W) and steel (S). They each have a linear production possibility frontier in both goods. For Country A, if it spends all of its available resources to produce wheat, it can produce 500 units of wheat and zero units of steel. If it uses all of its resources to produce steel it can produce 250 units of steel and zero units of wheat. For Country B, if it spends all of its available resources producing wheat, it can produce 400 units of wheat, and if it spends all of its resources on the production of steel, it can produce 400 units of steel.

23. (Scenario: Countries A and B) If Country B specializes in steel and produces 300 units of steel, how much wheat can it produce?
A) 100 units
B) 200 units
C) 300 units
D) 400 units

24. When moving along a production possibility frontier, the opportunity cost to society of getting more of one good:
A) is constant.
B) is measured in dollar terms.
C) is measured by the amount of the other good that must be given up.
D) usually decreases.

25. (Table: Production Possibilities Schedule II) The production of 8 units of consumer goods and 2 units of capital goods per period would:
A) result in full employment.
B) result in no unused resources.
C) result in some unused or inefficiently used resources.
D) increase economic growth.

26. Which of the following statements is true?
A) Some very talented people have a comparative advantage in everything they do.
B) Some very untalented people have a comparative advantage in nothing they do.
C) Some very talented people have a very low opportunity cost in everything they do.
D) It is possible to have an absolute disadvantage in doing something but still have a comparative advantage in the same thing.

Figure: Comparative Advantage
Eastland and Westland produce only two goods, peaches and oranges, and this figure shows each nation's production possibility frontier for the two goods.

27. (Figure: Comparative Advantage) The opportunity cost of producing 1 unit of oranges for Westland is:
A) 1 unit of peaches.
B) 1/4 unit of peaches.
C) 4 units of peaches.
D) 10 units of peaches.

28. (Figure: Comparative Advantage) The opportunity cost of producing 1 unit of oranges for Eastland is:
A) 1 unit of peaches.
B) 1/4 unit of peaches.
C) 4 units of peaches.
D) 10 units of peaches.

29. An example of a positive statement is:
A) the rate of unemployment is 4%.
B) a high rate of economic growth is good for the country.
C) everyone in the country needs to be covered by national health insurance.
D) baseball players should not be paid higher salaries than the president of the United States.

 

30. (Figure: Production Possibilities and Circular-Flow Diagram) Assume the accompanying figures represent the same economy. Suppose that in the circular-flow diagram there is a significant increase in the amount of productivity that is occurring inside most of the firms. This results in a significant increase in the output of both coconuts and fish. If all other variables remain unchanged, then the adjustment in this economy would be best represented in the production possibilities figure by a movement from point A toward:
A) point A (no movement would occur).
B) point B (an increase in fish production).
C) point C (a decrease in coconut production).
D) point D (an outward shift of the entire curve).

31. (Figure: Consumer and Capital Goods) Point Z:
A) is unattainable, all other things unchanged.
B) is attainable if the economy is able to reach full employment.
C) is attainable if the quantity and/or quality of factors decreases.
D) will be attained as soon as the economy becomes efficient and moves to Curve 2.

32. Roommates Sarah and Zoe are hosting a Halloween party and have to make food for their guests and costumes for themselves. To finish both tasks as quickly as possible, Sarah and Zoe know that each of them should focus on just one task, but they don't know who should do what. To decide which roommate should do the cooking, Sarah and Zoe should determine which roommate:
A) has the absolute advantage in cooking.
B) has the comparative advantage in cooking.
C) has the largest production possibility frontier in cooking.
D) can complete the cooking in the least amount of time.

33. The concept of comparative advantage is based upon:
A) absolute labor productivity.
B) relative labor costs.
C) dollar prices of labor.
D) relative opportunity costs.

34. (Figure: Sugar and Freight Trains) Suppose the economy is operating at point C. The opportunity cost of producing the fourth freight train would be:
A) 19 tons of sugar.
B) 45 tons of sugar.
C) 80 tons of sugar.
D) 3 freight trains.

35. The U.S. production possibility frontier will ________ if all computers using Microsoft operating systems contracted a virus that deleted all information on those computers.
A) shift in
B) shift out
C) not change
D) Cannot be determined from the information provided.

36. The circular-flow diagram illustrates how households ________ goods and services and ________ factors of production.
A) buy; sell
B) buy; buy
C) own; buy
D) own; sell

Use the following to answer question 37:

Table: Production Possibilities Schedule I

 

37. (Table: Production Possibilities Schedule I) If the economy produces 2 units of consumer goods per period, it also can produce at most ________ units of capital goods per period.
A) 30
B) 28
C) 24
D) 18

38. A normative statement deals with:
A) the facts.
B) what was, is, or will be.
C) what ought to be.
D) the scientific method.

Use the following to answer question 39:

Figure: Production Possibility Frontier

 

39. (Figure: Production Possibility Frontier) The combination of cars and computers at point H:
A) can be attained, but would cost too much.
B) cannot be attained given the level of technology and the resources available.
C) has no meaning since it is not what consumers want.
D) is attainable but would increase unemployment.

40. (Table: Coffee and Salmon Production Possibilities) The table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. The opportunity cost of producing 1 unit of coffee for Brazil is:
A) 2 salmon.
B) 1/4 salmon.
C) 1 salmon.
D) 1/2 salmon.