Question 1

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 2

What is productive efficiency? Illustrate it with a production possibilities curve.

Accepted Answer

Productive efficiency means achieving as

Question 3

Refer to the graph below.   Which of the shifts explains what would happen to the production possibility curve if a cyclone destroys five major garment factories in the Philippines?

Accepted Answer

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

Question 4

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 5

Refer to the graph shown.   If Countries X and Y face the production possibility curves A and B, respectively, Country X has a comparative advantage in the production of:

Accepted Answer

A) neither agricultural goods nor industrial goods. 
B) both agricultural goods and industrial goods. 
C) agricultural goods only. 
D) industrial goods only. 
A) neither agricultural goods nor industrial goods. 
B) both agricultural goods and industrial goods. 
C) agricultural goods only. 
D) industrial goods only.

Question 6

The production possibility model can be used to demonstrate the concept of opportunity cost.

Accepted Answer

A) True 
 B)False

Question 7

Refer to the graph shown. Destruction of some of the resources necessary to produce both guns and butter would result in what movement?

Accepted Answer

A) From A to B to C to D in diagram a. 
B) From C to D to A to B in diagram a. 
C) From X to Y to X to Z in diagram b. 
D) From X to Z to X to Y in diagram b. 
A) From A to B to C to D in diagram a. 
B) From C to D to A to B in diagram a. 
C) From X to Y to X to Z in diagram b. 
D) From X to Z to X to Y in diagram b.

Question 8

Which of the following is an example of the law of one price in action?

Accepted Answer

A) Prices are just one of the many factors that firms use when deciding where to locate production. 
B) If one county has a comparative advantage in producing a particular good, another country must have a comparative advantage in producing another good. 
C) Wages in India are lower than wages in the United States, and so firms move their call centers to India. This tends to raise wages in India and depress wages in the United States. 
D) Because most industries in the United States are dominated by one or two firms, the dominant firm sets the price and other firms in the industry follow. 
A) Prices are just one of the many factors that firms use when deciding where to locate production. 
B) If one county has a comparative advantage in producing a particular good, another country must have a comparative advantage in producing another good. 
C) Wages in India are lower than wages in the United States, and so firms move their call centers to India. This tends to raise wages in India and depress wages in the United States. 
D) Because most industries in the United States are dominated by one or two firms, the dominant firm sets the price and other firms in the industry follow.

Question 9

Consider a farmer's production possibilities curve,with corn measured on the vertical axis,and soybeans on the horizontal axis.Describe the impact of each of the following on the curve:
(a)The farmer buys or rents more land.
(b)A higher yielding variety of corn seed is developed.
(c)A hailstorm wipes out half of whatever crops the farmer has planted
(d)The government raises price supports for soybeans.

Accepted Answer

(a)The entire curve should shift out,sin

Question 10

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 11

Given the production possibility tables for First and Second Bakeries shown, we know that the opportunity cost of producing pies: $$\begin{array} { c } 
{ \text { First Bakery } }  \quad\quad  { \text { Second Bukery } } \
\begin{array} { | c | c | c | c | } 
\hline \text { Conkies } & \text { Pies } & \text { Conkies } & \text { Pies } \
\hline 0 & 18 & 0 & 9 \
\hline 10 & 12 & 30 & 6 \
\hline 20 & 6 & 60 & 3 \
\hline 30 & 0 & 90 & 0 \
\hline
\end{array}\end{array}$$

Accepted Answer

A) is higher at First Bakery. 
B) is higher at Second Bakery. 
C) is the same at both bakeries. 
D) cannot be computed without further information. 
A) is higher at First Bakery. 
B) is higher at Second Bakery. 
C) is the same at both bakeries. 
D) cannot be computed without further information.

Question 12

An economy that operates inside its production possibility curve is less efficient than it would be if it were operating on its production possibility curve.

Accepted Answer

A) True 
 B)False

Question 13

The graph below indicates that the economy can produce both:

Accepted Answer

A) 20 units of eggs and 5 units of rye, although this would not be efficient. 
B) 10 units of eggs and 20 units of rye, although this would not be efficient. 
C) 20 units of eggs and 5 units of rye, and this would be efficient. 
D) 10 units of eggs and 20 units of rye, and this would be efficient. 
A) 20 units of eggs and 5 units of rye, although this would not be efficient. 
B) 10 units of eggs and 20 units of rye, although this would not be efficient. 
C) 20 units of eggs and 5 units of rye, and this would be efficient. 
D) 10 units of eggs and 20 units of rye, and this would be efficient.

Question 14

Countries gain from trade by producing:

Accepted Answer

A) the goods they produce at the highest opportunity cost. 
B) the goods they can produce at the lowest opportunity cost. 
C) where the production possibility curve has a slope of -1. 
D) all goods in equal amounts. 
A) the goods they produce at the highest opportunity cost. 
B) the goods they can produce at the lowest opportunity cost. 
C) where the production possibility curve has a slope of -1. 
D) all goods in equal amounts.

Question 15

The table below is a production possibility table for the fictional country of Myopia.Use it to construct the corresponding production possibility curve in the quadrant below.(Label the axes. )   (a)Explain the meaning of a production possibilities curve.
(b)What is assumed to be constant when we draw that curve?
(c)How is a point on the curve different from (1)a point inside the curve or (2)a point outside the curve?
(d)How does this curve illustrate the concept of opportunity cost?
(e)How does it illustrate the principle of increasing marginal opportunity cost?

Accepted Answer

@#IMG-DLM& (a)A production possibilities curve is

Question 16

If you move from a point inside the production possibility curve to a point on the production possibility curve, it follows that efficiency is:

Accepted Answer

A) increased because the economy is now on the production possibility curve. 
B) increased only if production of both goods increases. 
C) increased as long as the combined output of both goods increases. 
D) reduced if less of one good is produced. 
A) increased because the economy is now on the production possibility curve. 
B) increased only if production of both goods increases. 
C) increased as long as the combined output of both goods increases. 
D) reduced if less of one good is produced.

Question 17

The principle of increasing marginal opportunity cost does not hold in which of the following cases?

Accepted Answer

A) All inputs are equally useful in the production of all goods. 
B) Some inputs are more useful in the production of certain goods. 
C) Some inputs are less useful in the production of certain goods. 
D) Each input is useful in the production of a limited number of goods. 
A) All inputs are equally useful in the production of all goods. 
B) Some inputs are more useful in the production of certain goods. 
C) Some inputs are less useful in the production of certain goods. 
D) Each input is useful in the production of a limited number of goods.

Question 18

Because you can get more of one good only by giving up some of another good, the shape of a production possibility curve is:

Accepted Answer

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

Question 19

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.

Question 20

The text argues that the United States has had a comparative advantage in goods and services that:

Accepted Answer

A) require creativity and innovation. 
B) are artistic and well crafted. 
C) are mass-produced. 
D) are luxury goods. 
A) require creativity and innovation. 
B) are artistic and well crafted. 
C) are mass-produced. 
D) are luxury goods.

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

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

What is productive efficiency? Illustrate it with a production possibilities curve.

Refer to the graph below. Which of the shifts explains what would happen to the production possibility curve if a cyclone destroys five major garment factories in the Philippines?

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?

Refer to the graph shown. If Countries X and Y face the production possibility curves A and B, respectively, Country X has a comparative advantage in the production of:

The production possibility model can be used to demonstrate the concept of opportunity cost.

Refer to the graph shown. Destruction of some of the resources necessary to produce both guns and butter would result in what movement?

Which of the following is an example of the law of one price in action?

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?

Given the production possibility tables for First and Second Bakeries shown, we know that the opportunity cost of producing pies: First Bakery Second Bukery Conkies Pies Conkies Pies 0 18 0 9 10 12 30 6 20 6 60 3 30 0 90 0

An economy that operates inside its production possibility curve is less efficient than it would be if it were operating on its production possibility curve.

The graph below indicates that the economy can produce both:

Countries gain from trade by producing:

If you move from a point inside the production possibility curve to a point on the production possibility curve, it follows that efficiency is:

The principle of increasing marginal opportunity cost does not hold in which of the following cases?

Because you can get more of one good only by giving up some of another good, the shape of a production possibility curve is:

According to the law of one price,

The text argues that the United States has had a comparative advantage in goods and services that:

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