Question 1

Use the following to answer questions:
Figure: Sofas and Windows  
-How is slope, measured as rise over run, related to the production possibilities frontier?

Accepted Answer

A)  Slope measures the fixed costs of producing Good X and Good Y. For a slope of -3, the fixed cost of producing either Good X or Good Y is $3 multiplied by the number of units produced. 
B)  Slope gives the opportunity cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing one-third of a unit of Good Y for every additional unit of Good X it produces. 
C)  Slope gives the fixed cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing one-third of a unit of Good Y for every additional unit of Good X it produces. 
D)  Slope gives the opportunity cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing 3 units of Good Y for every additional unit of Good X it produces. 
A)  Slope measures the fixed costs of producing Good X and Good Y. For a slope of -3, the fixed cost of producing either Good X or Good Y is $3 multiplied by the number of units produced. 
B)  Slope gives the opportunity cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing one-third of a unit of Good Y for every additional unit of Good X it produces. 
C)  Slope gives the fixed cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing one-third of a unit of Good Y for every additional unit of Good X it produces. 
D)  Slope gives the opportunity cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing 3 units of Good Y for every additional unit of Good X it produces.

Question 2

Use the following to answer questions:
Figure: Computers and Books  
-(Figure: Computers and Books) According to the figure, the opportunity cost of producing books:

Accepted Answer

A)  is higher for country A than for country B. 
B)  is higher for country B than for country A. 
C)  is the same for countries A and B. 
D)  cannot be determined. 
A)  is higher for country A than for country B. 
B)  is higher for country B than for country A. 
C)  is the same for countries A and B. 
D)  cannot be determined.

Question 3

Use the following to answer questions:
Figure: PPF Nickel & Textiles  
-(Figure: PPF Nickel & Textiles) Refer to the figure. What is the maximum amount of nickel China can produce?

Accepted Answer

A)  10 tons 
B)  8 tons 
C)  6 tons 
D)  4 tons 
A)  10 tons 
B)  8 tons 
C)  6 tons 
D)  4 tons

Question 4

According to the theory of comparative advantage, the reason wages are lower in China than in the United States is:

Accepted Answer

A)  the higher cost of living in the United States. 
B)  lower productivity in China. 
C)  the lower opportunity cost to work in China. 
D)  more trade restrictions in the United States. 
A)  the higher cost of living in the United States. 
B)  lower productivity in China. 
C)  the lower opportunity cost to work in China. 
D)  more trade restrictions in the United States.

Question 5

Phil can clean and polish silverware in two hours and change spark plugs in a car in four hours. Betty can clean and polish the same silverware in 1 hour and change spark plugs in a car in 1 hour. Phil does not have a comparative advantage in either activity.

Accepted Answer

A) True 
 B)False

Question 6

The Dark Ages was a period in which trade:

Accepted Answer

A)  expanded because of rising transportation and communication costs. 
B)  expanded because of falling transportation and communication costs. 
C)  decreased because world markets became more isolated. 
D)  decreased because world markets became less isolated. 
A)  expanded because of rising transportation and communication costs. 
B)  expanded because of falling transportation and communication costs. 
C)  decreased because world markets became more isolated. 
D)  decreased because world markets became less isolated.

Question 7

Conan O'Brien hosts the Conan show and Andy Richter, his sidekick, writes for it. Conan needs 4 hours to rehearse and host a good show. It takes Andy 10 hours to do the same. Conan writes one usable joke in an hour, but Andy needs 2 hours to do the same. From these numbers, we infer that Conan has an absolute advantage in the production of:

Accepted Answer

A)  show hosting. 
B)  joke writing. 
C)  neither show hosting nor joke writing. 
D)  both show hosting and joke writing. 
A)  show hosting. 
B)  joke writing. 
C)  neither show hosting nor joke writing. 
D)  both show hosting and joke writing.

Question 8

When comparing two countries with two goods each, if one country has a comparative advantage in one good, the other country will have a comparative advantage in the other good.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following explains why someone with an absolute advantage in painting houses may NOT spend their time painting houses?

Accepted Answer

A)  They may have a comparative advantage in painting houses, as well. 
B)  Even though they have the absolute advantage in painting houses, they still may not be very good at it. 
C)  In an efficient market, someone with an absolute advantage in painting houses will always spend their time painting houses. 
D)  They may be relatively better at something else than painting houses. 
A)  They may have a comparative advantage in painting houses, as well. 
B)  Even though they have the absolute advantage in painting houses, they still may not be very good at it. 
C)  In an efficient market, someone with an absolute advantage in painting houses will always spend their time painting houses. 
D)  They may be relatively better at something else than painting houses.

Question 10

The production possibility frontier shows:

Accepted Answer

A)  how society can produce more of one good without giving up the production of another good. 
B)  what people can consume given different combinations of goods produced. 
C)  the combinations of output that an economy can produce given its productivity and supply of inputs. 
D)  the types of goods and services that society should produce to satisfy social interest. 
A)  how society can produce more of one good without giving up the production of another good. 
B)  what people can consume given different combinations of goods produced. 
C)  the combinations of output that an economy can produce given its productivity and supply of inputs. 
D)  the types of goods and services that society should produce to satisfy social interest.

Question 11

Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. What are each country's opportunity costs of producing iPods?

Accepted Answer

A)  Brazil: 4 units of sugar cane; China: 2 units of sugar cane 
B)  Brazil: 8 units of sugar cane; China: 2 units of sugar cane 
C)  Brazil: 1/8 unit of sugar cane; China: 1/2 unit of sugar cane 
D)  Brazil: 1/2 unit of sugar cane; China: 1/2 unit of sugar cane 
A)  Brazil: 4 units of sugar cane; China: 2 units of sugar cane 
B)  Brazil: 8 units of sugar cane; China: 2 units of sugar cane 
C)  Brazil: 1/8 unit of sugar cane; China: 1/2 unit of sugar cane 
D)  Brazil: 1/2 unit of sugar cane; China: 1/2 unit of sugar cane

Question 12

Figure: Cars and Boats   Refer to the figure. A country needs 4 units of labor to produce one car and 3 units of labor to produce one boat, and the country has 120 units of labor. Which of the figures represents this country's PPF?

Accepted Answer

A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D 
A)  Figure A 
B)  Figure B 
C)  Figure C 
D)  Figure D

Question 13

Roses grown in Kenya travel to Amsterdam and ultimately to your local flower shop because:

Accepted Answer

A)  the World Rose Commission coordinates the different elements of the rose industry. 
B)  markets coordinate the specialization and trade necessary for the flower industry to function. 
C)  of the trade agreement between the governments of Kenya and Amsterdam. 
D)  customers are willing to pay more for roses that pass through Amsterdam. 
A)  the World Rose Commission coordinates the different elements of the rose industry. 
B)  markets coordinate the specialization and trade necessary for the flower industry to function. 
C)  of the trade agreement between the governments of Kenya and Amsterdam. 
D)  customers are willing to pay more for roses that pass through Amsterdam.

Question 14

Babe Ruth could produce two home runs in a week of play as a fielder or one win in a week of play as a pitcher. What was his opportunity cost of a week of fielding?

Accepted Answer

A)  one win 
B)  two wins 
C)  one home run 
D)  two home runs 
A)  one win 
B)  two wins 
C)  one home run 
D)  two home runs

Question 15

New Zealand is more productive than Madagascar at producing all goods and services. In this situation:

Accepted Answer

A)  New Zealand might benefit by trading with Madagascar. 
B)  Madagascar would be harmed if it traded with New Zealand. 
C)  both countries would benefit from trading with each other. 
D)  New Zealand would see its standard of living decline if it traded with Madagascar. 
A)  New Zealand might benefit by trading with Madagascar. 
B)  Madagascar would be harmed if it traded with New Zealand. 
C)  both countries would benefit from trading with each other. 
D)  New Zealand would see its standard of living decline if it traded with Madagascar.

Question 16

Use the following to answer questions:
Figure: Countries A and B  
-(Figure: Countries A and B) Refer to the figure. According to the diagram about countries A and B, which of the following statement(s) is correct? I. Country A has a comparative advantage in Good Y.
II. Country B has an absolute advantage in both goods.
III. Country B has a comparative advantage in Good X.

Accepted Answer

A)  I and II only 
B)  I and III only 
C)  II and III only 
D)  I, II, and III 
A)  I and II only 
B)  I and III only 
C)  II and III only 
D)  I, II, and III

Question 17

The points on the production possibilities frontier show the cost of the different goods that a country can produce.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is TRUE?

Accepted Answer

A)  Only a high-wage country can benefit by trading with a low-wage country. 
B)  A high-wage country cannot benefit by trading with a low-wage country. 
C)  Trade raises the wages of workers in low- and high-wage countries. 
D)  There is an inverse relationship between productivity and wages. 
A)  Only a high-wage country can benefit by trading with a low-wage country. 
B)  A high-wage country cannot benefit by trading with a low-wage country. 
C)  Trade raises the wages of workers in low- and high-wage countries. 
D)  There is an inverse relationship between productivity and wages.

Question 19

Which of the following is least likely a consequence of the division of knowledge?

Accepted Answer

A)  The development of the computer tablet. 
B)  A totally self-sufficient family farm. 
C)  A new delivery method for cancer-fighting drugs. 
D)  The provision of a new bike path in your community. 
A)  The development of the computer tablet. 
B)  A totally self-sufficient family farm. 
C)  A new delivery method for cancer-fighting drugs. 
D)  The provision of a new bike path in your community.

Exam 2: The Power of Trade and Comparative

Use the following to answer questions: Figure: Sofas and Windows -How is slope, measured as rise over run, related to the production possibilities frontier?

Use the following to answer questions: Figure: Computers and Books -(Figure: Computers and Books) According to the figure, the opportunity cost of producing books:

Use the following to answer questions: Figure: PPF Nickel & Textiles -(Figure: PPF Nickel & Textiles) Refer to the figure. What is the maximum amount of nickel China can produce?

According to the theory of comparative advantage, the reason wages are lower in China than in the United States is:

Phil can clean and polish silverware in two hours and change spark plugs in a car in four hours. Betty can clean and polish the same silverware in 1 hour and change spark plugs in a car in 1 hour. Phil does not have a comparative advantage in either activity.

The Dark Ages was a period in which trade:

When comparing two countries with two goods each, if one country has a comparative advantage in one good, the other country will have a comparative advantage in the other good.

Which of the following explains why someone with an absolute advantage in painting houses may NOT spend their time painting houses?

The production possibility frontier shows:

Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. What are each country's opportunity costs of producing iPods?

Figure: Cars and Boats Refer to the figure. A country needs 4 units of labor to produce one car and 3 units of labor to produce one boat, and the country has 120 units of labor. Which of the figures represents this country's PPF?

Roses grown in Kenya travel to Amsterdam and ultimately to your local flower shop because:

Babe Ruth could produce two home runs in a week of play as a fielder or one win in a week of play as a pitcher. What was his opportunity cost of a week of fielding?

New Zealand is more productive than Madagascar at producing all goods and services. In this situation:

The points on the production possibilities frontier show the cost of the different goods that a country can produce.

Which of the following statements is TRUE?

Which of the following is least likely a consequence of the division of knowledge?

The Big Ideas

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters