Question 1

The principle of opportunity cost is that

Accepted Answer

A) in a market economy,taking advantage of profitable opportunities involves some money cost. 
B) the economic cost of using a factor of production is the alternative use of that factor that is given up. 
C) taking advantage of investment opportunities involves costs. 
D) the cost of production varies depending on the opportunity for technological application. 
A) in a market economy,taking advantage of profitable opportunities involves some money cost. 
B) the economic cost of using a factor of production is the alternative use of that factor that is given up. 
C) taking advantage of investment opportunities involves costs. 
D) the cost of production varies depending on the opportunity for technological application.

Question 2

$$\begin{array} { | l | c | c | } 
\hline & \text { George } & \text { Jack } \
\hline \begin{array} { l } 
\text { Lawns } \
\text { Mowed }
\end{array} & 10 & 6 \
\hline \begin{array} { l } 
\text { Gardens } \
\text { Cultivated }
\end{array} & 5 & 4 \
\hline
\end{array}$$ Table 2-15 shows the output per day of two gardeners,George and Jack.They can either devote their time to mowing lawns or cultivating gardens.
-Refer to Table 2-15.Which of the following statements is true?

Accepted Answer

A) Jack has an absolute advantage in both tasks. 
B) George has an absolute advantage in both tasks. 
C) Jack has an absolute advantage in lawn mowing and George in garden cultivating. 
D) Jack has an absolute advantage in garden cultivating and George in lawn mowing. 
A) Jack has an absolute advantage in both tasks. 
B) George has an absolute advantage in both tasks. 
C) Jack has an absolute advantage in lawn mowing and George in garden cultivating. 
D) Jack has an absolute advantage in garden cultivating and George in lawn mowing.

Question 3

Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
-Refer to Figure 2-4.A movement from ________ is the result of additional government restrictions on the pollution that results from plastic production.

Accepted Answer

A) X to V 
B) X to W 
C) Z to W 
D) Z to Y 
A) X to V 
B) X to W 
C) Z to W 
D) Z to Y

Question 4

Scarcity

Accepted Answer

A) stems from the incompatibility between limited resources and unlimited wants. 
B) can be overcome by discovering new resources. 
C) can be eliminated by rationing products. 
D) is a bigger problem in market economies than in socialist economies. 
A) stems from the incompatibility between limited resources and unlimited wants. 
B) can be overcome by discovering new resources. 
C) can be eliminated by rationing products. 
D) is a bigger problem in market economies than in socialist economies.

Question 5

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except

Accepted Answer

A) engage in mutually beneficial trade with other nations. 
B) increase the variety of products that it can consume with no increase in resources. 
C) consume a combination of goods that lies outside its own production possibilities frontier. 
D) produce a combination of goods that lies outside its own production possibilities frontier. 
A) engage in mutually beneficial trade with other nations. 
B) increase the variety of products that it can consume with no increase in resources. 
C) consume a combination of goods that lies outside its own production possibilities frontier. 
D) produce a combination of goods that lies outside its own production possibilities frontier.

Question 6

$$\begin{array} { | l | c | c | } 
\hline& \text { One Cell Phone } & \begin{array} { c } 
\text { Lumber (per } \
\text { board foot) }
\end{array} \
\hline \text { Estonia } & 40 \text { hours } & 8 \text { hours } \
\hline \text { Finland } & 16 \text { hours } & 4 \text { hours } \
\hline
\end{array}$$ Table 2-16 shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland.
-Refer to Table 2-16.What is Finland's opportunity cost of producing one board foot of lumber?

Accepted Answer

A) 0.25 cell phones 
B) 4 cell phones 
C) 12 cell phones 
D) 16 cell phones 
A) 0.25 cell phones 
B) 4 cell phones 
C) 12 cell phones 
D) 16 cell phones

Question 7

$$\begin{array} { | l | c | c | } 
\hline & \begin{array} { c } 
\text { One Digital } \
\text { Camera }
\end{array} & \begin{array} { c } 
\text { Wheat } \
\text { (per pound) }
\end{array} \
\hline \text { China } & 100 \text { hours } & 4 \text { hours } \
\hline \text { South Korea } & 60 \text { hours } & 3 \text { hours } \
\hline
\end{array}$$ Table 2-11 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea.
-Refer to Table 2-11.Does either China or South Korea have an absolute advantage and if so,in what product?

Accepted Answer

A) South Korea only has an absolute advantage in wheat. 
B) China only has an absolute advantage in wheat. 
C) South Korea has an absolute advantage in both products. 
D) China only has an absolute advantage in digital cameras. 
A) South Korea only has an absolute advantage in wheat. 
B) China only has an absolute advantage in wheat. 
C) South Korea has an absolute advantage in both products. 
D) China only has an absolute advantage in digital cameras.

