Question 1

Exhibit 1  
-Refer to Exhibit 1. As we move from point A to point D,

Accepted Answer

A)  the opportunity cost of eggs in terms of bacon falls. 
B)  the opportunity cost of eggs in terms of bacon rises. 
C)  the opportunity cost of eggs in terms of bacon is constant. 
D)  the economy becomes less efficient. 
E)  the economy becomes more efficient. 
A)  the opportunity cost of eggs in terms of bacon falls. 
B)  the opportunity cost of eggs in terms of bacon rises. 
C)  the opportunity cost of eggs in terms of bacon is constant. 
D)  the economy becomes less efficient. 
E)  the economy becomes more efficient.

Question 2

If trade benefits one country, its trading partner must be worse off due to trade.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements about a tariff is true?

Accepted Answer

A)  A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and increases total surplus. 
B)  A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and reduces total surplus. 
C)  A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus. 
D)  A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and increases total surplus. 
A)  A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and increases total surplus. 
B)  A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and reduces total surplus. 
C)  A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus. 
D)  A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and increases total surplus.

Question 4

Suppose the world consists of two countries: Germany and Spain. Further, suppose there are only two goods, food and clothing. Which of the following statements is true?

Accepted Answer

A)  If Germany has an absolute advantage in the production of food, then Spain must have an absolute advantage in the production of clothing. 
B)  none of these answers. 
C)  If Germany has a comparative advantage in the production of food, Spain might also have a comparative advantage in the production of food. 
D)  If Germany has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing. 
E)  If Germany has a comparative advantage in the production of food, then Spain must have a comparative advantage in the production of clothing. 
A)  If Germany has an absolute advantage in the production of food, then Spain must have an absolute advantage in the production of clothing. 
B)  none of these answers. 
C)  If Germany has a comparative advantage in the production of food, Spain might also have a comparative advantage in the production of food. 
D)  If Germany has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing. 
E)  If Germany has a comparative advantage in the production of food, then Spain must have a comparative advantage in the production of clothing.

Question 5

Exhibit 1  
- Refer to Exhibit 1. Point F represents a combination of production that:

Accepted Answer

A)  is a more equitable output level of both bacon and eggs 
B)  can be reached if we reduce the production of eggs by 20 units. 
C)  can be reached if there is a sufficient advance in technology. 
D)  is inefficient because there are unemployed resources. 
A)  is a more equitable output level of both bacon and eggs 
B)  can be reached if we reduce the production of eggs by 20 units. 
C)  can be reached if there is a sufficient advance in technology. 
D)  is inefficient because there are unemployed resources.

Question 6

Table 1 shows the units of output a worker can produce per month in Australia and Korea. ?
$\begin{array}{|l|l|l|}
\hline & \text { Food } & \text { Electronics } \
\hline \text { Australia } & 20 & 5 \
\hline \text { Korea } & 8 & 2 \
\hline
\end{array}$
?
Refer to table 1. The opportunity cost of 1 unit of electronics in Korea is

Accepted Answer

A)  4 units of food. 
B)  1/4 units of food. 
C)  2 units of food. 
D)  1/2 of a unit of food. 
A)  4 units of food. 
B)  1/4 units of food. 
C)  2 units of food. 
D)  1/2 of a unit of food.

Question 7

Which of the following statements about trade is true?

Accepted Answer

A)  Unrestricted international trade benefits every person in a country equally. 
B)  Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage. 
C)  People that are skilled at all activities cannot benefit from trade because they do not have an opportunity cost in production. 
D)  Trade can benefit everyone in society because it allows people to specialize in activities in which they have an absolute advantage. 
A)  Unrestricted international trade benefits every person in a country equally. 
B)  Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage. 
C)  People that are skilled at all activities cannot benefit from trade because they do not have an opportunity cost in production. 
D)  Trade can benefit everyone in society because it allows people to specialize in activities in which they have an absolute advantage.

Question 8

The production possibilities frontier demonstrates the basic economic principle that:

Accepted Answer

A)  economies are always efficient. 
B)  assuming full employment, supply will always determine demand. 
C)  assuming full employment, an economy is efficient only when the production of capital goods in a particular year is greater than the production of consumption goods in that year. 
D)  assuming full employment, to produce more of any one thing, the economy must produce less of at least one other good. 
A)  economies are always efficient. 
B)  assuming full employment, supply will always determine demand. 
C)  assuming full employment, an economy is efficient only when the production of capital goods in a particular year is greater than the production of consumption goods in that year. 
D)  assuming full employment, to produce more of any one thing, the economy must produce less of at least one other good.

Question 9

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the domestic price of 1 ring is

Accepted Answer

A)  1/4 of a watch. 
B)  3 watches. 
C)  1/3 of a watch. 
D)  12 watches. 
E)  4 watches. 
A)  1/4 of a watch. 
B)  3 watches. 
C)  1/3 of a watch. 
D)  12 watches. 
E)  4 watches.

