Question 1

Specialization and trade can take place only if a country is endowed with more of something compared to other countries.

Accepted Answer

A) True 
 B)False  False

Question 2

If a nation specializes in activities in which opportunity costs are the lowest and then trades with other nations, it is most likely to:

Accepted Answer

A)  have a higher standard of living for its citizens than it would if it did not specialize and then trade. 
B)  have a lower standard of living for its citizens than it would if it did not specialize and then trade. 
C)  create as much wealth for its citizens as it could if it did not specialize and then trade. 
D)  benefit in the short run but incur heavy loss in the long run. 
E)  incur heavy loss in the short run and eventually cease production in the long run. 
A)  have a higher standard of living for its citizens than it would if it did not specialize and then trade. 
B)  have a lower standard of living for its citizens than it would if it did not specialize and then trade. 
C)  create as much wealth for its citizens as it could if it did not specialize and then trade. 
D)  benefit in the short run but incur heavy loss in the long run. 
E)  incur heavy loss in the short run and eventually cease production in the long run. A

Question 3

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. What is the opportunity cost of repairing one car to Bill?

Accepted Answer

A)  10 toys 
B)  8 toys 
C)  16 toys 
D)  12 toys 
E)  4 toys 
A)  10 toys 
B)  8 toys 
C)  16 toys 
D)  12 toys 
E)  4 toys B

Question 4

Which of the following is related to the concept of trade-off used in economics?

Accepted Answer

A)  Paying tuition to attend college 
B)  Paying a high price for a movie ticket on the first day of screening 
C)  Not having enough information available to make a rational decision 
D)  Giving up one good or activity in order to obtain some other good or activity 
E)  Having your cake and eating it too 
A)  Paying tuition to attend college 
B)  Paying a high price for a movie ticket on the first day of screening 
C)  Not having enough information available to make a rational decision 
D)  Giving up one good or activity in order to obtain some other good or activity 
E)  Having your cake and eating it too

Question 5

The city of Austin can buy roads or light rail. If 10 miles of roads cost $1 million and 2 miles of light rail cost $10 million, what is the city's opportunity cost of 1000 miles of roads?

Accepted Answer

A)  $100 million 
B)  2 miles of light rail 
C)  200 miles of light rail 
D)  $50 million 
E)  $1,000 million 
A)  $100 million 
B)  2 miles of light rail 
C)  200 miles of light rail 
D)  $50 million 
E)  $1,000 million

Question 6

Archie can paint 5 backyard fences or repair 2 cars in 8 hours, while Austin can paint 4 backyard fences or repair 2 cars in 8 hours. Identify the correct statement.

Accepted Answer

A)  Archie is relatively better in repairing cars. 
B)  Archie is relatively better in painting fences. 
C)  Austin is relatively better in painting fences. 
D)  Archie and Austin are equally good in painting fences. 
E)  Neither Archie not Austin are good in repairing cars. 
A)  Archie is relatively better in repairing cars. 
B)  Archie is relatively better in painting fences. 
C)  Austin is relatively better in painting fences. 
D)  Archie and Austin are equally good in painting fences. 
E)  Neither Archie not Austin are good in repairing cars.

Question 7

A nation's production possibilities curve [PPC] will shift outward if its workers receive better training.

Accepted Answer

A) True 
 B)False

Question 8

The table given below represents butter and ham production by two countries Norway and Sweden.?Table 2.5
  
-Refer to Table 2.5 and identify the correct statement.

Accepted Answer

A)  Norway has an absolute advantage in butter production. 
B)  Sweden has a comparative advantage in ham production. 
C)  Norway has an absolute advantage in ham production. 
D)  Trade is not possible between these two nations. 
E)  It would be advantageous for Sweden to trade with Norway. 
A)  Norway has an absolute advantage in butter production. 
B)  Sweden has a comparative advantage in ham production. 
C)  Norway has an absolute advantage in ham production. 
D)  Trade is not possible between these two nations. 
E)  It would be advantageous for Sweden to trade with Norway.

Question 9

Which of the following would not cause any kind of an outward shift of a nation's production possibilities curve [PPC]?

Accepted Answer

A)  An improvement in the general level of education 
B)  Technological innovation 
C)  Discovery of a new source of energy 
D)  An increase in the size of the labor force 
E)  A flood that renders thousands of acres of farmland unusable 
A)  An improvement in the general level of education 
B)  Technological innovation 
C)  Discovery of a new source of energy 
D)  An increase in the size of the labor force 
E)  A flood that renders thousands of acres of farmland unusable

Question 10

Economic growth can be illustrated by an outward shift of the PPC.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Given below is the production possibilities schedule for capital goods and consumer goods.?Table 2.2
  
-If the nation depicted in Figure 2.3 is producing at combination E, the opportunity cost of producing the tenth unit of consumer good is:

Accepted Answer

A)  10 units of capital goods. 
B)  6 units of capital goods. 
C)  1 unit of capital good. 
D)  4 units of capital goods. 
E)  zero unit of capital good. 
A)  10 units of capital goods. 
B)  6 units of capital goods. 
C)  1 unit of capital good. 
D)  4 units of capital goods. 
E)  zero unit of capital good.

Question 13

Which of the following statements is true about comparative advantage?

Accepted Answer

A)  Comparative advantage exists whenever one person, firm, or nation can do something at higher opportunity costs than some other individual, firm, or nation. 
B)  Comparative advantage is interesting theoretically, but it is not relevant when evaluating real-world economic conditions. 
C)  Low income countries cannot possibly have a comparative advantage in the production of any good or service because of the relatively low literacy rate. 
D)  Comparative advantage exists whenever one person, firm, or nation can do something at lower opportunity costs than some other individual, firm, or nation. 
E)  Only technologically advanced economies can have a comparative advantage in the production of a good or service. 
A)  Comparative advantage exists whenever one person, firm, or nation can do something at higher opportunity costs than some other individual, firm, or nation. 
B)  Comparative advantage is interesting theoretically, but it is not relevant when evaluating real-world economic conditions. 
C)  Low income countries cannot possibly have a comparative advantage in the production of any good or service because of the relatively low literacy rate. 
D)  Comparative advantage exists whenever one person, firm, or nation can do something at lower opportunity costs than some other individual, firm, or nation. 
E)  Only technologically advanced economies can have a comparative advantage in the production of a good or service.

Question 14

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 15

Julio makes wine and beer. Last year he made 20 bottles of wine and 20 cases of beer. If the price of grapes goes down (making wine cheaper to make), Julio will be able to make the same amount of wine and more beer.

Accepted Answer

A) True 
 B)False

Question 16

If you have a choice of consuming either two apples, three oranges, or one candy bar, the opportunity cost of the candy bar is:

Accepted Answer

A)  two apples. 
B)  three oranges. 
C)  two apples and three oranges. 
D)  two apples or three oranges, whichever you value more. 
E)  the difference in the prices of the three options. 
A)  two apples. 
B)  three oranges. 
C)  two apples and three oranges. 
D)  two apples or three oranges, whichever you value more. 
E)  the difference in the prices of the three options.

Question 17

Which of the following best describes a tradeoff?

Accepted Answer

A)  An office executive enrolling into a management course to develop her skills. 
B)  An investor buying stocks of a start-up company. 
C)  A businessman investing a portion of company's profit in research and development. 
D)  A college student sacrificing a few hours of study time to work at the town cafeteria. 
E)  A worker purchasing a new car with her bonus earnings. 
A)  An office executive enrolling into a management course to develop her skills. 
B)  An investor buying stocks of a start-up company. 
C)  A businessman investing a portion of company's profit in research and development. 
D)  A college student sacrificing a few hours of study time to work at the town cafeteria. 
E)  A worker purchasing a new car with her bonus earnings.

Question 18

The figure given below represents the production possibilities curve for goods and services in an economy.?Figure 2.3
  
-Refer to Figure 2.3. The movement from Curve X to Curve Y indicates a(n):

Accepted Answer

A)  contraction in the production of goods. 
B)  contraction in the production of services. 
C)  expansion in the ability to produce both goods and services. 
D)  expansion in the ability to produce goods. 
E)  expansion in the ability to produce services. 
A)  contraction in the production of goods. 
B)  contraction in the production of services. 
C)  expansion in the ability to produce both goods and services. 
D)  expansion in the ability to produce goods. 
E)  expansion in the ability to produce services.

Question 19

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 20

People (and all resources):

Accepted Answer

A)  tend to specialize in those activities in which their opportunity costs are minimized. 
B)  tend to specialize in those activities in which their opportunity costs are maximized. 
C)  never consider opportunity costs before specializing in a particular activity. 
D)  consider only direct costs while choosing to specialize in a particular activity. 
E)  do not act in their own self-interest but specialize in those activities which benefit others. 
A)  tend to specialize in those activities in which their opportunity costs are minimized. 
B)  tend to specialize in those activities in which their opportunity costs are maximized. 
C)  never consider opportunity costs before specializing in a particular activity. 
D)  consider only direct costs while choosing to specialize in a particular activity. 
E)  do not act in their own self-interest but specialize in those activities which benefit others.

Specialization and trade can take place only if a country is endowed with more of something compared to other countries.

If a nation specializes in activities in which opportunity costs are the lowest and then trades with other nations, it is most likely to:

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. What is the opportunity cost of repairing one car to Bill?

Which of the following is related to the concept of trade-off used in economics?

The city of Austin can buy roads or light rail. If 10 miles of roads cost $1 million and 2 miles of light rail cost $10 million, what is the city's opportunity cost of 1000 miles of roads?

Archie can paint 5 backyard fences or repair 2 cars in 8 hours, while Austin can paint 4 backyard fences or repair 2 cars in 8 hours. Identify the correct statement.

A nation's production possibilities curve [PPC] will shift outward if its workers receive better training.

The table given below represents butter and ham production by two countries Norway and Sweden.?Table 2.5 -Refer to Table 2.5 and identify the correct statement.

Which of the following would not cause any kind of an outward shift of a nation's production possibilities curve [PPC]?

Economic growth can be illustrated by an outward shift of the PPC.

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.

Given below is the production possibilities schedule for capital goods and consumer goods.?Table 2.2 -If the nation depicted in Figure 2.3 is producing at combination E, the opportunity cost of producing the tenth unit of consumer good is:

Which of the following statements is true about comparative advantage?

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:

Julio makes wine and beer. Last year he made 20 bottles of wine and 20 cases of beer. If the price of grapes goes down (making wine cheaper to make), Julio will be able to make the same amount of wine and more beer.

If you have a choice of consuming either two apples, three oranges, or one candy bar, the opportunity cost of the candy bar is:

Which of the following best describes a tradeoff?

The figure given below represents the production possibilities curve for goods and services in an economy.?Figure 2.3 -Refer to Figure 2.3. The movement from Curve X to Curve Y indicates a(n):

People (and all resources):

The Wealth of Nations: Ownership and Economic Freedom

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange 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

Exchapterange Rates and Financial Links Between Countries

Filters

Exam 2: Scarcity and Opportunity Costs

Specialization and trade can take place only if a country is endowed with more of something compared to other countries.

If a nation specializes in activities in which opportunity costs are the lowest and then trades with other nations, it is most likely to:

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. What is the opportunity cost of repairing one car to Bill?

Which of the following is related to the concept of trade-off used in economics?

The city of Austin can buy roads or light rail. If 10 miles of roads cost $1 million and 2 miles of light rail cost $10 million, what is the city's opportunity cost of 1000 miles of roads?

Archie can paint 5 backyard fences or repair 2 cars in 8 hours, while Austin can paint 4 backyard fences or repair 2 cars in 8 hours. Identify the correct statement.

A nation's production possibilities curve [PPC] will shift outward if its workers receive better training.

The table given below represents butter and ham production by two countries Norway and Sweden.?Table 2.5 -Refer to Table 2.5 and identify the correct statement.

Which of the following would not cause any kind of an outward shift of a nation's production possibilities curve [PPC]?

Economic growth can be illustrated by an outward shift of the PPC.

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.

Given below is the production possibilities schedule for capital goods and consumer goods.?Table 2.2 -If the nation depicted in Figure 2.3 is producing at combination E, the opportunity cost of producing the tenth unit of consumer good is:

Which of the following statements is true about comparative advantage?

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:

Julio makes wine and beer. Last year he made 20 bottles of wine and 20 cases of beer. If the price of grapes goes down (making wine cheaper to make), Julio will be able to make the same amount of wine and more beer.

If you have a choice of consuming either two apples, three oranges, or one candy bar, the opportunity cost of the candy bar is:

Which of the following best describes a tradeoff?

The figure given below represents the production possibilities curve for goods and services in an economy.?Figure 2.3 -Refer to Figure 2.3. The movement from Curve X to Curve Y indicates a(n):

People (and all resources):

The Wealth of Nations: Ownership and Economic Freedom

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange 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

Exchapterange Rates and Financial Links Between Countries

Filters