Question 1

Voluntary free trade results in:

Accepted Answer

A)  population growth. 
B)  inflation. 
C)  higher living standards. 
D)  income disparity. 
E)  unemployment. 
A)  population growth. 
B)  inflation. 
C)  higher living standards. 
D)  income disparity. 
E)  unemployment. C

Question 2

A point inside a nation's production possibilities curve can represent:

Accepted Answer

A)  a recession. 
B)  an increase in population size. 
C)  an economic growth. 
D)  a technological advancement. 
E)  an improvement in living standards. 
A)  a recession. 
B)  an increase in population size. 
C)  an economic growth. 
D)  a technological advancement. 
E)  an improvement in living standards. A

Question 3

Consider a nation with an endowment of iron ore and petroleum. If the nation specializes in the production of aluminum and gasoline instead of steel we can say that it is operating:

Accepted Answer

A)  on its production possibilities curve. 
B)  outside its production possibilities curve. 
C)  inside its production possibilities curve. 
D)  on the highest achievable production possibilities curve. 
E)  on the lowest production possibilities curve. 
A)  on its production possibilities curve. 
B)  outside its production possibilities curve. 
C)  inside its production possibilities curve. 
D)  on the highest achievable production possibilities curve. 
E)  on the lowest production possibilities curve. C

Question 4

A world-renowned brain surgeon can type twice as fast as her secretarial assistant. Which of the following statements is true in this situation?

Accepted Answer

A)  The secretary has an absolute advantage in typing. 
B)  The surgeon should do her own typing to save money. 
C)  The surgeon should fire the assistant and work weekends and evenings to stay up on her typing. 
D)  The surgeon should spend her time doing brain surgery and allow her secretary to do the typing because the secretary has a comparative advantage in typing. 
E)  The surgeon should spend her time doing brain surgery and allow her secretary to do the typing because the surgeon has a comparative advantage in typing. 
A)  The secretary has an absolute advantage in typing. 
B)  The surgeon should do her own typing to save money. 
C)  The surgeon should fire the assistant and work weekends and evenings to stay up on her typing. 
D)  The surgeon should spend her time doing brain surgery and allow her secretary to do the typing because the secretary has a comparative advantage in typing. 
E)  The surgeon should spend her time doing brain surgery and allow her secretary to do the typing because the surgeon has a comparative advantage in typing.

Question 5

Free trade leads to an overall improvement in the standard of living in a country because everything is produced at the lowest possible cost.

Accepted Answer

A) True 
 B)False

Question 6

Nicky makes $25,000 a year as a sales clerk. He then decides to quit his job to enter an MBA program full-time (assume Nicky doesn't work in the summer or hold any part-time jobs). His tuition, books, living expenses, and fees total $15,000 a year. Given this information, the annual total cost of Nicky's MBA studies is:

Accepted Answer

A)  $10,000. 
B)  $30,000. 
C)  $40,000. 
D)  $15,000. 
E)  $25,000. 
A)  $10,000. 
B)  $30,000. 
C)  $40,000. 
D)  $15,000. 
E)  $25,000.

Question 7

Bob and Bill can make 16 toys each if they devote 8 working hours in a day. Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day. When these two individuals engage in trade, it would be advantageous for both if:

Accepted Answer

A)  Bob specializes in the production of toys and Bill specializes in car repairing. 
B)  Bob specializes in car repairing and Bill specializes in the production of toys. 
C)  they specialize only in car repairing. 
D)  they specialize only in the production of toys. 
E)  they distribute their working hours evenly between the production of two goods. 
A)  Bob specializes in the production of toys and Bill specializes in car repairing. 
B)  Bob specializes in car repairing and Bill specializes in the production of toys. 
C)  they specialize only in car repairing. 
D)  they specialize only in the production of toys. 
E)  they distribute their working hours evenly between the production of two goods.

Question 8

If an economy is operating at a point outside the PPC, either the society has resources that are not being fully used or production is not efficient.

