Question 1

The text attributes the growth of economies over the last 200 years largely to:

Accepted Answer

A)  the development of markets. 
B)  the discovery of additional resources. 
C)  a decrease in the size of the world population. 
D)  laissez-faire policies. 
A)  the development of markets. 
B)  the discovery of additional resources. 
C)  a decrease in the size of the world population. 
D)  laissez-faire policies. A

Question 2

This production possibility table illustrates: $$\begin{array} { | c | c | } 
\hline \text { Eggs } & \text { Rye } \
\hline 10 & 0 \
\hline 8 & 10 \
\hline 6 & 20 \
\hline 4 & 30 \
\hline 2 & 40 \
\hline 0 & 50 \
\hline
\end{array}$$

Accepted Answer

A)  increasing marginal opportunity cost. 
B)  decreasing marginal opportunity cost. 
C)  constant marginal opportunity cost. 
D)  zero opportunity cost. 
A)  increasing marginal opportunity cost. 
B)  decreasing marginal opportunity cost. 
C)  constant marginal opportunity cost. 
D)  zero opportunity cost. C

Question 3

Refer to the graph below.   Productive inefficiency occurs at what point?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D D

Question 4

Suppose New Zealand uses one unit of labor to produce a kiwi and two units of labor to produce an apple. Suppose Australia uses two units of labor to produce a kiwi and one unit of labor to produce an apple. In this case, New Zealand:

Accepted Answer

A)  has a comparative advantage in producing apples. 
B)  has a comparative advantage in producing kiwis. 
C)  has a comparative advantage in producing both goods. 
D)  does not have a comparative advantage in producing either good. 
A)  has a comparative advantage in producing apples. 
B)  has a comparative advantage in producing kiwis. 
C)  has a comparative advantage in producing both goods. 
D)  does not have a comparative advantage in producing either good.

Question 5

Refer to the graph below.   If the production possibility curve shifts along the Good Y axis, which point will remain as a point of efficiency?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 6

Refer to the graph below.   Laura's production possibility curve for math and economics problems in one night is shown in the graph. Her opportunity cost of finishing six math problems instead of four math problems is:

Accepted Answer

A)  one economics problem. 
B)  two economics problems. 
C)  three economics problems. 
D)  four economics problems. 
A)  one economics problem. 
B)  two economics problems. 
C)  three economics problems. 
D)  four economics problems.

Question 7

The principle of increasing marginal opportunity cost holds in which of the following cases?

Accepted Answer

A)  All inputs are equally useful in the production of all goods. 
B)  The production possibility curve is a downward-sloping straight line. 
C)  Some inputs are better for producing particular goods. 
D)  Each input can be used to produce only one good. 
A)  All inputs are equally useful in the production of all goods. 
B)  The production possibility curve is a downward-sloping straight line. 
C)  Some inputs are better for producing particular goods. 
D)  Each input can be used to produce only one good.

Question 8

Refer to the graph shown. Given the production possibility curve, the opportunity cost of reading 2 more articles when you are already reading 11 articles is on average:

Accepted Answer

A)  1/2 album per article. 
B)  2 albums per article. 
C)  2/3 album per article. 
D)  3 albums per article. 
A)  1/2 album per article. 
B)  2 albums per article. 
C)  2/3 album per article. 
D)  3 albums per article.

Question 9

John and Jane Smith are both economists who are deciding how to split household chores of cooking and cleaning. They discover that John has a comparative advantage in cooking. Does this discovery tell them anything about comparative advantage in cleaning?

Accepted Answer

A)  No, both or neither may have a comparative advantage in cleaning. 
B)  No, either one may have a comparative advantage in cleaning. 
C)  Yes, John must also have a comparative advantage in cleaning. 
D)  Yes, Jane must have a comparative advantage in cleaning. 
A)  No, both or neither may have a comparative advantage in cleaning. 
B)  No, either one may have a comparative advantage in cleaning. 
C)  Yes, John must also have a comparative advantage in cleaning. 
D)  Yes, Jane must have a comparative advantage in cleaning.

Question 10

Refer to the graph below.         Which of the shifts explains what will happen to the production possibility curve if the cost of producing books goes down while the cost of producing DVDs goes up?

Accepted Answer

A)  I 
B)  II 
C)  III 
D)  IV 
A)  I 
B)  II 
C)  III 
D)  IV

Question 11

Two nations with differing comparative advantages will be able to consume more if each produces the good for which the opportunity cost is highest and trades for the good for which opportunity cost is lowest.

Accepted Answer

A) True 
 B)False

Question 12

If there is an inverse relationship between two variables, the graph relating the two variables will be:

Accepted Answer

A)  upward-sloping. 
B)  downward-sloping. 
C)  vertical. 
D)  horizontal. 
A)  upward-sloping. 
B)  downward-sloping. 
C)  vertical. 
D)  horizontal.

Question 13

Investment in capital goods is one way to increase the standard of living in the future. Investment in capital goods, however, means that we must forgo consumption today. One of the trade-offs facing an economy is the balance of consumption today with that of the future. The following table shows such a trade-off. With this information we know that the opportunity cost of which of the following is the greatest? $\begin{array}{l}
\begin{array}{|c|c|}
\hline\text { Current consumption } & \text { Future consumption }\
\hline 800 & 100 \
\hline 750 & 260 \
\hline 650 & 340 \
\hline 600 & 380 \
\hline 550 & 400 \
\hline
\end{array}
\end{array}$

Accepted Answer

A)  Increasing current consumption from 750 to 800 
B)  Increasing current consumption from 650 to 750 
C)  Increasing current consumption from 600 to 650 
D)  Increasing current consumption from 550 to 600 
A)  Increasing current consumption from 750 to 800 
B)  Increasing current consumption from 650 to 750 
C)  Increasing current consumption from 600 to 650 
D)  Increasing current consumption from 550 to 600

Question 14

According to Adam Smith, individuals are directed to do those things for which they have a comparative advantage by:

Accepted Answer

A)  their self-interest. 
B)  corporate management. 
C)  government policy. 
D)  the educational system. 
A)  their self-interest. 
B)  corporate management. 
C)  government policy. 
D)  the educational system.

Question 15

Which of the following cannot be determined by using a production possibility table?

Accepted Answer

A)  What combination of outputs can be produced? 
B)  How much less of one output must be produced if more of another output is produced? 
C)  What combination of outputs is best? 
D)  How much output can be produced from a given level of inputs? 
A)  What combination of outputs can be produced? 
B)  How much less of one output must be produced if more of another output is produced? 
C)  What combination of outputs is best? 
D)  How much output can be produced from a given level of inputs?

Question 16

Suppose that in Colombia one unit of labor can produce 8 tons of papayas or 2 tons of bananas and in Brazil, one unit of labor can produce either 2 tons of papayas or 4 tons of bananas. If each country has two units of labor, which of the following consumption combinations can be attained only with trade?

Accepted Answer

A)  Brazil consumes 8 tons of bananas and no papayas. 
B)  Colombia consumes 16 tons of papayas and no bananas. 
C)  Brazil consumes 2 tons of papayas and 4 tons of bananas. 
D)  Colombia consumes 8 tons of papayas and 4 tons of bananas. 
A)  Brazil consumes 8 tons of bananas and no papayas. 
B)  Colombia consumes 16 tons of papayas and no bananas. 
C)  Brazil consumes 2 tons of papayas and 4 tons of bananas. 
D)  Colombia consumes 8 tons of papayas and 4 tons of bananas.

