Question 1

A person has a comparative advantage in an activity if that person can

Accepted Answer

A)  produce more goods in a given amount of time than another person. 
B)  produce fewer goods in a given amount of time than another person. 
C)  perform the activity at a lower opportunity cost than anyone else. 
D)  perform that activity at a higher opportunity cost than anyone else.

Question 2

Susan likes to drink sodas. The ________ soda Susan drinks, the ________ of the last soda.

Accepted Answer

A)  more; higher the marginal benefit 
B)  less; higher the opportunity cost 
C)  less; lower the marginal benefit 
D)  more; lower the marginal benefit

Question 3

When economists state that the opportunity cost of a product increases as more of it is produced, what do they mean? What is the opportunity cost?

Accepted Answer

The answer of When economists state that the opportunity cost...

Question 4

China's State Council has encouraged more spending to "improve transportation links and other infrastructure...." It will also "step up its spending on vocational training and other educational programs for adults." www.nytimes.com, Keith Bradsher, October 19, 2008
Suppose that capital goods are on the vertical axis while consumption goods are on the horizontal axis of China's PPF. As a result of enacting the policies, China's PPF will

Accepted Answer

A)  shift outward. 
B)  shift inward. 
C)  rotate outward. 
D)  become flatter.

Question 5

-The above table shows production points on Sweet-Tooth Land's production possibilities frontier. Which of the following statements is TRUE?

Accepted Answer

A)  Producing 0 chocolate bars and 100 cans of cola is both attainable and efficient. 
B)  Producing 20 chocolate bars and 80 cans of cola is attainable, but inefficient. 
C)  Producing 30 chocolate bars and 38 cans of cola is only attainable with an increase in technology. 
D)  Producing 40 chocolate bars and 0 cans of cola is unattainable and inefficient.

Question 6

-In the figure above, moving from point B to point D

Accepted Answer

A)  has an opportunity cost of one ton of butter per month. 
B)  has an opportunity cost of one ton of guns per month. 
C)  requires an increase in technology. 
D)  is impossible.

Question 7

Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is ________ his production possibilities frontier.

Accepted Answer

A)  producing inside 
B)  producing on 
C)  producing outside 
D)  producing either inside or on

Question 8

-In the production possibilities frontier depicted in the figure above, which of the following combinations of hats and bananas is unattainable?

Accepted Answer

A)  4 million pounds of bananas and 4 million hats 
B)  2 million pounds of bananas and 5 million hats 
C)  0 pounds of bananas and 6 million hats 
D)  1 million pounds of bananas and 3 million hats

Question 9

Japan can use all of its resources to produce 100 videos or 400 shoes. China can use all of its resources to produce 25 videos or 200 shoes. Which nation has the comparative advantage in shoes and which nation has the comparative advantage in videos?

Accepted Answer

The answer of Japan can use all of its resources...

Question 10

Why does the marginal benefit curve have a negative slope?

Accepted Answer

The answer of Why does the marginal benefit curve have...

Question 11

-The figure above shows the production possibilities frontiers for four nations that have identical production possibilities frontiers in the present. The one that will grow most rapidly in the future is most likely to be producing at point

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 12

One point on a PPF shows production levels at 50 tons of coffee and 100 tons of bananas. Remaining on the PPF, an increase of banana production to 140 tons shows coffee production at 30 tons. Still remaining on the PPF, coffee production at 10 tons allows banana production at 160 tons. The opportunity cost of a ton of bananas is

Accepted Answer

A)  constant because coffee production decreased by the same amount each time. 
B)  decreasing, since the increase in banana production is less at each point considered. 
C)  16 to 1, that is every 1 ton of coffee given up will result in 16 more tons of bananas. 
D)  increasing from 1/2 ton of coffee per ton of bananas to 1 ton of coffee per ton of bananas.

Question 13

In the movie Cast Away, Tom Hanks plays a FedEx efficiency expert stranded on a deserted island. While on the island, he divides his time between catching fish, gathering coconuts, painting, and building a raft. Suppose that these were Mr. Hanks' only activities. Did he face an opportunity cost from pursuing any of these activities? Why or why not?

Accepted Answer

The answer of In the movie Cast Away, Tom Hanks...

Question 14

A society that is producing on its production possibilities frontier is

Accepted Answer

A)  not utilizing all of its resources. 
B)  not being technologically efficient. 
C)  producing too much output. 
D)  fully utilizing all of its productive resources.

Question 15

-The above table shows the number of pencils or pens that could be produced by Don and Bob in an hour. This schedule shows that

Accepted Answer

A)  Don has an absolute advantage in the production of pencils, and Bob has an absolute advantage in the production of pens. 
B)  Bob has an absolute advantage in the production of pencils, and Don has an absolute advantage in the production of pens. 
C)  Don has a comparative advantage in the production of both pencils and pens. 
D)  Bob has a comparative advantage in the production of pencils.

Question 16

If two countries specialize in the production of goods in which they have a comparative advantage, they can experience gains from trade.

Accepted Answer

A) True 
 B)False

Question 17

Some time ago the government of China required many highly skilled technicians and scientists to engage in unskilled agricultural labor in order to develop "proper social attitudes." This policy probably caused China to produce

Accepted Answer

A)  at an inappropriate point along its production possibilities frontier. 
B)  outside its production possibilities frontier with respect to food, but inside with respect to high-technology goods. 
C)  inside its production possibilities frontier with respect to food, but outside with respect to high-technology goods. 
D)  inside its production possibilities frontier.

Question 18

-Anna and Maria produce shirts and ties. The figure above shows Anna's PPF and Maria's PPF. Anna and Maria can achieve the gains from trade if Anna produces ________ and Maria produces ________.

Accepted Answer

A)  ties; shirts 
B)  shirts and ties; only ties 
C)  only ties; shirts and ties 
D)  shirts; ties

Question 19

When the production possibilities frontier is bowed outwards, the opportunity cost of producing more of one good

Accepted Answer

A)  increases in terms of the amount foregone of the other good. 
B)  decreases in terms of the amount foregone of the other good. 
C)  remains constant. 
D)  cannot be determined.

Question 20

The nation's production possibilities frontier is bowed outward. Suppose that the government decides to increase the production of armaments by $20 billion, and that as a result the output of consumer goods falls by $20 billion. If a further $20 billion increase beyond the initial $20 billion increase in armaments output is sought, we can expect that the output of consumer goods and services will fall further by

Accepted Answer

A)  less than $20 billion. 
B)  $20 billion. 
C)  more than $20 billion. 
D)  There is not enough information to determine the answer.

Exam 2: The Economic Problem