Accepted Answer

A) True 
 B)False

Question 9

If you have a choice between studying and doing another activity, you will devote your time to studying as long as the additional benefit of studying is greater than the additional cost of studying.

Accepted Answer

A) True 
 B)False

Question 10

If society begins by producing 3 units of X and 4 units of Y and then alters production so that it is now producing 4 units of X and 4 units of Y, and we know that the quantity and quality of resources were unchanged and that technology did not change, then:

Accepted Answer

A)  3 units of X and 4 units of Y are a combination best represented by a point inside the production possibilities curve [PPC]. 
B)  society has moved along the PPC. 
C)  resources were being fully utilized at 3 units of X and 4 units of Y. 
D)  resources were being efficiently utilized at 3 units of X and 4 units of Y. 
E)  3 units of X and 4 units of Y are a combination best represented by a point outside the PPC. 
A)  3 units of X and 4 units of Y are a combination best represented by a point inside the production possibilities curve [PPC]. 
B)  society has moved along the PPC. 
C)  resources were being fully utilized at 3 units of X and 4 units of Y. 
D)  resources were being efficiently utilized at 3 units of X and 4 units of Y. 
E)  3 units of X and 4 units of Y are a combination best represented by a point outside the PPC.

Question 11

A point outside the production possibilities curve [PPC]:

Accepted Answer

A)  represents inefficient use of resources. 
B)  may be due to unemployment. 
C)  is attainable if all resources are used efficiently. 
D)  represents more resources than are currently available. 
E)  will never be attainable, even if the quantity of resources increases. 
A)  represents inefficient use of resources. 
B)  may be due to unemployment. 
C)  is attainable if all resources are used efficiently. 
D)  represents more resources than are currently available. 
E)  will never be attainable, even if the quantity of resources increases.

Question 12

The figure given below represents an economy producing corn and planes under different economic situations.
Figure 2.2
  
-Refer to Figure 2.2. If there is an increase in the effectiveness of pesticides, which of the following graph(s) will represent(s) the resulting shift in the production possibilities curve [PPC]?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph A and B 
E)  Graph B and C 
A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph A and B 
E)  Graph B and C

Question 13

A person has a comparative advantage in producing a good if:

Accepted Answer

A)  that person can produce the good at a lower absolute cost than anyone else. 
B)  that person can produce the good at a lower opportunity cost than anyone else. 
C)  that person can do a better job than anyone else. 
D)  that person spends less money in out-of-pocket expenses than anybody else. 
E)  that person can produce the good at a higher opportunity cost than anyone else. 
A)  that person can produce the good at a lower absolute cost than anyone else. 
B)  that person can produce the good at a lower opportunity cost than anyone else. 
C)  that person can do a better job than anyone else. 
D)  that person spends less money in out-of-pocket expenses than anybody else. 
E)  that person can produce the good at a higher opportunity cost than anyone else.

Question 14

Following is the production possibilities schedule for an economy producing two goods Good A and Good B.
Table 2.1
 $\begin{array}{ccc}
\text { Production Possibilities Schedule } \
\begin{array}{ccc}
&\text { Good A }&\text { Good B }\

\text { Choice 1 } & 100 & 0 \
\text { Choice 2 } & 90 & 20 \
\text { Choice 3 } & 70 & 40 \
\text { Choice 4 } & 40 & 60 \
\text { Choice 5 } & 0 & 80
\end{array}\end{array}$
-Refer to Table 2.1. Identify the correct statement.

Accepted Answer

A)  This economy can produce 100 units of A and 20 units of B. 
B)  The opportunity cost of producing more of A decreases as A increases. 
C)  The opportunity cost of producing more of B decreases as B increases. 
D)  This economy can produce 70 units of A and 40 units of B. 
E)  If this economy fully and efficiently employs all its resources, it can produce 100 units of A and 80 units of B. 
A)  This economy can produce 100 units of A and 20 units of B. 
B)  The opportunity cost of producing more of A decreases as A increases. 
C)  The opportunity cost of producing more of B decreases as B increases. 
D)  This economy can produce 70 units of A and 40 units of B. 
E)  If this economy fully and efficiently employs all its resources, it can produce 100 units of A and 80 units of B.

Question 15

The figure given below represents the production possibilities curve for goods and services in an economy.
Figure 2.3
  
-Which of the following actions is most likely to cause a rightward shift in a production possibilities curve [PPC]?

Accepted Answer

A)  Shifting from the production of one product to the production of another product 
B)  Shifting all resources to the production of one product 
C)  Employing idle resources 
D)  Using fewer resources in production 
E)  Increasing the technological know-how used in production 
A)  Shifting from the production of one product to the production of another product 
B)  Shifting all resources to the production of one product 
C)  Employing idle resources 
D)  Using fewer resources in production 
E)  Increasing the technological know-how used in production

Question 16

Specialization according to comparative advantage followed by free trade makes every economy better off.

Accepted Answer

A) True 
 B)False

Question 17

Consider the production possibilities curve [PPC] for a country producing only cheese and wine. The first few resources transferred from cheese to wine production are:

Accepted Answer

A)  those that are most specialized in cheese production. 
B)  those that are most specialized in wine production. 
C)  those that are least specialized in cheese production. 
D)  those that are neither specialized in cheese nor wine production. 
E)  those that are highly specialized in both cheese and wine production. 
A)  those that are most specialized in cheese production. 
B)  those that are most specialized in wine production. 
C)  those that are least specialized in cheese production. 
D)  those that are neither specialized in cheese nor wine production. 
E)  those that are highly specialized in both cheese and wine production.

Question 18

Given below is the production possibilities schedule for a small island nation in South Pacific that produces capital and consumer goods.
Table 2.2
 $\begin{array}{c}
\text { Production Possibilities Schedule }\
\begin{array}{|c|c|}
\hline \text { Capital Goods } & \text { Conswuer Goods } \
\hline 10 & 0 \
\hline 9 & 1 \
\hline 7 & 2 \
\hline 4 & 3 \
\hline 0 & 4 \
\hline
\end{array}
\end{array}$
-Refer to Table 2.2. Identify the correct statement.

Accepted Answer

A)  The best the economy can do is to produce 10 units of capital goods and 4 units of consumer goods. 
B)  If the economy produces 10 units of capital goods, it has sufficient resources to produce 4 units of consumer goods. 
C)  If the economy produces 10 units of capital goods and no units of consumer goods, there is unemployment. 
D)  If the economy produces 4 units of capital goods, it can manage to produce only 3 units of consumer goods. 
E)  In order to produce the 10th unit of capital goods, 4 units of consumer goods must be forgone. 
A)  The best the economy can do is to produce 10 units of capital goods and 4 units of consumer goods. 
B)  If the economy produces 10 units of capital goods, it has sufficient resources to produce 4 units of consumer goods. 
C)  If the economy produces 10 units of capital goods and no units of consumer goods, there is unemployment. 
D)  If the economy produces 4 units of capital goods, it can manage to produce only 3 units of consumer goods. 
E)  In order to produce the 10th unit of capital goods, 4 units of consumer goods must be forgone.

Question 19

There is no cost of using your own savings in your business.

Accepted Answer

A) True 
 B)False

Question 20

Public property rights refer to the right of ownership that is absolutely necessary for trade to occur and are ensured by a legal system of laws and courts.

Accepted Answer

A) True 
 B)False

Voluntary free trade results in:

A point inside a nation's production possibilities curve can represent:

Consider a nation with an endowment of iron ore and petroleum. If the nation specializes in the production of aluminum and gasoline instead of steel we can say that it is operating:

A world-renowned brain surgeon can type twice as fast as her secretarial assistant. Which of the following statements is true in this situation?

Free trade leads to an overall improvement in the standard of living in a country because everything is produced at the lowest possible cost.

Bob and Bill can make 16 toys each if they devote 8 working hours in a day. Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day. When these two individuals engage in trade, it would be advantageous for both if:

If an economy is operating at a point outside the PPC, either the society has resources that are not being fully used or production is not efficient.

