Question 1

How can a nation that is at an absolute disadvantage gain from trade?

Accepted Answer

Being at an absolute disadvantage means that the nation can produce less than its trading partner, but it says nothing about the relative costs of producing the goods. International trade is based on comparative advantage, which means that the low-cost producer specializes in the production of a good and exports it to the other nation that has the higher cost of production. A nation that has an absolute disadvantage still has a lower opportunity cost of production for one of the goods and hence has the comparative advantage in the production of that good. Therefore this country will gain from trade, as will all its trading partners.

Question 2

$\begin{array}{cccc}
\begin{array}{c}
\text { Production Pages } \
\text { point }
\end{array} & \begin{array}{c}
\text { Web pages } \
\text { typed }
\end{array} & & \text { created } \
\hline \text { A } & 0 & \text { and } & 4 \
\text { B } & 40 & \text { and } & 3 \
\text { C } & 70 & \text { and } & 2 \
\text { D } & 90 & \text { and } & 1 \
\text { E } & 100 & \text { and } & 0
\end{array}$
-Jean can either type her term paper or create Web pages during the limited time she has available. The table above shows her PPF.
a. Can Jean type 90 pages and create 2 Web pages?
b. Use the above numbers to calculate the opportunity cost of a typed page as she increases her time typing and decreases time creating a Web page.

Accepted Answer

a. Jean cannot type 90 pages and create 2 Web pages because, as row D shows, that combination is beyond her PPF.
b. The opportunity cost is the ratio of the decrease in the number of Web pages divided by the increase in the number of typed pages. The following table gives the opportunity cost for typed pages.
 $$\begin{array}{l}
\text { Movement Increase in Decrease in Opportunity }\
\begin{array} { l c c c } 
\text { from } & \text { typed pages } & \text { Web pages } & \text { cost } \
\hline A \text { to } B & 40 & 1 & 1 / 40 \
B \text { to } C & 30 & 1 & 1 / 30 \
C \text { to } D & 20 & 1 & 1 / 20 \
D \text { to } E & 10 & 1 & 1 / 10 \
\hline
\end{array}
\end{array}$$

Question 3

If there is increasing opportunity cost, then when moving downward on a production possibilities frontier, the opportunity cost of the good on the horizontal axis ________ as more of the good is produced.

Accepted Answer

A) increases and the PPF gets steeper 
B) increases and the PPF gets flatter 
C) decreases and the PPF gets steeper 
D) decreases and the PPF gets flatter 
E) does not change and the PPF gets steeper 
A) increases and the PPF gets steeper 
B) increases and the PPF gets flatter 
C) decreases and the PPF gets steeper 
D) decreases and the PPF gets flatter 
E) does not change and the PPF gets steeper A

Question 4

On a production possibilities frontier diagram, where are production points that have tradeoffs?
 Where are production points with a free lunch?

Accepted Answer

A tradeoff is a situation in which a lim

Question 5

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Production } \
\text { point }
\end{array} & \begin{array} { c } 
\text { Milk } \
\text { (gallons) }
\end{array} & & \begin{array} { c } 
\text { Shirts } \
\text { (numbers) }
\end{array} \
\hline \text { A } & 0 & \text { and } & 100 \
\text { B } & 2 & \text { and } & 90 \
\text { C } & 4 & \text { and } & 70 \
\text { D } & 6 & \text { and } & 40 \
\text { E } & 8 & \text { and } & 0 \
\hline
\end{array}$$
-A (very, very small)country produces milk and shirts and its production possibilities frontier is in the table above.
a. The nation is currently producing at point B. What is the opportunity cost of two additional gallons of milk?
 At point C?
 At point D?
 What do your results show?
b. Suppose the nation is initially producing 4 gallons of milk and 40 shirts. What is the opportunity cost of 2 additional gallons of milk?
 Explain your answer.

Accepted Answer

a. At point B, the opportunity cost of 2

Question 6

"Because the United States is the largest economy in the world and can produce anything it needs domestically, there are no gains from trade for the United States." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect. Th

Question 7

-The above figure shows the production possibility frontier for an economy. The point or points that are attainable are

Accepted Answer

A) points B and C. 
B) points A, B, and C. 
C) point E. 
D) points A, B, C, and D. 
E) points A and D. 
A) points B and C. 
B) points A, B, and C. 
C) point E. 
D) points A, B, C, and D. 
E) points A and D.

Question 8

To achieve gains from trade, a country

Accepted Answer

A) needs to have an absolute advantage in the production of all goods. 
B) specializes in the producing a good in which it has a lower opportunity cost. 
C) must produce at a point beyond its PPF. 
D) should produce at the midpoint of its PPF. 
E) needs to have an absolute advantage in the production of at least one good. 
A) needs to have an absolute advantage in the production of all goods. 
B) specializes in the producing a good in which it has a lower opportunity cost. 
C) must produce at a point beyond its PPF. 
D) should produce at the midpoint of its PPF. 
E) needs to have an absolute advantage in the production of at least one good.

