Question 1

-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.

Question 2

-The figure above shows the production possibilities frontier for a country.A combination of 2 million gallons of milk and 2 million gallons of ice cream is

Accepted Answer

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

Question 3

-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 raising another 100 cows?

Accepted Answer

A)  1.25 tons of potatoes 
B)  5.0 tons of potatoes 
C)  3.0 tons of potatoes 
D)  1.0 ton of potatoes 
E)  100 cows

Question 4

When drawing a production possibilities frontier,which of the following is held constant?

Accepted Answer

A)  the amount of money in the economy 
B)  the available factors of production and the state of technology 
C)  the prices of goods and services 
D)  the quantity of the goods and services that are produced 
E)  None of the above because nothing is held constant when drawing the production possibilities frontier.

Question 5

The United States can use all its resources to produce 250 DVDs or 500 shoes.China can use all of its resources to produce 30 DVDs or 300 shoes.The opportunity cost of producing a DVD in the United States is

Accepted Answer

A)  2 shoes. 
B)  1/2 of a shoe. 
C)  20 shoes. 
D)  500 shoes. 
E)  1 DVD.

Question 6

-Deb and Pete have volunteered to help their favorite charity mail out fundraiser information.The figure above shows their production possibilities frontiers for assembling packets and stuffing envelopes.Which of the following statements is correct?

Accepted Answer

A)  Deb has a comparative advantage in assembling packets. 
B)  Pete has an absolute advantage in both assembling packets and stuffing envelopes. 
C)  Deb has a comparative advantage in stuffing envelopes. 
D)  Deb has an absolute advantage in both assembling packets and stuffing envelopes. 
E)  Deb has a comparative advantage in both assembling packets and stuffing envelopes.

Question 7

-The table above shows the production possibilities for an economy.Drawing a PPF with books on the vertical axis and bread on the horizontal axis,a movement from possibility B to possibility C to possibility D shows the opportunity cost of ________ moving down along the PPF.

Accepted Answer

A)  books decreasing 
B)  bread decreasing 
C)  bread increases 
D)  books is constant 
E)  books and bread are both increasing

Question 8

Increasing opportunity cost exists

Accepted Answer

A)  in the real world. 
B)  as long as there is high unemployment. 
C)  only in theory but not in real life. 
D)  for a country but not for an individual. 
E)  inside the PPF but not on the PPF.

Question 9

-The above figure shows the production possibility frontier for a country.What is the opportunity cost per ton of rice to move from point D to E?

Accepted Answer

A)  3000 bottles of wine 
B)  333 bottles of wine 
C)  3 bottles of wine 
D)  1/3 of a bottle of wine 
E)  None of the above answers is correct.

Question 10

A point on the production possibilities frontier reflects an

Accepted Answer

A)  attainable point with full employment of all resources. 
B)  attainable point without full employment of all resources. 
C)  unattainable point with full employment of all resources. 
D)  unattainable point without full employment of all resources. 
E)  None of the above answers are correct.

Question 11

-Deb and Pete have volunteered to help their favorite charity mail out fundraiser information.The figure above shows their production possibilities frontiers for assembling packets and stuffing envelopes.What is Deb's opportunity cost of assembling 1 packet?

Accepted Answer

A)  160 envelopes 
B)  40 envelopes 
C)  4 envelopes 
D)  1/4 of an envelope 
E)  4 packets

Question 12

"When a person is more productive in producing a good or service than another person,the first person has the comparative advantage in producing the good." Is this assertion correct or incorrect? Explain your answer.

Accepted Answer

The answer of "When a person is more productive in...

Question 13

If the production possibilities frontier between two goods were a straight line,then the opportunity cost of one good in terms of another would be

Accepted Answer

A)  constant. 
B)  increasing. 
C)  decreasing. 
D)  zero. 
E)  either constant, increasing, or decreasing but more information is needed to determine which.

Question 14

"If Mexico is currently operating at a point beyond its production possibilities frontier,then there are unemployed or misallocated resources in Mexico." Is this statement true or false? Briefly explain your answer.

Accepted Answer

The answer of "If Mexico is currently operating at a...

Question 15

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 16

If there is unemployment in an economy,then the

Accepted Answer

A)  production possibilities frontier will shift inwards. 
B)  economy is operating at an unattainable point. 
C)  production possibilities frontier will shift outwards. 
D)  economy is producing at a point inside the production possibilities frontier. 
E)  production possibilities frontier must be bowed inward.

Question 17

When one person's opportunity cost of producing a good is lower than another person's opportunity cost of producing the same good,it is called

Accepted Answer

A)  an absolute advantage. 
B)  a comparative advantage. 
C)  specialization. 
D)  production possibilities. 
E)  a trade off.

Question 18

If there is increasing opportunity cost,then when moving downward on a production possibilities frontier,the opportunity cost of the good on the horizontal axis ________ as more of the good is produced.

Accepted Answer

A)  increases and the PPF gets steeper 
B)  increases and the PPF gets flatter 
C)  decreases and the PPF gets steeper 
D)  decreases and the PPF gets flatter 
E)  does not change and the PPF gets steeper

Question 19

David takes 10 minutes to process a customer,and 20 minutes to stock the shelves.Danny takes 15 minutes to process a customer,and 15 minutes to stock the shelves.Which of the following statements is true?

Accepted Answer

A)  David has an absolute advantage in performing both tasks. 
B)  Danny has an absolute advantage in performing both tasks. 
C)  David has a comparative advantage in processing customers but not in stocking shelves. 
D)  Danny has a comparative advantage in processing customers but not in stocking shelves. 
E)  Danny has a comparative advantage in processing customers and in stocking shelves.

Question 20

In one hour John can produce 20 loaves of bread or 8 cakes.In one hour Phyllis can produce 30 loaves of bread or 15 cakes.Which of the following statements is true?

Accepted Answer

A)  Phyllis has a comparative advantage in producing bread. 
B)  John has a comparative advantage in producing cakes. 
C)  Phyllis has an absolute advantage in both goods. 
D)  John has an absolute advantage in both goods. 
E)  Phyllis has a comparative advantage in producing both cakes and bread.

Exam 3: The Economic Problem