Question 1

When there is a choice between the consumption of bundle X and bundle Y, the opportunity cost of consuming bundle X is bundle Y.

Accepted Answer

A) True 
 B)False

Question 2

Consider the production possibilities curve [PPC] for a country producing only two commodities;wheat and wine.Ceteris paribus, the _____ cost of producing wine increases with each successive increase in wine production.

Accepted Answer

A) average 
B) marginal 
C) total 
D) external 
E) social 
A) average 
B) marginal 
C) total 
D) external 
E) social

Question 3

If an economy is operating at a point outside the PPC, either the society has resources that are not being fully used or production is not efficient.

Accepted Answer

A) True 
 B)False

Question 4

The reason why South Korea flourished economically relative to North Korea was that the former retained a strong version of communism and totalitarianism post World War II.

Accepted Answer

A) True 
 B)False

Question 5

Given below is the production possibilities schedule for capital goods and consumer goods. Table 2.3
  Consider Table 2.3.The production possibilities curve [PPC] representing this schedule would be:

Accepted Answer

A) bowed in. 
B) bowed out. 
C) a negatively sloped straight line. 
D) a positively sloped straight line. 
E) bowed in if consumer goods are plotted on the horizontal axis and bowed out if capital goods are plotted on the horizontal axis. 
A) bowed in. 
B) bowed out. 
C) a negatively sloped straight line. 
D) a positively sloped straight line. 
E) bowed in if consumer goods are plotted on the horizontal axis and bowed out if capital goods are plotted on the horizontal axis.

Question 6

If you have a choice between studying and doing another activity, you will devote your time to studying as long as the additional benefit of studying is greater than the additional cost of studying.

Accepted Answer

A) True 
 B)False

Question 7

Refer to Figure 2.2.If there is an increase in the effectiveness of pesticides, which of the following graph(s)will represent(s)the resulting shift in the production possibilities curve [PPC]?

Accepted Answer

A) Graph A 
B) Graph B 
C) Graph C 
D) Graph A and B 
E) Graph B and C 
A) Graph A 
B) Graph B 
C) Graph C 
D) Graph A and B 
E) Graph B and C

Question 8

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa. Table 2.4
  Refer to Table 2.4.Identify the correct statement.

Accepted Answer

A) Ohio should specialize in the production of cookies and trade with Iowa. 
B) Iowa should specialize in the production of cookies and trade with Ohio. 
C) Ohio should specialize in the production of chilies and trade with Iowa. 
D) Both should specialize in the production of chilies. 
E) Each of the nations should continue to produce both the commodities and not specialize in any one commodity. 
A) Ohio should specialize in the production of cookies and trade with Iowa. 
B) Iowa should specialize in the production of cookies and trade with Ohio. 
C) Ohio should specialize in the production of chilies and trade with Iowa. 
D) Both should specialize in the production of chilies. 
E) Each of the nations should continue to produce both the commodities and not specialize in any one commodity.

Question 9

If the general education level within a country rises significantly over time, it is likely that:

Accepted Answer

A) the country will move to a different point along its current production possibilities curve. 
B) the country's production possibilities curve will not change in any way. 
C) the country's production possibilities curve will shift in. 
D) the country's production possibilities curve will shift out. 
E) the country's production possibilities curve will become convex to the origin. 
A) the country will move to a different point along its current production possibilities curve. 
B) the country's production possibilities curve will not change in any way. 
C) the country's production possibilities curve will shift in. 
D) the country's production possibilities curve will shift out. 
E) the country's production possibilities curve will become convex to the origin.

Question 10

Which of the following statements is true about comparative advantage?

Accepted Answer

A) Comparative advantage exists whenever one person, firm, or nation can do something with greater opportunity costs than some other individual, firm, or nation. 
B) Comparative advantage is interesting theoretically, but it is not relevant when evaluating real-world economic conditions. 
C) Third-world countries cannot possibly have a comparative advantage in the production of any good or service because of the relatively low educational attainment of their work force. 
D) Comparative advantage exists whenever one person, firm, or nation can do something with lesser opportunity costs than some other individual, firm, or nation. 
E) Only highly advanced economies can have a comparative advantage in the production of a good or service. 
A) Comparative advantage exists whenever one person, firm, or nation can do something with greater opportunity costs than some other individual, firm, or nation. 
B) Comparative advantage is interesting theoretically, but it is not relevant when evaluating real-world economic conditions. 
C) Third-world countries cannot possibly have a comparative advantage in the production of any good or service because of the relatively low educational attainment of their work force. 
D) Comparative advantage exists whenever one person, firm, or nation can do something with lesser opportunity costs than some other individual, firm, or nation. 
E) Only highly advanced economies can have a comparative advantage in the production of a good or service.

Question 11

Bob and Bill can make 16 toys each if they devote 8 working hours in a day.Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day.What is the opportunity cost of repairing one car to Bob?

Accepted Answer

A) 10 toys 
B) 8 toys 
C) 16 toys 
D) 12 toys 
E) 4 toys 
A) 10 toys 
B) 8 toys 
C) 16 toys 
D) 12 toys 
E) 4 toys

Question 12

Consider the production possibilities curve [PPC] for a country producing only cheese and wine.The first few resources transferred from cheese to wine production are:

Accepted Answer

A) those that are most specialized in cheese production. 
B) those that are most specialized in wine production. 
C) those that are least specialized in cheese production. 
D) those that are neither specialized in cheese nor wine production. 
E) those that are highly specialized in both cheese and wine production. 
A) those that are most specialized in cheese production. 
B) those that are most specialized in wine production. 
C) those that are least specialized in cheese production. 
D) those that are neither specialized in cheese nor wine production. 
E) those that are highly specialized in both cheese and wine production.

Question 13

A point outside the production possibilities curve [PPC]:

Accepted Answer

A) represents inefficient use of resources. 
B) may be due to unemployment. 
C) is attainable if all resources are used efficiently. 
D) represents more resources than are currently available. 
E) will never be attainable, even if the quantity of resources increases. 
A) represents inefficient use of resources. 
B) may be due to unemployment. 
C) is attainable if all resources are used efficiently. 
D) represents more resources than are currently available. 
E) will never be attainable, even if the quantity of resources increases.

Question 14

Shirley can choose between peanut butter pretzels and caramel coated popcorns for her evening snack.According to economists, her _____ cost of consuming caramel coated popcorns would be the forgone peanut butter pretzels.

Accepted Answer

A) internal 
B) opportunity 
C) average 
D) transaction 
E) social 
A) internal 
B) opportunity 
C) average 
D) transaction 
E) social

Exam 2: Choice, Opportunity Costs, and Specialization

When there is a choice between the consumption of bundle X and bundle Y, the opportunity cost of consuming bundle X is bundle Y.

Consider the production possibilities curve [PPC] for a country producing only two commodities;wheat and wine.Ceteris paribus, the _____ cost of producing wine increases with each successive increase in wine production.

If an economy is operating at a point outside the PPC, either the society has resources that are not being fully used or production is not efficient.

The reason why South Korea flourished economically relative to North Korea was that the former retained a strong version of communism and totalitarianism post World War II.

Given below is the production possibilities schedule for capital goods and consumer goods. Table 2.3 Consider Table 2.3.The production possibilities curve [PPC] representing this schedule would be:

If you have a choice between studying and doing another activity, you will devote your time to studying as long as the additional benefit of studying is greater than the additional cost of studying.

Refer to Figure 2.2.If there is an increase in the effectiveness of pesticides, which of the following graph(s)will represent(s)the resulting shift in the production possibilities curve [PPC]?

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa. Table 2.4 Refer to Table 2.4.Identify the correct statement.

If the general education level within a country rises significantly over time, it is likely that:

Which of the following statements is true about comparative advantage?

Bob and Bill can make 16 toys each if they devote 8 working hours in a day.Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day.What is the opportunity cost of repairing one car to Bob?

Consider the production possibilities curve [PPC] for a country producing only cheese and wine.The first few resources transferred from cheese to wine production are:

A point outside the production possibilities curve [PPC]:

Shirley can choose between peanut butter pretzels and caramel coated popcorns for her evening snack.According to economists, her _____ cost of consuming caramel coated popcorns would be the forgone peanut butter pretzels.

Economics: The World Around You

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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