Question 1

Which of the following statements is true?

Accepted Answer

A)  When two nations specialize and trade, there is a loss of efficiency and both the nations are made worse off. 
B)  Trade between two nations is most beneficial when neither has a comparative advantage in the production of any goods and services. 
C)  Trade between nations allows each nation to specialize in the production of goods for which it has comparative advantage. 
D)  Trade between two nations is possible only when the opportunity costs of producing goods and services in both nations are identical. 
A)  When two nations specialize and trade, there is a loss of efficiency and both the nations are made worse off. 
B)  Trade between two nations is most beneficial when neither has a comparative advantage in the production of any goods and services. 
C)  Trade between nations allows each nation to specialize in the production of goods for which it has comparative advantage. 
D)  Trade between two nations is possible only when the opportunity costs of producing goods and services in both nations are identical.

Question 2

Increasing opportunity cost can arise if ________.

Accepted Answer

A)  there are economies of scale in production 
B)  marginal costs of production are constant 
C)  production of the good is characterized by diminishing returns 
D)  the production possibility curve is linear 
A)  there are economies of scale in production 
B)  marginal costs of production are constant 
C)  production of the good is characterized by diminishing returns 
D)  the production possibility curve is linear

Question 3

The following figure depicts the production possibilities curve when Ann and Bob engage in trade. With all her resources, Ann can either produce two computer programs or one Web site. With all his resources, Bob can either produce one computer program or three Web sites.
  
-Refer to the figure above.What is the value of B?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 4

The figure below shows the domestic supply and demand of a product in the United States.
  
-Refer to the figure above.Suppose the world price of this product is $14.After the United States engages in free trade in this product,________.

Accepted Answer

A)  the consumers will win, the producers will win, and the overall economy will be better off 
B)  the consumers will win, the producers will lose, but the overall economy will be better off 
C)  the consumers will lose, the producers will win, but the overall economy will be better off 
D)  the consumers will lose, the producers will win, but the overall economy will be worse off 
A)  the consumers will win, the producers will win, and the overall economy will be better off 
B)  the consumers will win, the producers will lose, but the overall economy will be better off 
C)  the consumers will lose, the producers will win, but the overall economy will be better off 
D)  the consumers will lose, the producers will win, but the overall economy will be worse off

Question 5

The figure below shows the domestic supply and demand of a product in the United States.
  
-Refer to the figure above.If the world price of this product is $14,the United States will gain ________ in social surplus if it engages in free trade in this product.

Accepted Answer

A)  $160 
B)  $80 
C)  $280 
D)  $40 
A)  $160 
B)  $80 
C)  $280 
D)  $40

Question 6

The following figure shows the demand curve, D, and the supply curve, S, for calculators in Barylia. The world price of calculators is $40.
  
-Refer to the figure above.What is the total surplus before Barylia opens up to free trade?

Accepted Answer

A)  $250 
B)  $325 
C)  $800 
D)  $1,125 
A)  $250 
B)  $325 
C)  $800 
D)  $1,125

Question 7

The following figure shows the production possibilities curve for Sheena, who has to split her time between producing Web sites and computer programs.
  
-Refer to the figure above.What is the opportunity cost of producing 1 Web site?

Accepted Answer

A)  0.2 computer programs 
B)  5 computer programs 
C)  12 computer programs 
D)  60 computer programs 
A)  0.2 computer programs 
B)  5 computer programs 
C)  12 computer programs 
D)  60 computer programs

Question 8

The figure below shows production possibilities curves for tomatoes and oranges in two prefectures in a country.
  
-Refer to the figure above.In Prefecture B,the opportunity cost of producing each additional pound of tomatoes ________.

Accepted Answer

A)  increases as more tomatoes are produced 
B)  decreases as more tomatoes are produced 
C)  increases up to 1 billion pounds and then decreases after 1 billion pounds 
D)  decreases up to 1 billion pounds and then decreases after 1 billion pounds 
A)  increases as more tomatoes are produced 
B)  decreases as more tomatoes are produced 
C)  increases up to 1 billion pounds and then decreases after 1 billion pounds 
D)  decreases up to 1 billion pounds and then decreases after 1 billion pounds

Question 9

The following figure shows the production possibilities curve for a software engineer who has to divide her available time between producing computer programs and Web sites.
  
-Refer to the figure above.Which of the following combinations is attainable as well as efficient?

Accepted Answer

A)  B 
B)  C 
C)  D 
D)  E 
A)  B 
B)  C 
C)  D 
D)  E

Question 10

How are the following events likely to affect an economy's production possibilities curve?
a)An increase in the working population of the economy
b)The import of better production technology
c)A natural disaster that destroys some of the economy's resources
d)The emigration of workers to other countries

Accepted Answer

a)An increase in the working population

Question 11

Which of the following correctly identifies an argument against globalization?

Accepted Answer

A)  Globalization limits the bundle of goods and services available in smaller countries. 
B)  Globalization leads to an exploitation of developed countries. 
C)  Globalization can lead to a loss of indigenous culture and tradition. 
D)  Globalization works against free trade. 
A)  Globalization limits the bundle of goods and services available in smaller countries. 
B)  Globalization leads to an exploitation of developed countries. 
C)  Globalization can lead to a loss of indigenous culture and tradition. 
D)  Globalization works against free trade.

Question 12

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
-Refer to the scenario above.Yasmin's supervisor wants her to handle equal numbers of IP and CF cases.How much time would Yasmin spend on each type of case? (Hint: Assume that she can work on a fraction of a case.)

Accepted Answer

A)  24 hours each on IP cases and CF cases 
B)  28 hours and 48 minutes on IP cases, and 19 hours and 12 minutes on CF cases 
C)  32 hours and 24 minutes on IP cases and 15 hours and 36 minutes on CF cases 
D)  36 hours on IP cases and 12 hours on CF cases 
A)  24 hours each on IP cases and CF cases 
B)  28 hours and 48 minutes on IP cases, and 19 hours and 12 minutes on CF cases 
C)  32 hours and 24 minutes on IP cases and 15 hours and 36 minutes on CF cases 
D)  36 hours on IP cases and 12 hours on CF cases

Question 13

The figure below shows the domestic supply and demand of a product in the United States.
  
-Refer to the figure above.If the world price of this product is $14,the producer surplus in the United States before free trade is equal to ________,and the consumer surplus after free trade will equal ________ .

Accepted Answer

A)  $160; $360 
B)  $200; $800 
C)  $160; $280 
D)  $200; $280 
A)  $160; $360 
B)  $200; $800 
C)  $160; $280 
D)  $200; $280

Question 14

The figures below show markets for solar panels and textiles in Banana Republic. Pwₒᵣld is the world price in each market.
  
-Refer to the figures above.Suppose that,before Banana Republic opened up its markets to international trade,the domestic markets were in long-run equilibrium.All else being equal,what is expected to happen in the long run after the markets are opened up to trade?

Accepted Answer

A)  The new long-run equilibrium is achieved at the world price in each market. 
B)  The price in each market will move toward the original long-run equilibrium price. 
C)  Resources will shift from production of solar panels to production of textiles. 
D)  Resources will shift from production of textiles to production of solar panels. 
A)  The new long-run equilibrium is achieved at the world price in each market. 
B)  The price in each market will move toward the original long-run equilibrium price. 
C)  Resources will shift from production of solar panels to production of textiles. 
D)  Resources will shift from production of textiles to production of solar panels.

Question 15

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
-Refer to the scenario above.Zeek's supervisor wants him to handle equal number of IP and CF cases.How much time would Zeek spend on each type of case? (Hint: Assume that he can work on a fraction of a case.)

Accepted Answer

A)  32 hours on IP cases and 16 hours on CF cases 
B)  28 hours on IP cases and 20 hours on CF cases 
C)  24 hours each on IP cases and CF cases 
D)  16 hours on IP cases and 32 hours on CF cases 
A)  32 hours on IP cases and 16 hours on CF cases 
B)  28 hours on IP cases and 20 hours on CF cases 
C)  24 hours each on IP cases and CF cases 
D)  16 hours on IP cases and 32 hours on CF cases

Question 16

The domestic supply and demand of a product in Canada is given in the following figure.
  
-Refer to the figure above.If the world price of this product is $12 and Canada engages in free trade,Canada will ________.

Accepted Answer

A)  import this product but still produce some domestically 
B)  export this product but still consume some domestically 
C)  export the entire amount of this product that is produced in Canada 
D)  import the entire amount of this product that is consumed in Canada 
A)  import this product but still produce some domestically 
B)  export this product but still consume some domestically 
C)  export the entire amount of this product that is produced in Canada 
D)  import the entire amount of this product that is consumed in Canada

Question 17

Scenario: With her available resources, Wendy can produce 20 greeting cards or 10 earrings. Sarah, with the resources she has, can produce 5 greeting cards or 15 earrings.
-Refer to the scenario above.What is Sarah's opportunity cost of producing one greeting card?

Accepted Answer

A)  0.33 earrings 
B)  0.5 earrings 
C)  1 earring 
D)  3 earrings 
A)  0.33 earrings 
B)  0.5 earrings 
C)  1 earring 
D)  3 earrings

Question 18

Christine is a chef.She can cook a meal in 1 hour and make a cake in 2 hours.She works 10 hours per day.Which of the four lines in the following figure represents her production possibilities curve?

Accepted Answer

A)  Line 1 
B)  Line 2 
C)  Line 3 
D)  Line 4 
A)  Line 1 
B)  Line 2 
C)  Line 3 
D)  Line 4

Question 19

If a country is a price taker for a good in the world market,________.