Question 8

Figure 2-14 shows the production possibilities frontiers for Greenland and Iceland.Each country produces two goods,snow cones and popsicles.
-Refer to Figure 2-14.Which country has a comparative advantage in the production of snow cones?

Accepted Answer

A) Greenland 
B) They have equal productive abilities. 
C) Iceland 
D) neither country 
A) Greenland 
B) They have equal productive abilities. 
C) Iceland 
D) neither country

Question 9

Table 2-4
Production Choices for Dina's Diner
 $$\begin{array} { | c | c | c | } 
\hline \text { Choice } & \begin{array} { l } 
\text { Quantity of } \
\text { Sliders } \
\text { Produced }
\end{array} & \begin{array} { l } 
\text { Quantity of } \
\text { Hot Wings } \
\text { Produced }
\end{array} \
\hline \text { A } & 80 & 0 \
\hline \text { B } & 60 & 25 \
\hline \text { C } & 40 & 50 \
\hline \text { D } & 20 & 75 \
\hline \text { E } & 0 & 100 \
\hline
\end{array}$$
-Refer to Table 2-4.Assume Dina's Diner only produces sliders and hot wings.A combination of 60 sliders and 50 hot wings would appear

Accepted Answer

A) along Dina's production possibilities frontier. 
B) inside Dina's production possibilities frontier. 
C) outside Dina's production possibilities frontier. 
D) at the vertical intercept of Dina's production possibilities frontier. 
A) along Dina's production possibilities frontier. 
B) inside Dina's production possibilities frontier. 
C) outside Dina's production possibilities frontier. 
D) at the vertical intercept of Dina's production possibilities frontier.

Question 10

Figure 2-8 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
-Refer to Figure 2-8.The linear production possibilities frontier in the figure indicates that

Accepted Answer

A) Vidalia has a comparative advantage in the production of orchids. 
B) Vidalia has a comparative disadvantage in the production of roses. 
C) the tradeoff between roses and orchids is constant. 
D) it is progressively more expensive to produce orchids. 
A) Vidalia has a comparative advantage in the production of orchids. 
B) Vidalia has a comparative disadvantage in the production of roses. 
C) the tradeoff between roses and orchids is constant. 
D) it is progressively more expensive to produce orchids.

Question 11

On a diagram of a production possibilities frontier,economic growth is represented by the slope of the production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not a flow in the circular flow model?

Accepted Answer

A) the flow of goods and services and the flow of resources to produce goods and services 
B) the flow of profit and the flow of revenue 
C) the flow of income earned by households and the flow of expenditures incurred by households 
D) the flow of revenue received by producers and the flow of payments to resource owners 
A) the flow of goods and services and the flow of resources to produce goods and services 
B) the flow of profit and the flow of revenue 
C) the flow of income earned by households and the flow of expenditures incurred by households 
D) the flow of revenue received by producers and the flow of payments to resource owners

Question 13

Figure 2-18  
-Refer to Figure 2-18.Which two arrows in the diagram depict the following transaction: LaDonna sells 20 pairs of sunglasses at the Oakley store.

Accepted Answer

A) J and M 
B) J and G 
C) K and M 
D) K and G 
A) J and M 
B) J and G 
C) K and M 
D) K and G

Question 14

For each surfboard that Australia produces,it gives up the opportunity to make 25 boomerangs.New Zealand can produce 1 surfboard for every 15 boomerangs it produces.Which of the following is true about the comparative advantage between the two countries?

Accepted Answer

A) Australia has the comparative advantage in producing surfboards. 
B) Australia has the comparative advantage in producing boomerangs. 
C) New Zealand has the comparative advantage in producing surfboards and boomerangs. 
D) New Zealand has the comparative advantage in producing boomerangs. 
A) Australia has the comparative advantage in producing surfboards. 
B) Australia has the comparative advantage in producing boomerangs. 
C) New Zealand has the comparative advantage in producing surfboards and boomerangs. 
D) New Zealand has the comparative advantage in producing boomerangs.

Question 15

Figure 2-14 shows the production possibilities frontiers for Greenland and Iceland.Each country produces two goods,snow cones and popsicles.
-Refer to Figure 2-14.What is the opportunity cost of producing 1 snow cone in Iceland?

Accepted Answer

A) 2/3 of a popsicle 
B) 3/4 of a popsicle 
C) 1 1/2 popsicles 
D) 180 popsicles 
A) 2/3 of a popsicle 
B) 3/4 of a popsicle 
C) 1 1/2 popsicles 
D) 180 popsicles

Question 16

The resource income earned by those who supply labor services is called

Accepted Answer

A) wages and salaries. 
B) stock options. 
C) profit. 
D) bonus. 
A) wages and salaries. 
B) stock options. 
C) profit. 
D) bonus.

Question 17

Suppose your expenses for this term are as follows: tuition: $10,000,room and board: $6,000,books and other educational supplies: $1,000.Further,during the term,you can only work part-time and earn $8,000 instead of your full-time salary of $20,000.What is the opportunity cost of going to college this term,assuming that your room and board expenses would be the same even if you did not go to college?

Accepted Answer

A) $11,000 
B) $17,000 
C) $23,000 
D) $29,000 
A) $11,000 
B) $17,000 
C) $23,000 
D) $29,000

Question 18

Figure 2-6  
-Refer to Figure 2-6.If the economy is currently producing at point A,what is the opportunity cost of moving to point B?

Accepted Answer

A) 8 thousand wrenches 
B) 6 thousand hammers 
C) 30 thousand wrenches 
D) 23 thousand hammers 
A) 8 thousand wrenches 
B) 6 thousand hammers 
C) 30 thousand wrenches 
D) 23 thousand hammers

Question 19

Table 2-4
Production Choices for Dina's Diner
 $$\begin{array} { | c | c | c | } 
\hline \text { Choice } & \begin{array} { l } 
\text { Quantity of } \
\text { Sliders } \
\text { Produced }
\end{array} & \begin{array} { l } 
\text { Quantity of } \
\text { Hot Wings } \
\text { Produced }
\end{array} \
\hline \text { A } & 80 & 0 \
\hline \text { B } & 60 & 25 \
\hline \text { C } & 40 & 50 \
\hline \text { D } & 20 & 75 \
\hline \text { E } & 0 & 100 \
\hline
\end{array}$$
-Refer to Table 2-4.Assume Dina's Diner only produces sliders and hot wings.A combination of 40 sliders and 50 hot wings would appear

Accepted Answer

A) along Dina's production possibilities frontier. 
B) inside Dina's production possibilities frontier. 
C) outside Dina's production possibilities frontier. 
D) at the vertical intercept of Dina's production possibilities frontier. 
A) along Dina's production possibilities frontier. 
B) inside Dina's production possibilities frontier. 
C) outside Dina's production possibilities frontier. 
D) at the vertical intercept of Dina's production possibilities frontier.

Question 20

Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
-Refer to Figure 2-4.A movement from ________ is the result of advancements in plastic production technology.

Accepted Answer

A) V to X 
B) W to X 
C) Z to W 
D) Y to Z 
A) V to X 
B) W to X 
C) Z to W 
D) Y to Z

Exam 2: Trade-Offs, comparative Advantage, and the Market System

The principle of opportunity cost is that

George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 Table 2-15 shows the output per day of two gardeners,George and Jack.They can either devote their time to mowing lawns or cultivating gardens. -Refer to Table 2-15.Which of the following statements is true?

Figure 2-4 shows various points on three different production possibilities frontiers for a nation. -Refer to Figure 2-4.A movement from ________ is the result of additional government restrictions on the pollution that results from plastic production.

Scarcity

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do all of the following except

Figure 2-14 shows the production possibilities frontiers for Greenland and Iceland.Each country produces two goods,snow cones and popsicles. -Refer to Figure 2-14.Which country has a comparative advantage in the production of snow cones?

Table 2-4 Production Choices for Dina's Diner Choice Quantity of Sliders Produced Quantity of Hot Wings Produced A 80 0 B 60 25 C 40 50 D 20 75 E 0 100 -Refer to Table 2-4.Assume Dina's Diner only produces sliders and hot wings.A combination of 60 sliders and 50 hot wings would appear

Figure 2-8 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids. -Refer to Figure 2-8.The linear production possibilities frontier in the figure indicates that

On a diagram of a production possibilities frontier,economic growth is represented by the slope of the production possibilities frontier.

Which of the following is not a flow in the circular flow model?

Figure 2-18 -Refer to Figure 2-18.Which two arrows in the diagram depict the following transaction: LaDonna sells 20 pairs of sunglasses at the Oakley store.

For each surfboard that Australia produces,it gives up the opportunity to make 25 boomerangs.New Zealand can produce 1 surfboard for every 15 boomerangs it produces.Which of the following is true about the comparative advantage between the two countries?

Figure 2-14 shows the production possibilities frontiers for Greenland and Iceland.Each country produces two goods,snow cones and popsicles. -Refer to Figure 2-14.What is the opportunity cost of producing 1 snow cone in Iceland?

The resource income earned by those who supply labor services is called

Figure 2-6 -Refer to Figure 2-6.If the economy is currently producing at point A,what is the opportunity cost of moving to point B?

Table 2-4 Production Choices for Dina's Diner Choice Quantity of Sliders Produced Quantity of Hot Wings Produced A 80 0 B 60 25 C 40 50 D 20 75 E 0 100 -Refer to Table 2-4.Assume Dina's Diner only produces sliders and hot wings.A combination of 40 sliders and 50 hot wings would appear

Figure 2-4 shows various points on three different production possibilities frontiers for a nation. -Refer to Figure 2-4.A movement from ________ is the result of advancements in plastic production technology.

Economics: Foundations and Models

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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