Question 1

-In the figure above, the marginal cost of the fifth computer is

Accepted Answer

A)  0 television sets per computer. 
B)  4 television sets per computer. 
C)  20 television sets per computer. 
D)  35 television sets per computer. 
A)  0 television sets per computer. 
B)  4 television sets per computer. 
C)  20 television sets per computer. 
D)  35 television sets per computer.

Question 2

Sarah and her boyfriend Mike want to save some money to pay for their wedding. So they decided to help people in the neighborhood by cleaning their garages and mowing lawns. Sarah takes 60 minutes to clean a garage and 80 minutes to mow a lawn. Mike takes 80 minutes to clean a garage and 80 minutes to mow a lawn. Sarah and Mike devote 10 hours per week each to these activities and get paid $25 for each garage they clean and $25 for each lawn they mow. Sarah says to Mike: "I have an absolute advantage in cleaning and we are equally productive in mowing. Therefore I should do both cleaning and mowing but you should only mow lawns." Mike disagrees. He thinks Sarah should specialize in cleaning garages and he should specialize in mowing lawns. Help Sarah and Mike to resolve their dispute.
a) Who has an absolute advantage in cleaning garages? In mowing lawns? Explain.
b) Draw Sarah's and Mike's production possibilities frontiers. What are each individual's opportunity costs?
c) Who has a comparative advantage in cleaning garages? In mowing lawns? Explain.
d) Is Sarah right when she says that she should do both cleaning and mowing while Mike should only mow lawns? Or may be Mike is right when he suggests that Sarah specializes in cleaning and he specializes in mowing? Illustrate and substantiate your answer with a numerical example.

Accepted Answer

a) Sarah has an absolute advantage in cl

Question 3

The fact that individual productive resources are NOT equally useful in all activities

Accepted Answer

A)  implies that a production possibilities frontier will be bowed outward. 
B)  implies that gain from specialization and trade is unlikely. 
C)  follows from the law of demand. 
D)  implies a linear production possibilities frontier. 
A)  implies that a production possibilities frontier will be bowed outward. 
B)  implies that gain from specialization and trade is unlikely. 
C)  follows from the law of demand. 
D)  implies a linear production possibilities frontier.

Question 4

-As Rainclouds Inc. moves downward along its production possibilities frontier, illustrated in the figure above, the opportunity cost of a raincoat ________.

Accepted Answer

A)  decreases 
B)  depends on the initial quantity produced 
C)  increases 
D)  remains the same 
A)  decreases 
B)  depends on the initial quantity produced 
C)  increases 
D)  remains the same

Question 5

The existence of the tradeoff along the PPF means that the PPF is

Accepted Answer

A)  bowed outward. 
B)  linear. 
C)  negatively sloped. 
D)  positively sloped. 
A)  bowed outward. 
B)  linear. 
C)  negatively sloped. 
D)  positively sloped.

Question 6

-In the figure above, Jill is producing at point A. Jill's opportunity cost producing one pair of pants is

Accepted Answer

A)  2 shirts per pair of pants. 
B)  3 shirts per pair of pants. 
C)  3/5 of a shirt per pair of pants. 
D)  5/3 of a shirt per pair of pants. 
A)  2 shirts per pair of pants. 
B)  3 shirts per pair of pants. 
C)  3/5 of a shirt per pair of pants. 
D)  5/3 of a shirt per pair of pants.

Question 7

When economic growth occurs, the

Accepted Answer

A)  economy moves along its production possibilities frontier. 
B)  production possibilities frontier shifts outward. 
C)  production possibilities frontier becomes steeper. 
D)  production possibilities frontier shifts outward but no longer limits the amount that can be produced. 
A)  economy moves along its production possibilities frontier. 
B)  production possibilities frontier shifts outward. 
C)  production possibilities frontier becomes steeper. 
D)  production possibilities frontier shifts outward but no longer limits the amount that can be produced.

Question 8

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. If Tom and Jerry trade

Accepted Answer

A)  Tom will benefit and Jerry will not. 
B)  Jerry will benefit and Tom will not. 
C)  both will benefit. 
D)  none of them will benefit. 
A)  Tom will benefit and Jerry will not. 
B)  Jerry will benefit and Tom will not. 
C)  both will benefit. 
D)  none of them will benefit.

Question 9

-China's State Council has encouraged more spending to "improve transportation links and other infrastructure...." It will also "step up its spending on vocational training and other educational programs for adults." www.nytimes.com, Keith Bradsher, October 19, 2008 Suppose that capital goods are on the vertical axis while consumption goods are on the horizontal axis of China's PPF. As a result of enacting the policies, we would expect
I. an expansion of China's production possibilities.
II. capital accumulation.
III. an increase in human capital.

Accepted Answer

A)  i and II only. 
B)  i, II and III. 
C)  i and III only. 
D)  II and III only. 
A)  i and II only. 
B)  i, II and III. 
C)  i and III only. 
D)  II and III only.

Question 10

Marginal cost curves slope

Accepted Answer

A)  upward because of increasing opportunity cost. 
B)  upward because of decreasing opportunity cost. 
C)  downward because of increasing opportunity cost. 
D)  downward because of decreasing opportunity cost. 
A)  upward because of increasing opportunity cost. 
B)  upward because of decreasing opportunity cost. 
C)  downward because of increasing opportunity cost. 
D)  downward because of decreasing opportunity cost.

Question 11

-Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. Point b represents ________ of banking services and ice cream.

Accepted Answer

A)  allocation efficiency and possibly production efficiency 
B)  neither allocative nor production efficiency 
C)  allocative and production efficiency in the production 
D)  production efficiency and possibly allocative efficiency in the production 
A)  allocation efficiency and possibly production efficiency 
B)  neither allocative nor production efficiency 
C)  allocative and production efficiency in the production 
D)  production efficiency and possibly allocative efficiency in the production

Question 12

If a country must decrease current consumption to increase the amount of capital goods it produces today, then it must

Accepted Answer

A)  be using resources inefficiently today, but will be more efficient in the future. 
B)  be producing along the production possibilities frontier today and its production possibilities frontier will shift outward if it produces more capital goods. 
C)  must be producing outside the production possibilities frontier and will continue to do so in the future. 
D)  must not have private ownership of property and will have to follow planning authorities' decisions today and in the future. 
A)  be using resources inefficiently today, but will be more efficient in the future. 
B)  be producing along the production possibilities frontier today and its production possibilities frontier will shift outward if it produces more capital goods. 
C)  must be producing outside the production possibilities frontier and will continue to do so in the future. 
D)  must not have private ownership of property and will have to follow planning authorities' decisions today and in the future.

Question 13

As a country that has a bowed-out production possibilities frontier produces more of one good, the opportunity cost of a unit of that good ________.

Accepted Answer

A)  might increase or decrease 
B)  remains the same 
C)  increases 
D)  decreases 
A)  might increase or decrease 
B)  remains the same 
C)  increases 
D)  decreases

Question 14

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

Accepted Answer

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

Question 15

A PPF bows outward because

Accepted Answer

A)  not all resources are equally productive in all activities. 
B)  consumers prefer about equal amounts of the different goods. 
C)  entrepreneurial talent is more abundant than human capital. 
D)  resources are used inefficiently. 
A)  not all resources are equally productive in all activities. 
B)  consumers prefer about equal amounts of the different goods. 
C)  entrepreneurial talent is more abundant than human capital. 
D)  resources are used inefficiently.

Question 16

A production possibilities frontier figure does NOT illustrate

Accepted Answer

A)  the limits on production imposed by our limited resources and technology. 
B)  the exchange of one good or service for another. 
C)  opportunity cost. 
D)  attainable and unattainable points. 
A)  the limits on production imposed by our limited resources and technology. 
B)  the exchange of one good or service for another. 
C)  opportunity cost. 
D)  attainable and unattainable points.

Question 17

Suppose the United States discovers a way to produce clean nuclear fuel. The effect of this discovery would be to

Accepted Answer

A)  lead the United States to produce less nuclear fuel. 
B)  force the United States to produce at a point inside its PPF. 
C)  shift the U.S. PPF outward. 
D)  shift the U.S. PPF inward. 
A)  lead the United States to produce less nuclear fuel. 
B)  force the United States to produce at a point inside its PPF. 
C)  shift the U.S. PPF outward. 
D)  shift the U.S. PPF inward.

Question 18

The production possibilities frontier itself illustrates

Accepted Answer

A)  all goods that can be produced by an economy. 
B)  the combination of goods and services that can be produced efficiently. 
C)  all goods and services that are desired but cannot be produced due to scarce resources. 
D)  all possible production of capital goods. 
A)  all goods that can be produced by an economy. 
B)  the combination of goods and services that can be produced efficiently. 
C)  all goods and services that are desired but cannot be produced due to scarce resources. 
D)  all possible production of capital goods.

Question 19

A country that has a comparative advantage in producing capital goods will ________ a country that has a comparative advantage in consumption goods.

Accepted Answer

A)  reap all of the gains from trade when it trades with 
B)  grow slower than 
C)  reap fewer of the gains from trade when it trades with 
D)  specialize in producing capital goods and trade with 
A)  reap all of the gains from trade when it trades with 
B)  grow slower than 
C)  reap fewer of the gains from trade when it trades with 
D)  specialize in producing capital goods and trade with

Question 20

-Refer to the production possibilities frontier in the figure above. Which of the following movements requires the largest opportunity cost, in terms of good Y forgone, per extra unit of good X?

Accepted Answer

A)  from point a to point b 
B)  from point b to point c 
C)  from point c to point d 
D)  from point d to point e 
A)  from point a to point b 
B)  from point b to point c 
C)  from point c to point d 
D)  from point d to point e

-In the figure above, the marginal cost of the fifth computer is

The fact that individual productive resources are NOT equally useful in all activities

-As Rainclouds Inc. moves downward along its production possibilities frontier, illustrated in the figure above, the opportunity cost of a raincoat ________.

The existence of the tradeoff along the PPF means that the PPF is

-In the figure above, Jill is producing at point A. Jill's opportunity cost producing one pair of pants is

When economic growth occurs, the

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. If Tom and Jerry trade

Marginal cost curves slope

-Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. Point b represents ________ of banking services and ice cream.

If a country must decrease current consumption to increase the amount of capital goods it produces today, then it must

As a country that has a bowed-out production possibilities frontier produces more of one good, the opportunity cost of a unit of that good ________.

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

A PPF bows outward because

A production possibilities frontier figure does NOT illustrate

Suppose the United States discovers a way to produce clean nuclear fuel. The effect of this discovery would be to

The production possibilities frontier itself illustrates

A country that has a comparative advantage in producing capital goods will ________ a country that has a comparative advantage in consumption goods.

-Refer to the production possibilities frontier in the figure above. Which of the following movements requires the largest opportunity cost, in terms of good Y forgone, per extra unit of good X?

What Is Economics

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

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, the marginal cost of the fifth computer is

The fact that individual productive resources are NOT equally useful in all activities

-As Rainclouds Inc. moves downward along its production possibilities frontier, illustrated in the figure above, the opportunity cost of a raincoat ________.

The existence of the tradeoff along the PPF means that the PPF is

-In the figure above, Jill is producing at point A. Jill's opportunity cost producing one pair of pants is

When economic growth occurs, the

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. If Tom and Jerry trade

Marginal cost curves slope

-Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. Point b represents ________ of banking services and ice cream.

If a country must decrease current consumption to increase the amount of capital goods it produces today, then it must

As a country that has a bowed-out production possibilities frontier produces more of one good, the opportunity cost of a unit of that good ________.

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

A PPF bows outward because

A production possibilities frontier figure does NOT illustrate

Suppose the United States discovers a way to produce clean nuclear fuel. The effect of this discovery would be to

The production possibilities frontier itself illustrates

A country that has a comparative advantage in producing capital goods will ________ a country that has a comparative advantage in consumption goods.

-Refer to the production possibilities frontier in the figure above. Which of the following movements requires the largest opportunity cost, in terms of good Y forgone, per extra unit of good X?

What Is Economics

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

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