Question 1

All of the following are critical functions of the government in facilitating the operation of a market economy except

Accepted Answer

A)  protecting private property. 
B)  enforcing property rights. 
C)  ensuring an equal distribution of income to all citizens. 
D)  enforcing contracts.

Question 2

Figure 2-3  Figure 2-3 shows various points on three different production possibility frontiers for a nation.
-Refer to Figure 2-3.A movement from Y to Z

Accepted Answer

A)  represents an increase in the demand for plastic products. 
B)  could occur because of general technological advancements. 
C)  is the result of advancements in food production technology. 
D)  is the result of advancements in plastic production technology.

Question 3

Figure 2-3  Figure 2-3 shows various points on three different production possibility frontiers for a nation.
-Refer to Figure 2-3.Consider the following movements: 
a.from point V to point W
b.from point W to point Y
c.from point Y to point Z
Which of the movements listed above represents advancements in technology with respect to only plastic production?

Accepted Answer

A)  a, b and c 
B)  b and c only 
C)  b only 
D)  c only

Question 4

An increase in the unemployment rate may be represented as a movement from a point on the production possibility frontier to a different point on the frontier.

Accepted Answer

A) True 
 B)False

Question 5

________ marginal opportunity cost implies that the more resources already devoted to any activity,the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

Accepted Answer

A)  Increasing 
B)  Decreasing 
C)  Constant 
D)  Negative

Question 6

If the opportunity cost of producing more of one good remains the same as more of that good is produced,then the production method is inefficient.

Accepted Answer

A) True 
 B)False

Question 7

Table 2-8
  Table 2-8 shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland.
-Refer to Table 2-8.What is Scotland's opportunity cost of producing one guitar?

Accepted Answer

A)  0.25 of a motorcycle 
B)  4 motorcycles 
C)  12 motorcycles 
D)  16 motorcycles

Question 8

Figure 2-2 
-Refer to Figure 2-2.Steve Vignetto raises cattle and llamas on his land.His land is equally suitable for raising either animal.Which of the graphs in Figure 2-2 represents his production possibility frontier?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Either Graph B or Graph C

Question 9

Table 2-8
  Table 2-8 shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland.
-Refer to Table 2-8.What is Scotland's opportunity cost of producing one motorcycle?

Accepted Answer

A)  0.25 of a guitar 
B)  4 guitars 
C)  12 guitars 
D)  16 guitars

Question 10

a.Draw a production possibility frontier for a country that produces two goods,beer and pretzels.Assume that resources are equally suited to both tasks.
b.Define opportunity costs.
c.Use your production possibility frontier graph to demonstrate the principle of opportunity costs.

Accepted Answer

The answer of a.Draw a production possibility frontier for a...

Question 11

Table 2-5
  Table 2-5 shows the output per month of two people, Fred and Barney. They can either devote their time to making pogo sticks or making unicycles.
-Refer to Table 2-5.Which of the following statements is true?

Accepted Answer

A)  Fred has an absolute advantage in making both products. 
B)  Barney has an absolute advantage in making both products. 
C)  Barney has an absolute advantage in making pogo sticks and Fred in making unicycles. 
D)  Barney has an absolute advantage in making unicycles and Fred in making pogo sticks.

Question 12

Table 2-6
  Table 2-6 shows the number of labour hours required to produce a digital camera and a kilogram of wheat in China and South Korea.
-Refer to Table 2-6.South Korea has a comparative advantage in the production of

Accepted Answer

A)  wheat. 
B)  digital cameras. 
C)  both products. 
D)  neither product.

Question 13

For each bottle of wine that Italy produces,it gives up the opportunity to make 10 kilograms of cheese.France can produce 1 bottle of wine for every 25 kilograms of cheese it produces.Which of the following is true about the comparative advantage between the two countries?

Accepted Answer

A)  Italy has the comparative advantage in cheese. 
B)  Italy has the comparative advantage in wine. 
C)  France has the comparative advantage in wine and cheese. 
D)  France has the comparative advantage in wine.

Question 14

A decrease in the unemployment rate may be represented as a movement from a point on the production possibility frontier to a point outside the frontier.