Question 9

-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?
d. The movement from point C to point D results in a free lunch. What is the free lunch?

Accepted Answer

a. 3 million bushels of apples and 3 mil

Question 10

-The figure above illustrates a small country's production possibilities frontier. Moving from point A to point B, the per unit opportunity cost of a VCR is ________ per VCR.

Accepted Answer

A) 2 computers 
B) 4/3 of a computer 
C) 100 computers 
D) 1/2 of a computer 
E) 1 VCR 
A) 2 computers 
B) 4/3 of a computer 
C) 100 computers 
D) 1/2 of a computer 
E) 1 VCR

Question 11

The United States has an absolute advantage in producing sugar over all of the other sugar producing countries. Does this fact mean that we should not import any sugar from the other countries?

Accepted Answer

Having an absolute advantage doesn't mea

Question 12

Why is a production possibilities frontier bowed out (concave)?

Accepted Answer

A) The bowed shape reflects constant opportunity cost. 
B) The bowed shape reflects decreasing opportunity cost. 
C) The bowed shape indicates that opportunity cost at first decreases at a decreasing rate, and then begins to decrease at an increasing rate. 
D) The bowed shape indicates that opportunity cost at first increases at a decreasing rate, and then begins to increase at an increasing rate. 
E) The bowed shape reflects increasing opportunity cost. 
A) The bowed shape reflects constant opportunity cost. 
B) The bowed shape reflects decreasing opportunity cost. 
C) The bowed shape indicates that opportunity cost at first decreases at a decreasing rate, and then begins to decrease at an increasing rate. 
D) The bowed shape indicates that opportunity cost at first increases at a decreasing rate, and then begins to increase at an increasing rate. 
E) The bowed shape reflects increasing opportunity cost.

Question 13

Consider the United States' production of soy beans and running shoes. If the United States has an absolute advantage in the production of both goods compared to China,

Accepted Answer

A) both countries can gain from trade. 
B) only the United States can gain from trade. 
C) only China can gain from trade. 
D) each country will be able to produce at a point beyond its PPF. 
E) only the United States will be able to operate beyond its PPF. 
A) both countries can gain from trade. 
B) only the United States can gain from trade. 
C) only China can gain from trade. 
D) each country will be able to produce at a point beyond its PPF. 
E) only the United States will be able to operate beyond its PPF.

Question 14

-In the above figure, Jill's opportunity cost of producing 1 gallon of soda is ________ of bottled water.

Accepted Answer

A) 2 gallons 
B) 1/2 of a gallon 
C) 4 gallons 
D) 1 gallon 
E) 1/4 of a gallon 
A) 2 gallons 
B) 1/2 of a gallon 
C) 4 gallons 
D) 1 gallon 
E) 1/4 of a gallon

Question 15

A production possibilities frontier shows

Accepted Answer

A) the various combinations of output a nation can produce a certain time, given its available resources and technology. 
B) the limits to future growth of a nation. 
C) how money can be allocated among two kinds of goods. 
D) that if price of one good decreases, the price of the other has to increase. 
E) that it is impossible to produce inefficiently. 
A) the various combinations of output a nation can produce a certain time, given its available resources and technology. 
B) the limits to future growth of a nation. 
C) how money can be allocated among two kinds of goods. 
D) that if price of one good decreases, the price of the other has to increase. 
E) that it is impossible to produce inefficiently.

Question 16

-Point D in the above PPF figure is

Accepted Answer

A) an attainable production combination with unemployed resources. 
B) a tradeoff. 
C) an unattainable production combination. 
D) a production combination that can be attained once resources are fully employed. 
E) More information is needed to determine which of the above answers is correct. 
A) an attainable production combination with unemployed resources. 
B) a tradeoff. 
C) an unattainable production combination. 
D) a production combination that can be attained once resources are fully employed. 
E) More information is needed to determine which of the above answers is correct.

Question 17

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis. As the country moves along the frontier closer to the horizontal axis,

Accepted Answer

A) more jeans are produced. 
B) the country eventually chooses an unattainable point. 
C) free lunches occur. 
D) more tradeoffs occur. 
E) more shoes are produced. 
A) more jeans are produced. 
B) the country eventually chooses an unattainable point. 
C) free lunches occur. 
D) more tradeoffs occur. 
E) more shoes are produced.

Question 18

Suppose a country operates on its production possibility frontier when it produces 1000 books and 1000 tables. The combination of ________ reflects ________.

Accepted Answer

A) 500 books and 1000 tables; an inefficient but attainable point 
B) 1000 books and 500 tables; an efficient point 
C) 1000 books and 1000 tables; a free lunch 
D) 500 books and 500 tables; an attainable and efficient point 
E) 1000 books and 1500 tables; a free lunch 
A) 500 books and 1000 tables; an inefficient but attainable point 
B) 1000 books and 500 tables; an efficient point 
C) 1000 books and 1000 tables; a free lunch 
D) 500 books and 500 tables; an attainable and efficient point 
E) 1000 books and 1500 tables; a free lunch

Question 19

-The figure above shows how the PPF for cell phones and new cell-phone factories can expand. In the figure, if the economy chose the point on this year's PPF that is below point K, the next year's PPF would

Accepted Answer

A) shift outward along the horizontal axis farther than the new PPF shown in the figure. 
B) shift outward along the horizontal axis, but not as far as the new PPF shown in the figure. 
C) shift outward along the vertical axis, not along the horizontal axis. 
D) shift inward along the horizontal axis. 
E) shift inward along the vertical axis. 
A) shift outward along the horizontal axis farther than the new PPF shown in the figure. 
B) shift outward along the horizontal axis, but not as far as the new PPF shown in the figure. 
C) shift outward along the vertical axis, not along the horizontal axis. 
D) shift inward along the horizontal axis. 
E) shift inward along the vertical axis.

Question 20

Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Cindy's opportunity cost of producing 1 taco is

Accepted Answer

A) 3/4 of a pizza. 
B) 1 pizza. 
C) 30 pizzas. 
D) 40 pizzas. 
E) 1 1/3 tacos. 
A) 3/4 of a pizza. 
B) 1 pizza. 
C) 30 pizzas. 
D) 40 pizzas. 
E) 1 1/3 tacos.

How can a nation that is at an absolute disadvantage gain from trade?

If there is increasing opportunity cost, then when moving downward on a production possibilities frontier, the opportunity cost of the good on the horizontal axis ________ as more of the good is produced.

On a production possibilities frontier diagram, where are production points that have tradeoffs? Where are production points with a free lunch?

"Because the United States is the largest economy in the world and can produce anything it needs domestically, there are no gains from trade for the United States." Is the previous statement correct or incorrect?

-The above figure shows the production possibility frontier for an economy. The point or points that are attainable are

To achieve gains from trade, a country

-The figure above illustrates a small country's production possibilities frontier. Moving from point A to point B, the per unit opportunity cost of a VCR is ________ per VCR.

The United States has an absolute advantage in producing sugar over all of the other sugar producing countries. Does this fact mean that we should not import any sugar from the other countries?

Why is a production possibilities frontier bowed out (concave)?

Consider the United States' production of soy beans and running shoes. If the United States has an absolute advantage in the production of both goods compared to China,

-In the above figure, Jill's opportunity cost of producing 1 gallon of soda is ________ of bottled water.

A production possibilities frontier shows

-Point D in the above PPF figure is

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis. As the country moves along the frontier closer to the horizontal axis,

Suppose a country operates on its production possibility frontier when it produces 1000 books and 1000 tables. The combination of reflects .

-The figure above shows how the PPF for cell phones and new cell-phone factories can expand. In the figure, if the economy chose the point on this year's PPF that is below point K, the next year's PPF would

Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Cindy's opportunity cost of producing 1 taco is

Getting Started

The Us and Global Economies

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 3: The Economic Problem

How can a nation that is at an absolute disadvantage gain from trade?

If there is increasing opportunity cost, then when moving downward on a production possibilities frontier, the opportunity cost of the good on the horizontal axis ________ as more of the good is produced.

On a production possibilities frontier diagram, where are production points that have tradeoffs? Where are production points with a free lunch?

"Because the United States is the largest economy in the world and can produce anything it needs domestically, there are no gains from trade for the United States." Is the previous statement correct or incorrect?

-The above figure shows the production possibility frontier for an economy. The point or points that are attainable are

To achieve gains from trade, a country

-The figure above illustrates a small country's production possibilities frontier. Moving from point A to point B, the per unit opportunity cost of a VCR is ________ per VCR.

The United States has an absolute advantage in producing sugar over all of the other sugar producing countries. Does this fact mean that we should not import any sugar from the other countries?

Why is a production possibilities frontier bowed out (concave)?

Consider the United States' production of soy beans and running shoes. If the United States has an absolute advantage in the production of both goods compared to China,

-In the above figure, Jill's opportunity cost of producing 1 gallon of soda is ________ of bottled water.

A production possibilities frontier shows

-Point D in the above PPF figure is

Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis. As the country moves along the frontier closer to the horizontal axis,

Suppose a country operates on its production possibility frontier when it produces 1000 books and 1000 tables. The combination of ________ reflects ________.

-The figure above shows how the PPF for cell phones and new cell-phone factories can expand. In the figure, if the economy chose the point on this year's PPF that is below point K, the next year's PPF would

Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Cindy's opportunity cost of producing 1 taco is

Getting Started

The Us and Global Economies

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Suppose a country operates on its production possibility frontier when it produces 1000 books and 1000 tables. The combination of reflects .