Question 1

Technological change

Accepted Answer

A)  generates economic growth. 
B)  shifts the PPF leftward. 
C)  creates inefficiency. 
D)  Both answers A and C are correct. 
A)  generates economic growth. 
B)  shifts the PPF leftward. 
C)  creates inefficiency. 
D)  Both answers A and C are correct.

Question 2

When producing at a production efficient point,

Accepted Answer

A)  our choice of the goods can be either on or within the production possibilities frontier. 
B)  we can satisfy our all wants. 
C)  the opportunity cost of another good is zero. 
D)  we face a tradeoff and incur an opportunity cost. 
A)  our choice of the goods can be either on or within the production possibilities frontier. 
B)  we can satisfy our all wants. 
C)  the opportunity cost of another good is zero. 
D)  we face a tradeoff and incur an opportunity cost.

Question 3

-The figure above represents the production possibilities frontier for a country.
a) The nation is currently producing at point B and wants to move to point C. What is the opportunity cost of the move?
b) The nation is currently producing at point B and wants to move to point A. What is the opportunity cost of the move?

Accepted Answer

a) By moving from point B to point C, th

Question 4

When a nation has a comparative advantage in the production of a particular good

Accepted Answer

A)  the nation tends to avoid specialization. 
B)  the comparative advantage encourages self-sufficiency. 
C)  the opportunity cost of producing that good is higher than that of other goods. 
D)  the nation can gain from trade. 
A)  the nation tends to avoid specialization. 
B)  the comparative advantage encourages self-sufficiency. 
C)  the opportunity cost of producing that good is higher than that of other goods. 
D)  the nation can gain from trade.

Question 5

A key factor that leads to economic growth is

Accepted Answer

A)  human capital accumulation. 
B)  increasing current consumption. 
C)  avoiding the opportunity cost of investment. 
D)  Both answers A and B are correct. 
A)  human capital accumulation. 
B)  increasing current consumption. 
C)  avoiding the opportunity cost of investment. 
D)  Both answers A and B are correct.

Question 6

How do property rights help organize production and trade?

Accepted Answer

Property rights are necessary in order f

Question 7

-The table above lists six points on the production possibilities frontier for grain and cars. Given this information, which of the following combinations is unattainable?

Accepted Answer

A)  6 tons of grain and 18 cars 
B)  4 tons of grain and 26 cars 
C)  2 tons of grain and 27 cars 
D)  7 tons of grain and 10 cars 
A)  6 tons of grain and 18 cars 
B)  4 tons of grain and 26 cars 
C)  2 tons of grain and 27 cars 
D)  7 tons of grain and 10 cars

Question 8

-Refer to the production possibilities frontier in the figure above. Which of the following movements requires the largest opportunity cost, in terms of good Y forgone, per extra unit of good X?

Accepted Answer

A)  from point a to point b 
B)  from point b to point c 
C)  from point c to point d 
D)  from point d to point e 
A)  from point a to point b 
B)  from point b to point c 
C)  from point c to point d 
D)  from point d to point e

Question 9

-In the figure above, if 4 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources.

Accepted Answer

A)  marginal cost of a computer exceeds the marginal benefit of a computer, so more computers 
B)  marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers 
C)  marginal benefit of a computer exceeds the marginal cost of a computer, so more computers 
D)  marginal benefit of a computer exceeds the marginal cost of a computer, so fewer computers 
A)  marginal cost of a computer exceeds the marginal benefit of a computer, so more computers 
B)  marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers 
C)  marginal benefit of a computer exceeds the marginal cost of a computer, so more computers 
D)  marginal benefit of a computer exceeds the marginal cost of a computer, so fewer computers

Question 10

The quantity of shoes produced is measured along the horizontal axis of a PPF and the quantity of shirts is measured along the vertical axis. As you move down toward the right along the PPF, the marginal cost of

Accepted Answer

A)  shoes decreases. 
B)  shoes increases. 
C)  shirts increases. 
D)  shoes and shirts is equal at the midpoint between the vertical and horizontal axis. 
A)  shoes decreases. 
B)  shoes increases. 
C)  shirts increases. 
D)  shoes and shirts is equal at the midpoint between the vertical and horizontal axis.

Question 11

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 12

When we cannot produce more of any good without giving up some other good that we value more highly, we have achieved

Accepted Answer

A)  production. 
B)  equity. 
C)  allocative efficiency. 
D)  the production point where the marginal benefit exceeds the marginal cost by as much as possible. 
A)  production. 
B)  equity. 
C)  allocative efficiency. 
D)  the production point where the marginal benefit exceeds the marginal cost by as much as possible.

Question 13

-In the table above, country A is producing 4 units of X and 8 units of Y and country B is producing 4 units of X and 6 units of Y. The opportunity cost of producing more of

Accepted Answer

A)  good X is the same for both countries. 
B)  good Y is the same for both countries. 
C)  good X is lower in country A. 
D)  good Y is lower in country A. 
A)  good X is the same for both countries. 
B)  good Y is the same for both countries. 
C)  good X is lower in country A. 
D)  good Y is lower in country A.

Question 14

-Two countries, Blue Violet and Orange Rose, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. ________ has a comparative advantage in teapots and ________ has a comparative advantage in coffeepots.

Accepted Answer

A)  Orange Rose; Blue Violet 
B)  Blue Violet; Orange Rose 
C)  Blue Violet; Blue Violet 
D)  Orange Rose; Orange Rose 
A)  Orange Rose; Blue Violet 
B)  Blue Violet; Orange Rose 
C)  Blue Violet; Blue Violet 
D)  Orange Rose; Orange Rose

Question 15

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 16

In an hour, Andy can make either 5 pizzas or 12 pies and Chris can make either 6 pizzas or 18 pies. ________ advantage in making pizzas.

Accepted Answer

A)  Andy has an absolute 
B)  Andy has a comparative 
C)  Chris has a comparative 
D)  None of the above answers is correct. 
A)  Andy has an absolute 
B)  Andy has a comparative 
C)  Chris has a comparative 
D)  None of the above answers is correct.

Question 17

-The above table shows production combinations on a country's production possibilities frontier. Which of the following is an example of a production point that is inefficient?

Accepted Answer

A)  0 units of good X and 40 units of good Y 
B)  6 units of good X and 28 units of good Y 
C)  10 units of good X and 16 units of good Y 
D)  3 units of good X and 35 units of good Y 
A)  0 units of good X and 40 units of good Y 
B)  6 units of good X and 28 units of good Y 
C)  10 units of good X and 16 units of good Y 
D)  3 units of good X and 35 units of good Y

Question 18

A PPF bows outward because

Accepted Answer

A)  not all resources are equally productive in all activities. 
B)  consumers prefer about equal amounts of the different goods. 
C)  entrepreneurial talent is more abundant than human capital. 
D)  resources are used inefficiently. 
A)  not all resources are equally productive in all activities. 
B)  consumers prefer about equal amounts of the different goods. 
C)  entrepreneurial talent is more abundant than human capital. 
D)  resources are used inefficiently.

Question 19

Sarah and her boyfriend Mike want to save some money to pay for their wedding. So they decided to help people in the neighborhood by cleaning their garages and mowing lawns. Sarah takes 60 minutes to clean a garage and 80 minutes to mow a lawn. Mike takes 80 minutes to clean a garage and 80 minutes to mow a lawn. Sarah and Mike devote 10 hours per week each to these activities and get paid $25 for each garage they clean and $25 for each lawn they mow. Sarah says to Mike: "I have an absolute advantage in cleaning and we are equally productive in mowing. Therefore I should do both cleaning and mowing but you should only mow lawns." Mike disagrees. He thinks Sarah should specialize in cleaning garages and he should specialize in mowing lawns. Help Sarah and Mike to resolve their dispute.
a) Who has an absolute advantage in cleaning garages? In mowing lawns? Explain.
b) Draw Sarah's and Mike's production possibilities frontiers. What are each individual's opportunity costs?
c) Who has a comparative advantage in cleaning garages? In mowing lawns? Explain.
d) Is Sarah right when she says that she should do both cleaning and mowing while Mike should only mow lawns? Or may be Mike is right when he suggests that Sarah specializes in cleaning and he specializes in mowing? Illustrate and substantiate your answer with a numerical example.

Accepted Answer

a) Sarah has an absolute advantage in cl

Question 20

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. Tom has a comparative advantage in ________ and Jerry has a comparative advantage in ________.

Accepted Answer

A)  cooking eggs; making sandwiches 
B)  making sandwiches; cooking eggs 
C)  neither of these activities; both activities 
D)  both activities; neither of these activities 
A)  cooking eggs; making sandwiches 
B)  making sandwiches; cooking eggs 
C)  neither of these activities; both activities 
D)  both activities; neither of these activities

Technological change

When producing at a production efficient point,

When a nation has a comparative advantage in the production of a particular good

A key factor that leads to economic growth is

How do property rights help organize production and trade?

-The table above lists six points on the production possibilities frontier for grain and cars. Given this information, which of the following combinations is unattainable?

-Refer to the production possibilities frontier in the figure above. Which of the following movements requires the largest opportunity cost, in terms of good Y forgone, per extra unit of good X?

-In the figure above, if 4 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources.

The quantity of shoes produced is measured along the horizontal axis of a PPF and the quantity of shirts is measured along the vertical axis. As you move down toward the right along the PPF, the marginal cost 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

When we cannot produce more of any good without giving up some other good that we value more highly, we have achieved

-In the table above, country A is producing 4 units of X and 8 units of Y and country B is producing 4 units of X and 6 units of Y. The opportunity cost of producing more of

-Two countries, Blue Violet and Orange Rose, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. has a comparative advantage in teapots and has a comparative advantage in coffeepots.

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

In an hour, Andy can make either 5 pizzas or 12 pies and Chris can make either 6 pizzas or 18 pies. ________ advantage in making pizzas.

-The above table shows production combinations on a country's production possibilities frontier. Which of the following is an example of a production point that is inefficient?

A PPF bows outward because

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. Tom has a comparative advantage in and Jerry has a comparative advantage in .

What Is Economics

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 2: The Economic Problem

Technological change

When producing at a production efficient point,

When a nation has a comparative advantage in the production of a particular good

A key factor that leads to economic growth is

How do property rights help organize production and trade?

-The table above lists six points on the production possibilities frontier for grain and cars. Given this information, which of the following combinations is unattainable?

-Refer to the production possibilities frontier in the figure above. Which of the following movements requires the largest opportunity cost, in terms of good Y forgone, per extra unit of good X?

-In the figure above, if 4 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources.

The quantity of shoes produced is measured along the horizontal axis of a PPF and the quantity of shirts is measured along the vertical axis. As you move down toward the right along the PPF, the marginal cost 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

When we cannot produce more of any good without giving up some other good that we value more highly, we have achieved

-In the table above, country A is producing 4 units of X and 8 units of Y and country B is producing 4 units of X and 6 units of Y. The opportunity cost of producing more of

-Two countries, Blue Violet and Orange Rose, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. ________ has a comparative advantage in teapots and ________ has a comparative advantage in coffeepots.

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

In an hour, Andy can make either 5 pizzas or 12 pies and Chris can make either 6 pizzas or 18 pies. ________ advantage in making pizzas.

-The above table shows production combinations on a country's production possibilities frontier. Which of the following is an example of a production point that is inefficient?

A PPF bows outward because

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. Tom has a comparative advantage in ________ and Jerry has a comparative advantage in ________.

What Is Economics

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

-Two countries, Blue Violet and Orange Rose, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. has a comparative advantage in teapots and has a comparative advantage in coffeepots.

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. Tom has a comparative advantage in and Jerry has a comparative advantage in .