Question 1

Water is included in the definition of land.

Accepted Answer

A) True 
 B)False  True

Question 2

Absolute advantage is defined as when goods and services are produced at their lowest resource (opportunity) cost.

Accepted Answer

A) True 
 B)False  False

Question 3

(Figure: Bread and Honey) As more honey is produced, the opportunity cost of producing honey:

Accepted Answer

A)  decreases. 
B)  increases. 
C)  remains constant. 
D)  is constant for the first 50 jars and then decreases as productive efficiency is achieved. 
A)  decreases. 
B)  increases. 
C)  remains constant. 
D)  is constant for the first 50 jars and then decreases as productive efficiency is achieved. B

Question 4

Which action will NOT shift a production possibilities frontier curve outward?

Accepted Answer

A)  increasing the number of workers 
B)  increasing worker productivity 
C)  shifting preferences of consumers to cheaper products 
D)  technological change 
A)  increasing the number of workers 
B)  increasing worker productivity 
C)  shifting preferences of consumers to cheaper products 
D)  technological change

Question 5

Which economist is known for first describing "comparative advantage"?

Accepted Answer

A)  Thomas Malthus 
B)  John Stuart Mill 
C)  David Ricardo 
D)  Adam Smith 
A)  Thomas Malthus 
B)  John Stuart Mill 
C)  David Ricardo 
D)  Adam Smith

Question 6

Capital includes all of these EXCEPT:

Accepted Answer

A)  dollar bills in a bank vault. 
B)  copy machines in an insurance company. 
C)  tractor loaders of a construction firm. 
D)  drilling equipment at a tool-and-die company. 
A)  dollar bills in a bank vault. 
B)  copy machines in an insurance company. 
C)  tractor loaders of a construction firm. 
D)  drilling equipment at a tool-and-die company.

Question 7

As used by economists, the term "capital" includes the human talent one is born with.

Accepted Answer

A) True 
 B)False

Question 8

The payment to entrepreneurship is called:

Accepted Answer

A)  rent. 
B)  wages. 
C)  interest. 
D)  profit. 
A)  rent. 
B)  wages. 
C)  interest. 
D)  profit.

Question 9

_____ occurs when the mix of goods society decides to produce is produced at the lowest possible resource or opportunity cost.

Accepted Answer

A)  Allocative efficiency 
B)  Production efficiency 
C)  Opportunity cost 
D)  Cost allocation 
A)  Allocative efficiency 
B)  Production efficiency 
C)  Opportunity cost 
D)  Cost allocation

Question 10

(Figure: Bread and Honey) In the graph, a move from point a to point b costs:

Accepted Answer

A)  70 jars of honey. 
B)  75 loaves of bread. 
C)  90 loaves of bread. 
D)  15 loaves of bread. 
A)  70 jars of honey. 
B)  75 loaves of bread. 
C)  90 loaves of bread. 
D)  15 loaves of bread.

Question 11

If there are two goods and two countries, then one country can have both an absolute and a comparative advantage in both goods.

Accepted Answer

A) True 
 B)False

Question 12

The law of comparative advantage suggests that:

Accepted Answer

A)  each country should strive to produce roughly equal amounts of all goods. 
B)  nations can benefit if they trade with each other. 
C)  free trade among nations is generally harmful to an economy. 
D)  each country should strive to be self-sufficient. 
A)  each country should strive to produce roughly equal amounts of all goods. 
B)  nations can benefit if they trade with each other. 
C)  free trade among nations is generally harmful to an economy. 
D)  each country should strive to be self-sufficient.

Question 13

When two countries gain from trade:

Accepted Answer

A)  one country must have an absolute advantage over the other in producing all goods. 
B)  both countries can consume beyond their domestic production possibilities frontiers. 
C)  one country must have a comparative advantage over the other in producing all goods. 
D)  both countries must be equal in size. 
A)  one country must have an absolute advantage over the other in producing all goods. 
B)  both countries can consume beyond their domestic production possibilities frontiers. 
C)  one country must have a comparative advantage over the other in producing all goods. 
D)  both countries must be equal in size.

Question 14

If a producer does NOT face increasing opportunity cost, then the production possibilities frontier is:

Accepted Answer

A)  bowed inward. 
B)  a straight downward-sloping curve. 
C)  bowed outward. 
D)  a positively sloped curve. 
A)  bowed inward. 
B)  a straight downward-sloping curve. 
C)  bowed outward. 
D)  a positively sloped curve.

Question 15

(Table) Given the production possibilities schedules for the United States and Chile, which product should the United States produce if it is to produce the good for which it has a comparative advantage? $$\begin{array}{l}
\text { U.S. Production Possibilities }\
\begin{array} { c c c } 
& \begin{array} { c } 
\text { Bread } \
\text { (loaves) }
\end{array} & \begin{array} { c } 
\text { Avocados } \
\text { (bushels) }
\end{array} \
\text { A } & 100 & 0 \
\text { B } & 80 & 10 \
\text { C } & 60 & 20 \
\text { D } & 40 & 30 \
\text { E } & 20 & 40 \
\text { F } & 0 & 50 \
& & \
& \text { Chile Production Possibilities } \
& \text { Bread } & \text { Avocados } \
& \text { (loaves) } & \text { (bushels) } \
\text { G } & 15 & 0 \
\text { H } & 12 & 12 \
\text { I } & 9 & 24 \
\text { J } & 6 & 36 \
\text { K } & 3 & 48 \
\text { L } & 0 & 60
\end{array}
\end{array}$$

Accepted Answer

A)  bread 
B)  avocados 
C)  neither bread nor avocados 
D)  both bread and avocados 
A)  bread 
B)  avocados 
C)  neither bread nor avocados 
D)  both bread and avocados

Question 16

Why is entrepreneurial ability considered a factor of production?

Accepted Answer

A)  because it is a physical input such as land, labor, and capital 
B)  because entrepreneurs assume the risk of producing output, an important part of the production process 
C)  because entrepreneurs work very long hours and demand large profits for the work that they accomplish 
D)  because it is an input that can be used by itself to produce many goods and services desired by society 
A)  because it is a physical input such as land, labor, and capital 
B)  because entrepreneurs assume the risk of producing output, an important part of the production process 
C)  because entrepreneurs work very long hours and demand large profits for the work that they accomplish 
D)  because it is an input that can be used by itself to produce many goods and services desired by society

Question 17

Economists refer to the payment to land as:

Accepted Answer

A)  rent. 
B)  wages. 
C)  interest. 
D)  profit. 
A)  rent. 
B)  wages. 
C)  interest. 
D)  profit.

Question 18

In a pure market economy, the government's primary roles do NOT include:

Accepted Answer

A)  protecting property rights. 
B)  enforcing contracts between private parties. 
C)  providing public goods, such as national defense. 
D)  reallocating resources across the economy. 
A)  protecting property rights. 
B)  enforcing contracts between private parties. 
C)  providing public goods, such as national defense. 
D)  reallocating resources across the economy.

Question 19

(Table) Based on the table: $\text {Canada's Production Possibilities}$
$\begin{array} { c c } \text { Tons of Steel } & \text { Airplanes } \ 15 & 0 \ 10 & 4 \ 5 & 8 \ 0 & 12 \end{array}$

$\text {Mexico's Production Possibilities }$

$\begin{array} { cc} 
\text {Tons of Steel}& \text {Airplanes}\6 & 0 \ 4 & 2 \ 2 & 4 \ 0 & 6 \end{array}$

Accepted Answer

A)  Mexico has an absolute advantage over Canada in producing both steel and airplanes. 
B)  Canada has an absolute advantage over Mexico in producing both steel and airplanes. 
C)  Mexico has a comparative advantage in producing steel. 
D)  Canada has a comparative advantage in producing airplanes. 
A)  Mexico has an absolute advantage over Canada in producing both steel and airplanes. 
B)  Canada has an absolute advantage over Mexico in producing both steel and airplanes. 
C)  Mexico has a comparative advantage in producing steel. 
D)  Canada has a comparative advantage in producing airplanes.

Question 20

A nation that consumes most of what it produces will have a lower growth rate than another nation that focuses more on the production of capital goods.

Accepted Answer

A) True 
 B)False

Water is included in the definition of land.

Absolute advantage is defined as when goods and services are produced at their lowest resource (opportunity) cost.

(Figure: Bread and Honey) As more honey is produced, the opportunity cost of producing honey:

Which action will NOT shift a production possibilities frontier curve outward?

Which economist is known for first describing "comparative advantage"?

Capital includes all of these EXCEPT:

As used by economists, the term "capital" includes the human talent one is born with.

The payment to entrepreneurship is called:

_____ occurs when the mix of goods society decides to produce is produced at the lowest possible resource or opportunity cost.

(Figure: Bread and Honey) In the graph, a move from point a to point b costs:

If there are two goods and two countries, then one country can have both an absolute and a comparative advantage in both goods.

The law of comparative advantage suggests that:

When two countries gain from trade:

If a producer does NOT face increasing opportunity cost, then the production possibilities frontier is:

Why is entrepreneurial ability considered a factor of production?

Economists refer to the payment to land as:

In a pure market economy, the government's primary roles do NOT include:

(Table) Based on the table: $\text {Canada's Production Possibilities}$ Tons of Steel Airplanes 15 0 10 4 5 8 0 12 $\text {Mexico's Production Possibilities }$ Tons of Steel Airplanes 6 0 4 2 2 4 0 6

A nation that consumes most of what it produces will have a lower growth rate than another nation that focuses more on the production of capital goods.

Exploring Economics

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

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Exam 2: Production, Economic Growth, and Trade

Water is included in the definition of land.

Absolute advantage is defined as when goods and services are produced at their lowest resource (opportunity) cost.

(Figure: Bread and Honey) As more honey is produced, the opportunity cost of producing honey:

Which action will NOT shift a production possibilities frontier curve outward?

Which economist is known for first describing "comparative advantage"?

Capital includes all of these EXCEPT:

As used by economists, the term "capital" includes the human talent one is born with.

The payment to entrepreneurship is called:

_____ occurs when the mix of goods society decides to produce is produced at the lowest possible resource or opportunity cost.

(Figure: Bread and Honey) In the graph, a move from point a to point b costs:

If there are two goods and two countries, then one country can have both an absolute and a comparative advantage in both goods.

The law of comparative advantage suggests that:

When two countries gain from trade:

If a producer does NOT face increasing opportunity cost, then the production possibilities frontier is:

Why is entrepreneurial ability considered a factor of production?

Economists refer to the payment to land as:

In a pure market economy, the government's primary roles do NOT include:

A nation that consumes most of what it produces will have a lower growth rate than another nation that focuses more on the production of capital goods.

Exploring Economics

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Saving, Investment, and the Financial System

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters