Question 1

-In the figure above, suppose that Mac and Izzie specialize and trade to reach point c. Mac sends Izzie

Accepted Answer

A)  12 computers in exchange for 12 TVs. 
B)  12 computers in exchange for 6 TVs. 
C)  6 computers in exchange for 12 TVs. 
D)  6 computers in exchange for 6 TVs. 
A)  12 computers in exchange for 12 TVs. 
B)  12 computers in exchange for 6 TVs. 
C)  6 computers in exchange for 12 TVs. 
D)  6 computers in exchange for 6 TVs. D

Question 2

In the United States, Texas ranks number one in the amount of installed megawatts for wind power generation and Florida ranks number one in the number of beach vacations. These facts point out that

Accepted Answer

A)  Texas has a comparative advantage in wind power generation. 
B)  Texas definitely has an absolute advantage in wind power generation. 
C)  Florida should produce more wind energy. 
D)  Florida can produce wind energy at a lower opportunity cost than can Texas. 
A)  Texas has a comparative advantage in wind power generation. 
B)  Texas definitely has an absolute advantage in wind power generation. 
C)  Florida should produce more wind energy. 
D)  Florida can produce wind energy at a lower opportunity cost than can Texas. A

Question 3

-Suppose a factory can be designed to produce either trucks or cars. The figure above shows the marginal cost and marginal benefit of producing trucks in terms of the forgone cars.
a) What is the marginal benefit of the 25th truck?
b) What is the marginal cost of the 25th truck?
c) Should the 25th truck be produced? Why or why not.
d) What is the marginal benefit of the 75th truck?
e) What is the marginal cost of the 75th truck?
f) Should the 75th truck be produced? Why or why not?
g) What is the allocatively efficient quantity of trucks?

Accepted Answer

a) 3 cars per truck
b) 1 car per truck
c) This truck should be produced because people value the 25th truck at 3 cars per truck, but it only costs 1 car per truck to make it.
d) 1 car per truck
e) 3 cars per truck
f) This truck should not be produced because people value the 75th truck at 1 car per truck, but it costs 3 cars per truck to make it.
g) 50 trucks is the allocatively efficient quantity of trucks.

Question 4

Resource use is allocatively efficient if the

Accepted Answer

A)  total cost of what the resource produces is less than the total benefit of what is produced. 
B)  total cost of what the resource produces is equal to the total benefit of what is produced. 
C)  marginal benefit of what the resource produces has diminished to zero. 
D)  marginal cost of what the resource produces is equal to the marginal benefit of what is produced. 
A)  total cost of what the resource produces is less than the total benefit of what is produced. 
B)  total cost of what the resource produces is equal to the total benefit of what is produced. 
C)  marginal benefit of what the resource produces has diminished to zero. 
D)  marginal cost of what the resource produces is equal to the marginal benefit of what is produced.

Question 5

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is CORRECT?

Accepted Answer

A)  Homer has a comparative advantage in catching fish and Teddy has a comparative advantage in picking fruit. 
B)  Homer has a comparative advantage in picking fruit and Teddy has a comparative advantage in catching fish. 
C)  Homer has a comparative advantage in both catching fish and picking fruit. 
D)  Teddy has a comparative advantage in both catching fish and picking fruit. 
A)  Homer has a comparative advantage in catching fish and Teddy has a comparative advantage in picking fruit. 
B)  Homer has a comparative advantage in picking fruit and Teddy has a comparative advantage in catching fish. 
C)  Homer has a comparative advantage in both catching fish and picking fruit. 
D)  Teddy has a comparative advantage in both catching fish and picking fruit.

Question 6

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue's opportunity cost of changing oil is ________ than Fred's and her opportunity cost for changing tires is ________ than Fred's.

Accepted Answer

A)  greater; less 
B)  less; greater 
C)  less; less 
D)  greater; greater 
A)  greater; less 
B)  less; greater 
C)  less; less 
D)  greater; greater

Question 7

-In the figure above, at the allocatively efficient level of computer production the marginal cost of producing a computer is

Accepted Answer

A)  0 televisions per computer. 
B)  between 0 and 3 televisions per computer. 
C)  3 televisions per computer. 
D)  more than 3 televisions per computer. 
A)  0 televisions per computer. 
B)  between 0 and 3 televisions per computer. 
C)  3 televisions per computer. 
D)  more than 3 televisions per computer.

Question 8

-The figure above shows a nation's production possibilities frontier for apples and oranges.
a) What combination of goods is represented by point A?
b) What combination of goods is represented by point B?
c) Which point represents an unattainable combination of goods?

Accepted Answer

a) 3 million bushels of apples

Question 9

Tom and Di grow tomatoes and turnips. Tom has a comparative advantage in growing tomatoes if

Accepted Answer

A)  Tom can grow more tomatoes than Di can. 
B)  his opportunity cost of tomatoes is less than Di's opportunity cost of tomatoes. 
C)  his opportunity cost of tomatoes is less than his opportunity cost of turnips. 
D)  his marginal benefit from tomatoes is greater than Di's. 
A)  Tom can grow more tomatoes than Di can. 
B)  his opportunity cost of tomatoes is less than Di's opportunity cost of tomatoes. 
C)  his opportunity cost of tomatoes is less than his opportunity cost of turnips. 
D)  his marginal benefit from tomatoes is greater than Di's.

Question 10

-Refer to the table above, which gives five points on a nation's PPF. As we increase the production of X

Accepted Answer

A)  the output of Y increases. 
B)  unemployment increases. 
C)  the opportunity cost of each new unit of X increases. 
D)  the opportunity cost of each new unit of X decreases. 
A)  the output of Y increases. 
B)  unemployment increases. 
C)  the opportunity cost of each new unit of X increases. 
D)  the opportunity cost of each new unit of X decreases.

Question 11

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE?

Accepted Answer

A)  Missouri would specialize in pear production and trade pears to Washington pecans. 
B)  Missouri would specialize in pecan production and trade pecans to Washington for pears. 
C)  Washington would produce both pears and pecans and Missouri would produce neither. 
D)  Half of both Washington's and Missouri's resources would be devoted to pears and the other half to pecans because that is the comparative advantage. 
A)  Missouri would specialize in pear production and trade pears to Washington pecans. 
B)  Missouri would specialize in pecan production and trade pecans to Washington for pears. 
C)  Washington would produce both pears and pecans and Missouri would produce neither. 
D)  Half of both Washington's and Missouri's resources would be devoted to pears and the other half to pecans because that is the comparative advantage.

Question 12

After Hurricane Katrina devastated parts of Mississippi and New Orleans in 2005, we can be sure that the production possibilities frontier for that area temporarily

Accepted Answer

A)  shifted inward, toward the origin. 
B)  shifted outward, away from the origin. 
C)  became flatter. 
D)  became steeper. 
A)  shifted inward, toward the origin. 
B)  shifted outward, away from the origin. 
C)  became flatter. 
D)  became steeper.

Question 13

-The bowed outward shape of the production possibilities frontier in the above figure indicates that

Accepted Answer

A)  some resources are better suited for producing computers. 
B)  the opportunity cost of producing more computers decreases as more computers are produced. 
C)  computer technology is subject to the principle of decreasing costs. 
D)  All of the above answers are correct. 
A)  some resources are better suited for producing computers. 
B)  the opportunity cost of producing more computers decreases as more computers are produced. 
C)  computer technology is subject to the principle of decreasing costs. 
D)  All of the above answers are correct.

Question 14

-In the above figure, which point represents an attainable but inefficient production point?

Accepted Answer

A)  point C 
B)  point N 
C)  point L 
D)  point D 
A)  point C 
B)  point N 
C)  point L 
D)  point D

Question 15

How do property rights help organize production and trade?

Accepted Answer

Property rights are necessary in order f

Question 16

Explain the difference between marginal cost and marginal benefit.

Accepted Answer

Marginal benefit is the benefit someone

Question 17

-In the above figure, if 2 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 18

-The above figure illustrates Mary's production possibilities frontier. If Mary wants to move from point d to point c, she must

Accepted Answer

A)  improve technology. 
B)  increase her accumulation of capital. 
C)  give up some of good X in order to obtain more of good Y. 
D)  give up some of good Y in order to obtain more of good X. 
A)  improve technology. 
B)  increase her accumulation of capital. 
C)  give up some of good X in order to obtain more of good Y. 
D)  give up some of good Y in order to obtain more of good X.

Question 19

An increase in the production of capital goods

Accepted Answer

A)  must increase the current production of consumer goods. 
B)  must decrease the future production of consumer goods. 
C)  shifts the production possibilities frontier inward in the future. 
D)  shifts the production possibilities frontier outward in the future. 
A)  must increase the current production of consumer goods. 
B)  must decrease the future production of consumer goods. 
C)  shifts the production possibilities frontier inward in the future. 
D)  shifts the production possibilities frontier outward in the future.

Question 20

Increasing opportunity cost occurs along a production possibilities frontier because

Accepted Answer

A)  resources are not equally productive in all activities. 
B)  increasing wants need to be satisfied. 
C)  in order to produce more of one good decreasing amounts of another good must be sacrificed. 
D)  production takes time. 
A)  resources are not equally productive in all activities. 
B)  increasing wants need to be satisfied. 
C)  in order to produce more of one good decreasing amounts of another good must be sacrificed. 
D)  production takes time.

-In the figure above, suppose that Mac and Izzie specialize and trade to reach point c. Mac sends Izzie

In the United States, Texas ranks number one in the amount of installed megawatts for wind power generation and Florida ranks number one in the number of beach vacations. These facts point out that

Resource use is allocatively efficient if the

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is CORRECT?

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue's opportunity cost of changing oil is than Fred's and her opportunity cost for changing tires is than Fred's.

-In the figure above, at the allocatively efficient level of computer production the marginal cost of producing a computer is

-The figure above shows a nation's production possibilities frontier for apples and oranges. a) What combination of goods is represented by point A? b) What combination of goods is represented by point B? c) Which point represents an unattainable combination of goods?

Tom and Di grow tomatoes and turnips. Tom has a comparative advantage in growing tomatoes if

-Refer to the table above, which gives five points on a nation's PPF. As we increase the production of X

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE?

After Hurricane Katrina devastated parts of Mississippi and New Orleans in 2005, we can be sure that the production possibilities frontier for that area temporarily

-The bowed outward shape of the production possibilities frontier in the above figure indicates that

-In the above figure, which point represents an attainable but inefficient production point?

How do property rights help organize production and trade?

Explain the difference between marginal cost and marginal benefit.

-In the above figure, if 2 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources.

-The above figure illustrates Mary's production possibilities frontier. If Mary wants to move from point d to point c, she must

An increase in the production of capital goods

Increasing opportunity cost occurs along a production possibilities frontier because

What Is Economics

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 2: The Economic Problem

-In the figure above, suppose that Mac and Izzie specialize and trade to reach point c. Mac sends Izzie

In the United States, Texas ranks number one in the amount of installed megawatts for wind power generation and Florida ranks number one in the number of beach vacations. These facts point out that

Resource use is allocatively efficient if the

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is CORRECT?

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue's opportunity cost of changing oil is ________ than Fred's and her opportunity cost for changing tires is ________ than Fred's.

-In the figure above, at the allocatively efficient level of computer production the marginal cost of producing a computer is

-The figure above shows a nation's production possibilities frontier for apples and oranges. a) What combination of goods is represented by point A? b) What combination of goods is represented by point B? c) Which point represents an unattainable combination of goods?

Tom and Di grow tomatoes and turnips. Tom has a comparative advantage in growing tomatoes if

-Refer to the table above, which gives five points on a nation's PPF. As we increase the production of X

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE?

After Hurricane Katrina devastated parts of Mississippi and New Orleans in 2005, we can be sure that the production possibilities frontier for that area temporarily

-The bowed outward shape of the production possibilities frontier in the above figure indicates that

-In the above figure, which point represents an attainable but inefficient production point?

How do property rights help organize production and trade?

Explain the difference between marginal cost and marginal benefit.

-In the above figure, if 2 million computers are produced per year then the ________ should be produced to achieve the allocatively efficient use of resources.

-The above figure illustrates Mary's production possibilities frontier. If Mary wants to move from point d to point c, she must

An increase in the production of capital goods

Increasing opportunity cost occurs along a production possibilities frontier because

What Is Economics

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue's opportunity cost of changing oil is than Fred's and her opportunity cost for changing tires is than Fred's.