Question 10

Points outside the production possibilities frontier are attainable but inefficient.

Accepted Answer

A) True 
 B)False

Question 11

All points on a production possibilities frontier show the

Accepted Answer

A)  maximum satisfaction that households receive from their purchases of goods. 
B)  minimum quantities of resources that must be used to produce a given quantity of output. 
C)  maximum output that society can produce with given resources and technology. 
D)  minimum output that society can produce with given resources and technology. 
A)  maximum satisfaction that households receive from their purchases of goods. 
B)  minimum quantities of resources that must be used to produce a given quantity of output. 
C)  maximum output that society can produce with given resources and technology. 
D)  minimum output that society can produce with given resources and technology.

Question 12

Which of the following is not employed as an argument in support of trade restrictions?

Accepted Answer

A)  Free trade harms the national security if vital products are imported. 
B)  Free trade is harmful to importing countries if foreign countries subsidize their exporting industries. 
C)  Free trade destroys domestic jobs. 
D)  Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus. 
E)  Free trade harms infant industries in an importing country. 
A)  Free trade harms the national security if vital products are imported. 
B)  Free trade is harmful to importing countries if foreign countries subsidize their exporting industries. 
C)  Free trade destroys domestic jobs. 
D)  Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus. 
E)  Free trade harms infant industries in an importing country.

Question 13

The only two countries in the world, Alpha and Omega, face the following production possibilities frontiers.
Alpha's Production Possibilities Frontier
  
Omega's Production Possibilities Frontier   
a. Assume that each country decides to use half of its resources in the production of each good. Show these points on the graphs for each country as point A. How much of each good would the countries produce?
b. If these countries choose not to trade, what would be the total world production of popcorn and peanuts?
c. Now suppose that each country decides to specialize in the good in which each has a comparative advantage. By specializing, what is the total world production of each product now?
d. If each country decides to trade 100 units of popcorn for 100 units of peanuts, show on the graphs the gain each country would receive from trade. Label these points B.

Accepted Answer

Alpha's Production Possibilities Frontie

Question 14

Economic growth is depicted by a:

Accepted Answer

A)  shift in the production possibilities frontier outward. 
B)  movement from inside the curve toward the curve. 
C)  shift in the production possibilities frontier inward. 
D)  movement along a production possibilities frontier toward capital goods. 
A)  shift in the production possibilities frontier outward. 
B)  movement from inside the curve toward the curve. 
C)  shift in the production possibilities frontier inward. 
D)  movement along a production possibilities frontier toward capital goods.

Question 15

Comparative advantage is a comparison based on opportunity cost.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 1   ​ Refer to Exhibit 1. If the economy is operating at point C, the opportunity cost of producing an additional 15 units of bacon is

Accepted Answer

A)  40 units of eggs. 
B)  10 units of eggs. 
C)  20 units of eggs. 
D)  30 units of eggs. 
E)  50 units of eggs. 
A)  40 units of eggs. 
B)  10 units of eggs. 
C)  20 units of eggs. 
D)  30 units of eggs. 
E)  50 units of eggs.

Exam 19: Interdependence and the Gains From Trade

Exhibit 1 -Refer to Exhibit 1. As we move from point A to point D,

If trade benefits one country, its trading partner must be worse off due to trade.

Which of the following statements about a tariff is true?

Suppose the world consists of two countries: Germany and Spain. Further, suppose there are only two goods, food and clothing. Which of the following statements is true?

Exhibit 1 - Refer to Exhibit 1. Point F represents a combination of production that:

Table 1 shows the units of output a worker can produce per month in Australia and Korea. ? Food Electronics Australia 20 5 Korea 8 2 ? Refer to table 1. The opportunity cost of 1 unit of electronics in Korea is

Which of the following statements about trade is true?

The production possibilities frontier demonstrates the basic economic principle that:

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the domestic price of 1 ring is

Points outside the production possibilities frontier are attainable but inefficient.

All points on a production possibilities frontier show the

Which of the following is not employed as an argument in support of trade restrictions?

Economic growth is depicted by a:

Comparative advantage is a comparison based on opportunity cost.

Exhibit 1 ​ Refer to Exhibit 1. If the economy is operating at point C, the opportunity cost of producing an additional 15 units of bacon is

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Applications

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Consumers, Producers and the Efficiency of Markets

Supply, Demand and Government Policies

The Tax System

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Measuring a Nations Well-Being

Measuring the Cost of Living

Production and Growth

Unemployment

Saving, Investment and the Financial System

The Basic Tools of Finance

Issues in Financial Markets

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Business Cycles

Keynesian Economics and the Is-Lm Analysis

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Supply-Side Policies

Common Currency Areas and European Monetary Union

The Financial Crisis and Sovereign Debt

Filters

Exhibit 1 Refer to Exhibit 1. If the economy is operating at point C, the opportunity cost of producing an additional 15 units of bacon is