Accepted Answer

A)  its consumption and production decisions for the good play a key role in determining world prices 
B)  its consumption and production decisions for the good do not affect world prices 
C)  its demand for the good remains the same irrespective of changes in world prices 
D)  it is the only exporter of the good in the world market 
A)  its consumption and production decisions for the good play a key role in determining world prices 
B)  its consumption and production decisions for the good do not affect world prices 
C)  its demand for the good remains the same irrespective of changes in world prices 
D)  it is the only exporter of the good in the world market

Question 20

The following figure shows the demand curve, D, and supply curve, S, of ballpoint pens in Lithasia. The world price of pens is $2.
  
-Refer to the figure above.What is the total surplus after Lithasia opens up to free trade?

Accepted Answer

A)  $15 
B)  $25 
C)  $27 
D)  $35 
A)  $15 
B)  $25 
C)  $27 
D)  $35

Which of the following statements is true?

Increasing opportunity cost can arise if ________.

The figure below shows the domestic supply and demand of a product in the United States. -Refer to the figure above.Suppose the world price of this product is $14.After the United States engages in free trade in this product,________.

The figure below shows the domestic supply and demand of a product in the United States. -Refer to the figure above.If the world price of this product is $14,the United States will gain ________ in social surplus if it engages in free trade in this product.

The following figure shows the demand curve, D, and the supply curve, S, for calculators in Barylia. The world price of calculators is $40. -Refer to the figure above.What is the total surplus before Barylia opens up to free trade?

The following figure shows the production possibilities curve for Sheena, who has to split her time between producing Web sites and computer programs. -Refer to the figure above.What is the opportunity cost of producing 1 Web site?

The figure below shows production possibilities curves for tomatoes and oranges in two prefectures in a country. -Refer to the figure above.In Prefecture B,the opportunity cost of producing each additional pound of tomatoes ________.

The following figure shows the production possibilities curve for a software engineer who has to divide her available time between producing computer programs and Web sites. -Refer to the figure above.Which of the following combinations is attainable as well as efficient?

Which of the following correctly identifies an argument against globalization?

The figure below shows the domestic supply and demand of a product in the United States. -Refer to the figure above.If the world price of this product is $14,the producer surplus in the United States before free trade is equal to ,and the consumer surplus after free trade will equal .

The domestic supply and demand of a product in Canada is given in the following figure. -Refer to the figure above.If the world price of this product is $12 and Canada engages in free trade,Canada will ________.

Scenario: With her available resources, Wendy can produce 20 greeting cards or 10 earrings. Sarah, with the resources she has, can produce 5 greeting cards or 15 earrings. -Refer to the scenario above.What is Sarah's opportunity cost of producing one greeting card?

Christine is a chef.She can cook a meal in 1 hour and make a cake in 2 hours.She works 10 hours per day.Which of the four lines in the following figure represents her production possibilities curve?

If a country is a price taker for a good in the world market,________.

The following figure shows the demand curve, D, and supply curve, S, of ballpoint pens in Lithasia. The world price of pens is $2. -Refer to the figure above.What is the total surplus after Lithasia opens up to free trade?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Sellers and Incentives

Perfect Competition and the Invisible Hand

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters

Exam 8: Trade

Which of the following statements is true?

Increasing opportunity cost can arise if ________.

The figure below shows the domestic supply and demand of a product in the United States. -Refer to the figure above.Suppose the world price of this product is $14.After the United States engages in free trade in this product,________.

The figure below shows the domestic supply and demand of a product in the United States. -Refer to the figure above.If the world price of this product is $14,the United States will gain ________ in social surplus if it engages in free trade in this product.

The following figure shows the demand curve, D, and the supply curve, S, for calculators in Barylia. The world price of calculators is $40. -Refer to the figure above.What is the total surplus before Barylia opens up to free trade?

The following figure shows the production possibilities curve for Sheena, who has to split her time between producing Web sites and computer programs. -Refer to the figure above.What is the opportunity cost of producing 1 Web site?

The figure below shows production possibilities curves for tomatoes and oranges in two prefectures in a country. -Refer to the figure above.In Prefecture B,the opportunity cost of producing each additional pound of tomatoes ________.

The following figure shows the production possibilities curve for a software engineer who has to divide her available time between producing computer programs and Web sites. -Refer to the figure above.Which of the following combinations is attainable as well as efficient?

Which of the following correctly identifies an argument against globalization?

The domestic supply and demand of a product in Canada is given in the following figure. -Refer to the figure above.If the world price of this product is $12 and Canada engages in free trade,Canada will ________.

Scenario: With her available resources, Wendy can produce 20 greeting cards or 10 earrings. Sarah, with the resources she has, can produce 5 greeting cards or 15 earrings. -Refer to the scenario above.What is Sarah's opportunity cost of producing one greeting card?

Christine is a chef.She can cook a meal in 1 hour and make a cake in 2 hours.She works 10 hours per day.Which of the four lines in the following figure represents her production possibilities curve?

If a country is a price taker for a good in the world market,________.

The following figure shows the demand curve, D, and supply curve, S, of ballpoint pens in Lithasia. The world price of pens is $2. -Refer to the figure above.What is the total surplus after Lithasia opens up to free trade?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Sellers and Incentives

Perfect Competition and the Invisible Hand

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters