Question 1

We measure the marginal ________ of a good by what a ________ for another unit of the good.

Accepted Answer

A)  benefit; person must pay 
B)  cost; person is willing to pay 
C)  benefit; person is willing to pay 
D)  cost; person's preferences are

Question 2

Suppose Joe can prepare 20 sandwiches or 10 pizzas in an hour and Beth can produce 36 sandwiches or 27 pizzas. The concept of comparative advantage concludes that

Accepted Answer

A)  Beth should produce both goods because she can produce more of both goods in an hour than can Joe. 
B)  Beth should produce sandwiches and Joe should produce pizza. 
C)  Beth should produce pizza and Joe should produce sandwiches. 
D)  Beth should produce both goods and Joe should produce sandwiches.

Question 3

The production possibilities frontier itself shows

Accepted Answer

A)  the maximum amount of resources available at any given time. 
B)  combinations of goods and services that do not fully use available resources. 
C)  the maximum rate of growth of output possible for an economy. 
D)  the maximum levels of production that can be attained.

Question 4

Suppose that the government is trying to decide between allocating its resources to build more dams or to build more freeways. In terms of forgone dams, as more freeways are constructed, the marginal benefit of additional freeways ________ and the marginal cost of additional freeways ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 5

As a person consumes more of a good, the

Accepted Answer

A)  marginal benefit increases. 
B)  marginal benefit decreases. 
C)  marginal benefit increases or decreases depending whether or not the economy is on the PPF. 
D)  price of the good falls.

Question 6

A tradeoff is illustrated by

Accepted Answer

A)  a point inside the PPF. 
B)  a point outside the PPF. 
C)  a change in the slope of the PPF. 
D)  the negative slope of the PPF.

Question 7

In the United States, Texas ranks number one in the amount of installed megawatts for wind power generation and Florida ranks number one in the number of beach vacations. These facts point out that

Accepted Answer

A)  Texas has a comparative advantage in wind power generation. 
B)  Texas definitely has an absolute advantage in wind power generation. 
C)  Florida should produce more wind energy. 
D)  Florida can produce wind energy at a lower opportunity cost than can Texas.

Question 8

If production point is inside the production possibilities frontier

Accepted Answer

A)  it is not possible to produce more of both goods. 
B)  production is inefficient. 
C)  in order to produce more of one good, less of the other must be produced. 
D)  production is in the "unattainable" region.

Question 9

The United States has an absolute advantage in producing sugar over all of the other sugar producing countries. Does this fact mean that we should not import any sugar from the other countries?

Accepted Answer

The answer of The United States has an absolute advantage...

Question 10

-Refer to the above figure. Mario is self-sufficient and so is Mia. Each produces 6 dishes of pasta and 4 pizzas. Mario and Mia decide to specialize and trade. After they have specialized and traded, compared to the initial situation, Mia's opportunity cost of pasta has ________ and Mario's opportunity cost of a pizza has ________.

Accepted Answer

A)  decreased; decreased 
B)  decreased; increased 
C)  increased; increased 
D)  increased; decreased

Question 11

-In the figure above, suppose that Mac and Izzie trade and reach point c. Then

Accepted Answer

A)  Mac and Izzie should both produce at point a. 
B)  Mac should produce at point b and Izzie should produce at point d. 
C)  Mac should produce at point d and Izzie should produce at point b. 
D)  Mac and Izzie should both produce at point c.

Question 12

What is comparative advantage? Give an example.

Accepted Answer

The answer of What is comparative advantage? Give an example....

Question 13

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE?

Accepted Answer

A)  Missouri would specialize in pear production and trade pears to Washington pecans. 
B)  Missouri would specialize in pecan production and trade pecans to Washington for pears. 
C)  Washington would produce both pears and pecans and Missouri would produce neither. 
D)  Half of both Washington's and Missouri's resources would be devoted to pears and the other half to pecans because that is the comparative advantage.

Question 14

-Vicky currently produces at point a in the figure above. If Vicky moves from point a to point b to point c, her opportunity cost of a modem

Accepted Answer

A)  decreases. 
B)  increases. 
C)  is zero. 
D)  remains the same.

Question 15

Ted can study for his economics exam or go to a concert. He decides to study for his economics exam instead of going to the concert. The concert he will miss is Ted's ________ of studying for the exam.

Accepted Answer

A)  opportunity cost 
B)  explicit cost 
C)  implicit cost 
D)  discretionary cost

Question 16

Using a production possibilities frontier, economic growth is illustrated by a

Accepted Answer

A)  point inside the curve. 
B)  point on the curve. 
C)  movement from one point on the curve to another point on the curve. 
D)  rightward shift of the curve.

Question 17

One of the largest categories of exports from the United States is now pop culture: movies, music, TV programming, and videos. A direct conclusion from this information is that, compared to other countries, the United States has

Accepted Answer

A)  lower wages for producers of pop culture. 
B)  higher wages for producers of pop culture. 
C)  a higher opportunity cost of producing pop culture. 
D)  a lower opportunity cost of producing pop culture.

Question 18

Production possibilities
 
-In the above table, the production of 3 pizzas and 35 cases of soda is

Accepted Answer

A)  impossible unless more resources become available. 
B)  feasible but would involve unemployed or misallocated resources. 
C)  possible only if the economy produces with maximum efficiency. 
D)  possible only if there is inflation.

Question 19

An opportunity cost of economic growth is

Accepted Answer

A)  essentially zero because economic growth leads to such large gains in the long run. 
B)  the decrease in production of consumption goods in the present time period. 
C)  decreased by the creation of capital goods rather than consumption goods. 
D)  so high that places such as Hong Kong have had to do without it.

Question 20

Betty and Ann live on a desert island. With a day's labor, Ann can produce 8 fish or 4 coconuts; Betty can produce 6 fish or 2 coconuts. Ann's opportunity cost of producing 1 coconut is ________ and she should specialize in the production of ________.

Accepted Answer

A)  8 fish per coconut; fish 
B)  2 fish per coconut; coconuts 
C)  6 fish per coconut; coconuts 
D)  0 fish per coconut; coconuts

Exam 2: The Economic Problem

We measure the marginal of a good by what a for another unit of the good.