Accepted Answer

A) True 
 B)False

Question 15

If society decides it wants more of one good and all resources are fully utilised,then

Accepted Answer

A)  it is unable to do this unless technology advances. 
B)  additional resource supplies will have to be found. 
C)  it has to give up some of another good and incur some opportunity costs. 
D)  more unemployment will occur.

Question 16

Table 2-6
  Table 2-6 shows the number of labour hours required to produce a digital camera and a kilogram of wheat in China and South Korea.
-Refer to Table 2-6.China has a comparative advantage in the production of

Accepted Answer

A)  wheat. 
B)  digital cameras. 
C)  both products. 
D)  neither product.

Question 17

If opportunity costs are constant,the production possibility frontier would be graphed as

Accepted Answer

A)  a ray from the origin. 
B)  a positively sloped straight line. 
C)  a negatively sloped curve bowed in toward the origin. 
D)  a negatively sloped straight line.

Question 18

What is meant by the term 'opportunity cost'?

Accepted Answer

The answer of What is meant by the term 'opportunity...

Question 19

Figure 2-3  Figure 2-3 shows various points on three different production possibility frontiers for a nation.
-Refer to Figure 2-3.A movement from X to Y

Accepted Answer

A)  could be due to a change in consumers' tastes and preferences. 
B)  could occur because of an influx of immigrant labour. 
C)  is the result of advancements in food production technology only, with no change in the technology for plastic production. 
D)  is the result of advancements in plastic production technology only, with no change in food production technology.

Question 20

Figure 2-7  Figure 2-7 shows the production possibility frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.
-Refer to Figure 2-7.If the two countries have the same amount of resources and the same technological knowledge,which country has an absolute advantage in the production of cotton?

Accepted Answer

A)  Indonesia 
B)  They have the same advantage. 
C)  Pakistan 
D)  It cannot be determined.

Exam 2: Trade-Offs, comparative Advantage, and the Market System

All of the following are critical functions of the government in facilitating the operation of a market economy except

Figure 2-3 Figure 2-3 shows various points on three different production possibility frontiers for a nation. -Refer to Figure 2-3.A movement from Y to Z

An increase in the unemployment rate may be represented as a movement from a point on the production possibility frontier to a different point on the frontier.

________ marginal opportunity cost implies that the more resources already devoted to any activity,the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

If the opportunity cost of producing more of one good remains the same as more of that good is produced,then the production method is inefficient.

Table 2-8 Table 2-8 shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2-8.What is Scotland's opportunity cost of producing one guitar?

Figure 2-2 -Refer to Figure 2-2.Steve Vignetto raises cattle and llamas on his land.His land is equally suitable for raising either animal.Which of the graphs in Figure 2-2 represents his production possibility frontier?

Table 2-8 Table 2-8 shows the number of labour hours required to produce a motorcycle and a guitar in Ireland and Scotland. -Refer to Table 2-8.What is Scotland's opportunity cost of producing one motorcycle?

a.Draw a production possibility frontier for a country that produces two goods,beer and pretzels.Assume that resources are equally suited to both tasks. b.Define opportunity costs. c.Use your production possibility frontier graph to demonstrate the principle of opportunity costs.

Table 2-5 Table 2-5 shows the output per month of two people, Fred and Barney. They can either devote their time to making pogo sticks or making unicycles. -Refer to Table 2-5.Which of the following statements is true?

Table 2-6 Table 2-6 shows the number of labour hours required to produce a digital camera and a kilogram of wheat in China and South Korea. -Refer to Table 2-6.South Korea has a comparative advantage in the production of

For each bottle of wine that Italy produces,it gives up the opportunity to make 10 kilograms of cheese.France can produce 1 bottle of wine for every 25 kilograms of cheese it produces.Which of the following is true about the comparative advantage between the two countries?

A decrease in the unemployment rate may be represented as a movement from a point on the production possibility frontier to a point outside the frontier.

If society decides it wants more of one good and all resources are fully utilised,then

Table 2-6 Table 2-6 shows the number of labour hours required to produce a digital camera and a kilogram of wheat in China and South Korea. -Refer to Table 2-6.China has a comparative advantage in the production of

If opportunity costs are constant,the production possibility frontier would be graphed as

What is meant by the term 'opportunity cost'?

Figure 2-3 Figure 2-3 shows various points on three different production possibility frontiers for a nation. -Refer to Figure 2-3.A movement from X to Y