Question 17

If the hourly wage of German workers is $6, the hourly wage of Canadian workers is $10, and German workers produce half as much output per hour as Canadian workers, all else equal, it would be efficient to locate production facilities in:

Accepted Answer

A)  Germany since the cost per unit of output will be higher. 
B)  Germany since the cost per unit of output will be lower. 
C)  Canada since the cost per unit of output will be higher. 
D)  Canada since the cost per unit of output will be lower. 
A)  Germany since the cost per unit of output will be higher. 
B)  Germany since the cost per unit of output will be lower. 
C)  Canada since the cost per unit of output will be higher. 
D)  Canada since the cost per unit of output will be lower.

Question 18

Refer to the graph below.   Which of the shifts explains what would happen to the production possibility curve if restrictions were imposed on tuna fishing?

Accepted Answer

A)  I 
B)  II 
C)  III 
D)  IV 
A)  I 
B)  II 
C)  III 
D)  IV

Question 19

If no resources had a comparative advantage in the production of any good, the production possibility curve would be:

Accepted Answer

A)  bowed outward. 
B)  bowed inward. 
C)  a horizontal line. 
D)  a downward-sloping straight line. 
A)  bowed outward. 
B)  bowed inward. 
C)  a horizontal line. 
D)  a downward-sloping straight line.

Question 20

According to the law of one price,

Accepted Answer

A)  it is illegal to pay different people different amounts for the same work. 
B)  it is illegal to charge different people different amounts for the same product. 
C)  competition, combined with transferable goods and resources, drives the prices of similar goods toward equilibrium. 
D)  competition, combined with inherent advantages, drives the prices of similar goods toward equality. 
A)  it is illegal to pay different people different amounts for the same work. 
B)  it is illegal to charge different people different amounts for the same product. 
C)  competition, combined with transferable goods and resources, drives the prices of similar goods toward equilibrium. 
D)  competition, combined with inherent advantages, drives the prices of similar goods toward equality.

Exam 2: The Production Possibility Model, Trade, and Globalization

The text attributes the growth of economies over the last 200 years largely to:

This production possibility table illustrates: Eggs Rye 10 0 8 10 6 20 4 30 2 40 0 50

Refer to the graph below. Productive inefficiency occurs at what point?

Suppose New Zealand uses one unit of labor to produce a kiwi and two units of labor to produce an apple. Suppose Australia uses two units of labor to produce a kiwi and one unit of labor to produce an apple. In this case, New Zealand:

Refer to the graph below. If the production possibility curve shifts along the Good Y axis, which point will remain as a point of efficiency?

Refer to the graph below. Laura's production possibility curve for math and economics problems in one night is shown in the graph. Her opportunity cost of finishing six math problems instead of four math problems is:

The principle of increasing marginal opportunity cost holds in which of the following cases?

Refer to the graph shown. Given the production possibility curve, the opportunity cost of reading 2 more articles when you are already reading 11 articles is on average:

John and Jane Smith are both economists who are deciding how to split household chores of cooking and cleaning. They discover that John has a comparative advantage in cooking. Does this discovery tell them anything about comparative advantage in cleaning?

Refer to the graph below. Which of the shifts explains what will happen to the production possibility curve if the cost of producing books goes down while the cost of producing DVDs goes up?

Two nations with differing comparative advantages will be able to consume more if each produces the good for which the opportunity cost is highest and trades for the good for which opportunity cost is lowest.

If there is an inverse relationship between two variables, the graph relating the two variables will be:

According to Adam Smith, individuals are directed to do those things for which they have a comparative advantage by:

Which of the following cannot be determined by using a production possibility table?

If the hourly wage of German workers is $6, the hourly wage of Canadian workers is $10, and German workers produce half as much output per hour as Canadian workers, all else equal, it would be efficient to locate production facilities in:

Refer to the graph below. Which of the shifts explains what would happen to the production possibility curve if restrictions were imposed on tuna fishing?

If no resources had a comparative advantage in the production of any good, the production possibility curve would be:

According to the law of one price,

Economics and Economic Reasoning

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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