Question 1

Table 3.3
-Consider two individuals,Bob and Jerry,who produce guitars and banjos.Bob and Jerry's weekly productivity are shown in Table 3.3.Which of the following is true?

Accepted Answer

A)  Bob has an absolute advantage in producing both goods,and a comparative advantage in producing guitars.
B)  Bob has an absolute advantage in producing both goods,and a comparative advantage in producing banjos.
C)  Bob has an absolute and a comparative advantage in producing both goods.
D)  Bob has an absolute advantage in producing both goods,but no one has a comparative advantage in producing either good. D

Question 2

When there is imperfect competition,the role of the government is to:

Accepted Answer

A)  take over production.
B)  tell the firms how much to produce.
C)  foster competition.
D)  all of the above C

Question 3

When people exchange things,trading what they have for what they want,it is called a ________ economy.

Accepted Answer

market

Question 4

The returns to public sector investment is highest in poor countries like North Korea and Afghanistan,where measures of civil liberties are lower.

Accepted Answer

A) True 
 B)False

Question 5

Why does the government's role of enforcing contracts facilitate exchange?

Accepted Answer

A)  Enforcing contracts allows people to trade with confidence that the contracts they enter will be met.
B)  Enforcing contracts guarantees consumers that the government will bail them out in case the seller does not fulfill his end of the contract.
C)  Enforcing contracts guarantees sellers that the government will bail them out in case the buyer does not fulfill his end of the contract.
D)  Enforcing the contract effectively makes the government the seller's partner in the business.

Question 6

In modern economies,individuals in markets make most of the decisions about:

Accepted Answer

A)  what to produce.
B)  how to produce.
C)  for whom to produce.
D)  all of the above.

Question 7

When there is imperfect information,a role of government is to disseminate information and promote informed choice.

Accepted Answer

A) True 
 B)False

Question 8

Table 3.1
-Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.Based on the table,Blythe's opportunity cost of 1 carrot is:

Accepted Answer

A)  3 apples.
B)  4 apples.
C)  6 apples.
D)  1.5 apples.

Question 9

In a market system profits:

Accepted Answer

A)  are unfair.
B)  are too high.
C)  signal to entrepreneur what to produce.
D)  all of the above.

Question 10

Table 3.1
-Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.From the table,we can conclude that:

Accepted Answer

A)  Blythe should specialize in carrots and trade for apples.
B)  Blythe should specialize in apples and trade for carrots.
C)  Blythe should specialize in both goods.
D)  Willy should specialize in both goods.

Question 11

Imagine two countries,Bruceland and Davidia.Bruceland is producing everything at a lower absolute cost than Davidia.If the two countries trade what is the reason?

Accepted Answer

The answer of Imagine two countries,Bruceland and Davidia.Bruceland is producing...

Question 12

In a market economy,what is the role of the government with regards to public goods?

Accepted Answer

A)  The government has to facilitate the collective decision making in the production of public goods.
B)  The government must force the firms to produce all the public goods.
C)  The government must take over the production of all goods in the market,public or private.
D)  The government must hold a referendum before any public good is produced.

Question 13

In a market system,prices:

Accepted Answer

A)  signal the relative scarcity of a product.
B)  are unfair.
C)  are too high.
D)  all of the above.

Question 14

When it comes to pollution,economists believe that the government must:

Accepted Answer

A)  allow firms to pollute as long as they bear the full cost of their pollution.
B)  never allow pollution to exist.
C)  allow firms to pollute as long as the benefits of pollution is positive.
D)  allow pollution to exist unabated.

Question 15

According to the Application,which good does Latvia have comparative advantage on?

Accepted Answer

A)  timber
B)  grain
C)  milk
D)  livestock

Question 16

The main reason why the government enforces contracts and maintains a legal system that punishes those who violate contracts is:

Accepted Answer

A)  to facilitate exchange.
B)  to decrease imperfect competition.
C)  to decrease imperfect information.
D)  to increase uncertainty.

Question 17

Suppose a product suddenly loses popularity and the firms producing the product begin to realize large losses.In response,entrepreneurs would:

Accepted Answer

A)  enter the market and increase production.
B)  enter the market and decrease production.
C)  exit the market and decrease production.
D)  exit the market and increase production.

Question 18

Suppose that in the time it takes for him to bake a cake,Bob can sew 5 pairs of jeans.In the time it takes for Joe to bake a cake,he can sew 8 pairs of jeans day.In this example,Bob has ________ advantage over Joe in cake baking.

Accepted Answer

A)  an absolute
B)  an absolute and a comparative
C)  a comparative
D)  neither an absolute nor a comparative

Question 19

A patent:

Accepted Answer

A)  specifies the term of exchange,facilitating exchange between strangers.
B)  increases the profitability of inventions,encouraging firms to develop new products.
C)  provides the public with reliable information about the performance of a firm.
D)  increases the risk faced by entrepreneurs.

Question 20

________ is another term for "offshoring."

Accepted Answer

A)  Outsourcing
B)  Importing
C)  Exporting
D)  Insourcing

Exam 3: Exchange and Markets

Table 3.3 -Consider two individuals,Bob and Jerry,who produce guitars and banjos.Bob and Jerry's weekly productivity are shown in Table 3.3.Which of the following is true?