Question 1

Economic growth depends upon which of the following?
i.Increasing the quantity of labor
ii.Lowering the prices of goods and services
iii.Advancing technology

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  i and iii 
E)  i, ii, and iii

Question 2

The figure above shows Liz's and Joe's production possibilities for Salads and Smoothies.
-Given the information in the figure above,Joe can benefit from trade as far as the price at which he buys Liz's smoothies is

Accepted Answer

A)  below 5 salads per smoothie. 
B)  not higher than 2 salads per smoothie. 
C)  not lower than 2 salads per smoothie. 
D)  not lower than 1 salad per smoothie. 
E)  not higher than 4 salads per smoothie.

Question 3

Why do nations engage in international trade?

Accepted Answer

The answer of Why do nations engage in international trade?...

Question 4

-In the above figure,Jack's opportunity cost of producing 1 gallon of soda is ________ of bottled water.

Accepted Answer

A)  1 gallon 
B)  1/2 of a gallon 
C)  6 gallons 
D)  1/4 of a gallon 
E)  2 gallons

Question 5

The United States produced approximately ________ worth of goods and services in 2011.

Accepted Answer

A)  $15 trillion 
B)  $15 billion 
C)  $150 trillion 
D)  $150 billion 
E)  $1,500 trillion

Question 6

For country Gamma,the opportunity cost for producing 1 computer is 10 tons of steel.For country Beta,the opportunity cost for producing 1 computer is 6 tons of steel.Which country has the comparative advantage in the production of steel?

Accepted Answer

A)  Gamma 
B)  Beta 
C)  Both have the comparative advantage in the production of steel. 
D)  Neither country has the comparative advantage in the production of steel. 
E)  More information is needed to determine which of the two nations has the comparative advantage.

Question 7

If Toni has an absolute advantage in both sewing and ironing when compared to Tom,then

Accepted Answer

A)  they might benefit from trading, but we need more information to determine in which task they should specialize. 
B)  neither Toni nor Tom can benefit from trading with each other. 
C)  Toni should specialize in sewing, and Tom should specialize in ironing. 
D)  Toni cannot benefit from trading with Tom, but Tom can benefit from trading with Toni. 
E)  Tom cannot benefit from trading with Toni, but Toni can benefit from trading with Tom.

Question 8

The sustained expansion of production possibilities is called

Accepted Answer

A)  economic investment. 
B)  production expansion. 
C)  opportunity cost of growth. 
D)  economic growth. 
E)  production possibilities.

Question 9

$$\begin{array} { c c c } 
\text { Possibility } & \begin{array} { c } 
\text { Bread } \
\text { (number) }
\end{array} & \begin{array} { c } 
\text { Books } \
\text { (number) }
\end{array} \
\hline \text { A } & 0 & 1,000 \
\text { B } & 100 & 900 \
\text { C } & 200 & 700 \
\text { D } & 300 & 400 \
\text { E } & 400 & 0 \
\hline
\end{array}$$
-The table above shows the production possibilities for an economy.The opportunity cost of a loaf of bread is ________ when moving from possibility B to possibility C.

Accepted Answer

A)  1/2 of a book 
B)  2 books 
C)  200 books 
D)  100 loaves of bread 
E)  1 loaf of bread

Question 10

-The figure above shows the production possibilities frontier for a country.A combination of 3 million gallons of milk and 3 million gallons of ice cream is

Accepted Answer

A)  unattainable. 
B)  attainable and production efficient. 
C)  attainable and production inefficient. 
D)  unattainable and production efficient. 
E)  More information is needed to determine if the point is attainable or not.

Question 11

-The figure above shows a nation's production possibilities frontier.In the figure,point B shows

Accepted Answer

A)  an unattainable point. 
B)  an attainable point. 
C)  a point with a free lunch. 
D)  a point with no trade off. 
E)  a point at which there are unemployed resources.

Question 12

In terms of a nation's production possibilities frontier,what impact does international trade have?

Accepted Answer

A)  International trade shifts the nation's production possibilities frontier outward. 
B)  International trade shifts the nation's production possibilities frontier inward. 
C)  International trade allows the nation to consume at a point outside its production possibilities frontier. 
D)  International trade shifts the production possibilities frontier outward for the goods that are exported and inward for the goods that are imported. 
E)  International trade shifts the production possibilities frontier outward for the goods that are imported and inward for the goods that are exported.

Question 13

If a nation devotes a larger share of its current production to consumption goods,then

Accepted Answer

A)  its economic growth will slow down. 
B)  its PPF will shift outward. 
C)  its PPF will shift inward. 
D)  some productive factors will become unemployed. 
E)  it must produce at a point within its PPF.

Question 14

Moving from a point inside the production possibilities frontier to a point on the production possibilities frontier,the opportunity cost of producing more of the good on the horizontal axis

Accepted Answer

A)  increases. 
B)  decreases. 
C)  is constant. 
D)  is 0. 
E)  is infinite.

Question 15

Specialization and trade make a country better off because with trade,the country can consume at a point

Accepted Answer

A)  outside its production possibilities frontier. 
B)  inside its production possibilities frontier. 
C)  on its production possibilities frontier. 
D)  on its trading partner's production possibilities frontier. 
E)  inside its trading partner's production possibilities frontier.

Question 16

-Gabriel operates a ranch in Idaho where he raises cattle and grows potatoes.The figure above illustrates his production possibilities frontier.What is Gabriel's opportunity cost of growing another ton of potatoes?

Accepted Answer

A)  400 cows 
B)  80 cows 
C)  100 cows 
D)  0 cows 
E)  1 ton of potatoes

Question 17

When economists state that the opportunity cost of a product increases as more of it is produced,what do they mean? For instance,what is the opportunity cost? And,where in a PPF diagram does this statement apply and where does it not apply?

Accepted Answer

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

Question 18

The saying "There's no such thing as a free lunch," applies

Accepted Answer

A)  when there is some unemployment. 
B)  on the production possibilities frontier. 
C)  to unattainable combinations of goods and services. 
D)  when more of one good can be produced without decreasing production of another. 
E)  at all points inside the PPF.

Question 19

Moving along the production possibilities frontier itself illustrates

Accepted Answer

A)  the existence of tradeoffs. 
B)  the existence of unemployment of some factors of production. 
C)  the benefits of free lunches. 
D)  how free lunches can be exploited through trade. 
E)  how tradeoffs need not occur if the economy is efficient.

Question 20

-The above figure shows the production possibility frontier for a country.Suppose the country is producing at point D.What is the opportunity cost of increasing the production of rice to 15 tons?

Accepted Answer

A)  9 thousand bottles of wine 
B)  6 thousand bottles of wine 
C)  15 thousand bottles of wine 
D)  12 tons of rice 
E)  Nothing, it is a free lunch.

Exam 3: The Economic Problem

Economic growth depends upon which of the following? i.Increasing the quantity of labor ii.Lowering the prices of goods and services iii.Advancing technology

The figure above shows Liz's and Joe's production possibilities for Salads and Smoothies. -Given the information in the figure above,Joe can benefit from trade as far as the price at which he buys Liz's smoothies is