Question 1

Explain how trading of goods creates value without creating any new goods.

Accepted Answer

A trade enables each party to obtain som

Question 2

Why is the concept of ceteris paribus important for model building?

Accepted Answer

Ceteris paribus means "other things bein

Question 3

Use these production possibilities frontier PPF) curves, which compare the ancient production of agricultural products to art and literature, to answer the next questions.
A.
   B.
   C.
   D.
   E.
  
-Suppose the plow is invented and agricultural productivity greatly increases. Which of the following graphs best depicts how this would affect the PPF?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D 
E)  Graph E 
A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D 
E)  Graph E

Question 4

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier PPF)?

Accepted Answer

Unemployed labor resources mean that, as

Question 5

Even though person A has an absolute advantage over person B both at producing good X and at producing good Y, it can still make sense for persons A and B to engage in trade involving goods X and Y. Explain why this is so.

Accepted Answer

In general, person B will have a compara

Question 6

Consider the following scenario to answer the next questions: On a particular Saturday, Mark Zuckerberg and Bill Gates can either plant trees or spread mulch in their gardens. Their maximum output per day is listed in the following table, along with spaces where you can calculate the opportunity cost. $\begin{array}{lll}
\hline  &&&\text { Amount of }& \text { Opportunity Cost of }\
&\text { Trees} &\text { Opportunity } & \text { Mulch Spread }& \text { Spreading } 1 \text { Cubic }\
&\text { Planted} &\text { Cost of ITree}&\text {  (in cubic yards)}&\text {  Yard of Mulch }\ 
\hline \text { Zuckerberg } & 20 &&30 \
\text { Gates } & 15 & &30 \
\hline
\end{array}$

-Based on this scenario, who has an absolute advantage in spreading mulch?

Accepted Answer

A)  Zuckerberg has the advantage because he gives up fewer trees each time he spreads 1 cubic yard of mulch. 
B)  Gates has the advantage because he gives up fewer trees each time he spreads 1 cubic yard of mulch. 
C)  Zuckerberg has the advantage because he gives up more trees each time he spreads 1 cubic yard of mulch. 
D)  Neither has an absolute advantage in spreading mulch. 
E)  Both parties have an absolute advantage in planting trees. 
A)  Zuckerberg has the advantage because he gives up fewer trees each time he spreads 1 cubic yard of mulch. 
B)  Gates has the advantage because he gives up fewer trees each time he spreads 1 cubic yard of mulch. 
C)  Zuckerberg has the advantage because he gives up more trees each time he spreads 1 cubic yard of mulch. 
D)  Neither has an absolute advantage in spreading mulch. 
E)  Both parties have an absolute advantage in planting trees.

Question 7

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier PPF).

Accepted Answer

The PPF shows the maximum attainable com

Question 8

Goods that are produced now so that they can be used to produce other goods in the future are called _______goods.

Accepted Answer

A)  capital 
B)  consumer 
C)  investment 
D)  normal 
E)  opportunity 
A)  capital 
B)  consumer 
C)  investment 
D)  normal 
E)  opportunity

Question 9

Which of the following is an important characteristic of good economic models?

Accepted Answer

A)  They deal with the economy as a whole. 
B)  They use the language of mathematics. 
C)  They are flexible in their designs. 
D)  They avoid making predictions. 
E)  They are as complex as the realities they represent. 
A)  They deal with the economy as a whole. 
B)  They use the language of mathematics. 
C)  They are flexible in their designs. 
D)  They avoid making predictions. 
E)  They are as complex as the realities they represent.

Question 10

Consider the following scenario to answer the next questions: Kukla makes tables, with an opportunity cost of 3 rugs per every 4 tables. Zola makes rugs, with an opportunity cost of 2 tables per every 3 rugs.
-Ollie proposes that Kukla give Zola 2 tables in exchange for 2 rugs. What are Kukla's and Zola's reactions?