If you have a choice between studying and doing another activity, you will devote your time to studying as long as the additional benefit of studying is greater than the additional cost of studying.

If society begins by producing 3 units of X and 4 units of Y and then alters production so that it is now producing 4 units of X and 4 units of Y, and we know that the quantity and quality of resources were unchanged and that technology did not change, then:

A point outside the production possibilities curve [PPC]:

A person has a comparative advantage in producing a good if:

Following is the production possibilities schedule for an economy producing two goods Good A and Good B. Table 2.1 Production Possibilities Schedule Good A Good B Choice 1 100 0 Choice 2 90 20 Choice 3 70 40 Choice 4 40 60 Choice 5 0 80 -Refer to Table 2.1. Identify the correct statement.

The figure given below represents the production possibilities curve for goods and services in an economy. Figure 2.3 -Which of the following actions is most likely to cause a rightward shift in a production possibilities curve [PPC]?

Specialization according to comparative advantage followed by free trade makes every economy better off.

Consider the production possibilities curve [PPC] for a country producing only cheese and wine. The first few resources transferred from cheese to wine production are:

Given below is the production possibilities schedule for a small island nation in South Pacific that produces capital and consumer goods. Table 2.2 Production Possibilities Schedule Capital Goods Conswuer Goods 10 0 9 1 7 2 4 3 0 4 -Refer to Table 2.2. Identify the correct statement.

There is no cost of using your own savings in your business.

Public property rights refer to the right of ownership that is absolutely necessary for trade to occur and are ensured by a legal system of laws and courts.

Economics: the World Around You

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Exam 2: Choice, Opportunity Costs, and Specialization

Voluntary free trade results in:

A point inside a nation's production possibilities curve can represent:

Consider a nation with an endowment of iron ore and petroleum. If the nation specializes in the production of aluminum and gasoline instead of steel we can say that it is operating:

A world-renowned brain surgeon can type twice as fast as her secretarial assistant. Which of the following statements is true in this situation?

Free trade leads to an overall improvement in the standard of living in a country because everything is produced at the lowest possible cost.

Bob and Bill can make 16 toys each if they devote 8 working hours in a day. Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day. When these two individuals engage in trade, it would be advantageous for both if:

If an economy is operating at a point outside the PPC, either the society has resources that are not being fully used or production is not efficient.

If you have a choice between studying and doing another activity, you will devote your time to studying as long as the additional benefit of studying is greater than the additional cost of studying.

If society begins by producing 3 units of X and 4 units of Y and then alters production so that it is now producing 4 units of X and 4 units of Y, and we know that the quantity and quality of resources were unchanged and that technology did not change, then:

A point outside the production possibilities curve [PPC]:

A person has a comparative advantage in producing a good if:

Following is the production possibilities schedule for an economy producing two goods Good A and Good B. Table 2.1 Production Possibilities Schedule Good A Good B Choice 1 100 0 Choice 2 90 20 Choice 3 70 40 Choice 4 40 60 Choice 5 0 80 -Refer to Table 2.1. Identify the correct statement.

The figure given below represents the production possibilities curve for goods and services in an economy. Figure 2.3 -Which of the following actions is most likely to cause a rightward shift in a production possibilities curve [PPC]?

Specialization according to comparative advantage followed by free trade makes every economy better off.

Consider the production possibilities curve [PPC] for a country producing only cheese and wine. The first few resources transferred from cheese to wine production are:

Given below is the production possibilities schedule for a small island nation in South Pacific that produces capital and consumer goods. Table 2.2 Production Possibilities Schedule Capital Goods Conswuer Goods 10 0 9 1 7 2 4 3 0 4 -Refer to Table 2.2. Identify the correct statement.

There is no cost of using your own savings in your business.

Public property rights refer to the right of ownership that is absolutely necessary for trade to occur and are ensured by a legal system of laws and courts.

Economics: the World Around You

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters