Question 1

In order to societies to reap the gains from trade, it is necessary to

Accepted Answer

A)  define and enforce property rights. 
B)  foster economic growth. 
C)  distribute resources equally. 
D)  achieve productive efficiency. 
A)  define and enforce property rights. 
B)  foster economic growth. 
C)  distribute resources equally. 
D)  achieve productive efficiency.

Question 2

The idea of comparative advantage implies that people or countries

Accepted Answer

A)  should specialize in the production of goods. 
B)  can gain from trading. 
C)  can consume at a point outside their production possibilities frontier. 
D)  all of the above 
A)  should specialize in the production of goods. 
B)  can gain from trading. 
C)  can consume at a point outside their production possibilities frontier. 
D)  all of the above

Question 3

-According to the diagram in the figure above, an allocatively efficient use of resources requires that production and consumption of gasoline be

Accepted Answer

A)  1 million gallons of gasoline per month. 
B)  2 million gallons of gasoline per month. 
C)  3 million gallons of gasoline per month. 
D)  4 million gallons of gasoline per month. 
A)  1 million gallons of gasoline per month. 
B)  2 million gallons of gasoline per month. 
C)  3 million gallons of gasoline per month. 
D)  4 million gallons of gasoline per month.

Question 4

Explain the difference between marginal cost and marginal benefit.

Accepted Answer

Marginal benefit is the benefit someone

Question 5

Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A

Accepted Answer

A)  has a lower opportunity cost of producing good X than has B. 
B)  has a lower opportunity cost of producing good X than of producing good Y. 
C)  can produce more units of X in a given time period than can B. 
D)  can produce X using newer technology than can B. 
A)  has a lower opportunity cost of producing good X than has B. 
B)  has a lower opportunity cost of producing good X than of producing good Y. 
C)  can produce more units of X in a given time period than can B. 
D)  can produce X using newer technology than can B.

Question 6

A production point beyond the production possibilities frontier represents what?

Accepted Answer

A production point beyond the

Question 7

-In the figure above, both Joe and Jill initially produce at point A. If Joe and Jill realize that they each possess a comparative advantage, which outcome can we expect?

Accepted Answer

A)  Joe will specialize in shirts and Jill will specialize in pants. 
B)  Joe will specialize in pants and Jill will specialize in shirts. 
C)  Joe and Jill each will be able to consume more than 2 shirts and 2 pairs of pants. 
D)  Both answers B and C are correct. 
A)  Joe will specialize in shirts and Jill will specialize in pants. 
B)  Joe will specialize in pants and Jill will specialize in shirts. 
C)  Joe and Jill each will be able to consume more than 2 shirts and 2 pairs of pants. 
D)  Both answers B and C are correct.

Question 8

The opportunity cost of economic growth is

Accepted Answer

A)  future consumption that a nation gets if it gives up some present consumption. 
B)  future consumption that a nation gives up to consume more today. 
C)  present consumption that a nation gives up to accumulate capital. 
D)  present investment that a nation gives up to increase its economic growth. 
A)  future consumption that a nation gets if it gives up some present consumption. 
B)  future consumption that a nation gives up to consume more today. 
C)  present consumption that a nation gives up to accumulate capital. 
D)  present investment that a nation gives up to increase its economic growth.

Question 9

If production point is inside the production possibilities frontier,

Accepted Answer

A)  it is not possible to produce more of both goods. 
B)  production is inefficient. 
C)  in order to produce more of one good, less of the other must be produced. 
D)  production is in the "unattainable" region. 
A)  it is not possible to produce more of both goods. 
B)  production is inefficient. 
C)  in order to produce more of one good, less of the other must be produced. 
D)  production is in the "unattainable" region.

Question 10

-In the figure above, if the quantity of yogurt produced increases from 2 gallons an hour to 3 gallons an hour, the opportunity cost of a gallon of yogurt in terms of ice cream is

Accepted Answer

A)  half a gallon. 
B)  1 gallon. 
C)  3 gallons. 
D)  4 gallons. 
A)  half a gallon. 
B)  1 gallon. 
C)  3 gallons. 
D)  4 gallons.

Question 11

Blue Violet's Sweet Pansy's
production possibilities production possibilities  
-Two countries, Blue Violet and Sweet Pansy, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. With specialization and trade, Sweet Pansy produces ________ and Blue Violet produces ________.

Accepted Answer

A)  150 coffeepots, 150 teapots 
B)  150 teapots, 75 coffeepots 
C)  150 teapots and 150 coffeepots, nothing 
D)  100 teapots and 25 coffeepots, 100 teapots and 50 coffeepots 
A)  150 coffeepots, 150 teapots 
B)  150 teapots, 75 coffeepots 
C)  150 teapots and 150 coffeepots, nothing 
D)  100 teapots and 25 coffeepots, 100 teapots and 50 coffeepots

Question 12

Country A can produce 1 cello by giving up the production of 5 guitars. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage?

Accepted Answer

A)  guitars 
B)  cellos 
C)  both goods 
D)  neither good 
A)  guitars 
B)  cellos 
C)  both goods 
D)  neither good

Question 13

A tradeoff is illustrated by

Accepted Answer

A)  a point inside the PPF. 
B)  a point outside the PPF. 
C)  a change in the slope of the PPF. 
D)  the negative slope of the PPF. 
A)  a point inside the PPF. 
B)  a point outside the PPF. 
C)  a change in the slope of the PPF. 
D)  the negative slope of the PPF.

Question 14

If two countries specialize in the production of goods in which they have a comparative advantage, they can experience gains from trade.

Accepted Answer

A) True 
 B)False

Question 15

-In order to achieve the maximum gains from trade, people should specialize according to

Accepted Answer

A)  property rights. 
B)  PPF. 
C)  absolute advantage. 
D)  comparative advantage. 
A)  property rights. 
B)  PPF. 
C)  absolute advantage. 
D)  comparative advantage.

Question 16

Increasing opportunity cost while moving along a production possibilities frontier is the result of

Accepted Answer

A)  taxes. 
B)  firms' needs to produce profits. 
C)  the fact that it is more difficult to use resources efficiently the more society produces. 
D)  the fact that resources are not equally productive in alternative uses. 
A)  taxes. 
B)  firms' needs to produce profits. 
C)  the fact that it is more difficult to use resources efficiently the more society produces. 
D)  the fact that resources are not equally productive in alternative uses.

Question 17

Sam's production possibilities frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a point inside his frontier, then he

Accepted Answer

A)  can increase production of both goods with no increase in resources. 
B)  is fully using all his resources. 
C)  values good A more than good B. 
D)  values good B more than good A. 
A)  can increase production of both goods with no increase in resources. 
B)  is fully using all his resources. 
C)  values good A more than good B. 
D)  values good B more than good A.

Question 18

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. If Tom and Jerry trade

Accepted Answer

A)  Tom will benefit and Jerry will not. 
B)  Jerry will benefit and Tom will not. 
C)  both will benefit. 
D)  none of them will benefit. 
A)  Tom will benefit and Jerry will not. 
B)  Jerry will benefit and Tom will not. 
C)  both will benefit. 
D)  none of them will benefit.

Question 19

Why does it make sense for economies to specialize according to comparative advantage and trade?

Accepted Answer

A person has a comparative advantage in

Question 20

As a country that has a bowed-out production possibilities frontier produces more of one good, the opportunity cost of a unit of that good ________.

Accepted Answer

A)  might increase or decrease 
B)  remains the same 
C)  increases 
D)  decreases 
A)  might increase or decrease 
B)  remains the same 
C)  increases 
D)  decreases

Exam 2: The Economic Problem

In order to societies to reap the gains from trade, it is necessary to

The idea of comparative advantage implies that people or countries

-According to the diagram in the figure above, an allocatively efficient use of resources requires that production and consumption of gasoline be

Explain the difference between marginal cost and marginal benefit.

Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A

A production point beyond the production possibilities frontier represents what?

-In the figure above, both Joe and Jill initially produce at point A. If Joe and Jill realize that they each possess a comparative advantage, which outcome can we expect?

The opportunity cost of economic growth is

If production point is inside the production possibilities frontier,

-In the figure above, if the quantity of yogurt produced increases from 2 gallons an hour to 3 gallons an hour, the opportunity cost of a gallon of yogurt in terms of ice cream is

Country A can produce 1 cello by giving up the production of 5 guitars. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage?

A tradeoff is illustrated by

If two countries specialize in the production of goods in which they have a comparative advantage, they can experience gains from trade.

-In order to achieve the maximum gains from trade, people should specialize according to

Increasing opportunity cost while moving along a production possibilities frontier is the result of

Sam's production possibilities frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a point inside his frontier, then he

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. If Tom and Jerry trade

Why does it make sense for economies to specialize according to comparative advantage and trade?

As a country that has a bowed-out production possibilities frontier produces more of one good, the opportunity cost of a unit of that good ________.

What Is Economics

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

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