Accepted Answer

A)  Kukla likes the proposal, but Zola does not. 
B)  Zola likes the proposal, but Kukla does not. 
C)  Kukla and Zola both like the proposal. 
D)  Neither Kukla nor Zola likes the proposal. 
E)  Ollie's proposal is not feasible. 
A)  Kukla likes the proposal, but Zola does not. 
B)  Zola likes the proposal, but Kukla does not. 
C)  Kukla and Zola both like the proposal. 
D)  Neither Kukla nor Zola likes the proposal. 
E)  Ollie's proposal is not feasible.

Question 11

Mikhail and Stefan are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the next  questions  
-What is Mikhail's opportunity cost of a painting?

Accepted Answer

A)  1/2 painting 
B)  1/2 sculpture 
C)  3 paintings 
D)  2 sculptures 
E)  2 paintings 
A)  1/2 painting 
B)  1/2 sculpture 
C)  3 paintings 
D)  2 sculptures 
E)  2 paintings

Question 12

A town on the Gulf Coast is battered by a massive hurricane that destroys most of its productive resources. The community's production possibilities frontier PPF) would show an

Accepted Answer

A)  inward shift of the PPF. 
B)  outward shift of the PPF. 
C)  outward rotation along the x axis. 
D)  outward rotation along the y axis. 
E)  increase in opportunity cost. 
A)  inward shift of the PPF. 
B)  outward shift of the PPF. 
C)  outward rotation along the x axis. 
D)  outward rotation along the y axis. 
E)  increase in opportunity cost.

Question 13

On the television show MythBusters, the hosts design experiments, collect data, and test theories based on popular myths. This is an example of

Accepted Answer

A)  the scientific method. 
B)  economic growth. 
C)  gains from trade. 
D)  production possibilities. 
E)  absolute advantage. 
A)  the scientific method. 
B)  economic growth. 
C)  gains from trade. 
D)  production possibilities. 
E)  absolute advantage.

Question 14

Suppose that Lo and Manuel can either run errands or wash dishes. Their maximum outputs per hour are listed in the following table. Given the same quantity of resources, at what terms of trade relative price ratio) could they specialize and trade so that both consume outside their own production possibilities frontiers PPFs)? $$\begin{array} { l l l l l } 
\hline & \begin{array} { l } 
\text { Errands } \
\text { Run }
\end{array} & \begin{array} { l } 
\text { Opportunity Cost } \
\text { of 1 Errand }
\end{array} & \begin{array} { l } 
\text { Dishes } \
\text { Washed }
\end{array} & \begin{array} { l } 
\text { Opportunity Cost } \
\text { of 1 Dish Washed }
\end{array} \
\hline \text { Lo } & 1 & 60 \text { dishes } & 60 & 1 / 60 \text { errand } \
\text { Manuel } & 3 & 15 \text { dishes } & 45 & 1 / 15 \text { errand } \
\hline
\end{array}$$

Accepted Answer

A)  1 errand run per 75 dishes washed 
B)  1 errand run per 30 dishes washed 
C)  1 errand run per 12 dishes washed 
D)  1 errand run per 10 dishes washed 
E)  1 errand run per 6 dishes washed 
A)  1 errand run per 75 dishes washed 
B)  1 errand run per 30 dishes washed 
C)  1 errand run per 12 dishes washed 
D)  1 errand run per 10 dishes washed 
E)  1 errand run per 6 dishes washed

Question 15

Physicists can conduct experiments to study subatomic particles, even though no one has ever seen or photographed a subatomic particle. Experimental psychologists can study emotions, even though no one has ever seen or photographed an emotion. How can there be experiments in these areas of study? What are the implications for the science of economics?

Accepted Answer

Experiments don't require that every asp

Question 16

Use these production possibilities frontier PPF) curves, which compare the ancient production of agricultural products to art and literature, to answer the next questions.
A.
   B.
   C.
   D.
   E.
  
-Suppose a new generation of baby boomers is entering the workforce. Which graph best depicts how this would affect the PPF?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D 
E)  Graph E 
A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D 
E)  Graph E

Question 17

Consider the following scenario to answer the next questions: Kukla makes tables, with an opportunity cost of 3 rugs per every 4 tables. Zola makes rugs, with an opportunity cost of 2 tables per every 3 rugs.
-Ollie proposes that Kukla give Zola 1 table in exchange for 2 rugs. What are Kukla's and Zola's reactions?

Accepted Answer

A)  Kukla likes the proposal, but Zola does not. 
B)  Zola likes the proposal, but Kukla does not. 
C)  Kukla and Zola both like the proposal. 
D)  Neither Kukla nor Zola likes the proposal. 
E)  Ollie's proposal is not feasible. 
A)  Kukla likes the proposal, but Zola does not. 
B)  Zola likes the proposal, but Kukla does not. 
C)  Kukla and Zola both like the proposal. 
D)  Neither Kukla nor Zola likes the proposal. 
E)  Ollie's proposal is not feasible.

Question 18

Why has India's economy grown faster than the United States' in recent years?

Accepted Answer

A)  India production has focused more on consumer goods. 
B)  India has lowered its population growth rate. 
C)  India has attained a higher standard of living than the United States. 
D)  India's production has focused more on capital goods. 
E)  India has placed more focus on its citizens' immediate needs. 
A)  India production has focused more on consumer goods. 
B)  India has lowered its population growth rate. 
C)  India has attained a higher standard of living than the United States. 
D)  India's production has focused more on capital goods. 
E)  India has placed more focus on its citizens' immediate needs.

Question 19

One reason that economists make assumptions when designing models is to

Accepted Answer

A)  exclude variables that do not add predictive power to the model. 
B)  make models more like the real world. 
C)  make models more complex. 
D)  increase endogenous factors. 
E)  ensure that all possible factors are included. 
A)  exclude variables that do not add predictive power to the model. 
B)  make models more like the real world. 
C)  make models more complex. 
D)  increase endogenous factors. 
E)  ensure that all possible factors are included.

Question 20

The existing entries in the following table show the maximum quantities of milk shakes or fruit smoothies the college president and dining hall staffer could make during an afternoon shift, given a fixed amount of resources.
a. Fill in the remaining part of the table be sure to label the units) and answer the questions below.
 $$\begin{array} { l l l l l } 
\hline & \begin{array} { l } 
\text { Number of } \
\text { Milk Shakes } \
\text { per Shift }
\end{array} & \begin{array} { l } 
\text { Number of } \
\text { Smoothies } \
\text { per Shift }
\end{array} & \begin{array} { l } 
\text { Opportunity } \
\text { Cost of 1 } \
\text { Smoothie }
\end{array} & \begin{array} { l } 
\text { Opportunity } \
\text { Cost of 1 } \
\text { Milk Shake }
\end{array} \
\hline \text { President } & 50 & 25 & & \
\text { Dining Hall } & 90 & 30 & & \
\text { Staffer } & & & & \
\hline
\end{array}$$ 
b. Who has a comparative advantage in producing smoothies?
c. Who has an absolute advantage in producing milk shakes?

Accepted Answer

a. @#IMG-DLM& b. President has a comparative advan

Explain how trading of goods creates value without creating any new goods.

Why is the concept of ceteris paribus important for model building?

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier PPF)?

Even though person A has an absolute advantage over person B both at producing good X and at producing good Y, it can still make sense for persons A and B to engage in trade involving goods X and Y. Explain why this is so.

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier PPF).

Goods that are produced now so that they can be used to produce other goods in the future are called _______goods.

Which of the following is an important characteristic of good economic models?

Mikhail and Stefan are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the next questions -What is Mikhail's opportunity cost of a painting?

A town on the Gulf Coast is battered by a massive hurricane that destroys most of its productive resources. The community's production possibilities frontier PPF) would show an

On the television show MythBusters, the hosts design experiments, collect data, and test theories based on popular myths. This is an example of

Why has India's economy grown faster than the United States' in recent years?

One reason that economists make assumptions when designing models is to

Five Foundations of Economics

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy Learning Objectives

International Trade

International Finance

Filters

Exam 2: Model Building and Gains From Trade

Explain how trading of goods creates value without creating any new goods.

Why is the concept of ceteris paribus important for model building?

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier PPF)?

Even though person A has an absolute advantage over person B both at producing good X and at producing good Y, it can still make sense for persons A and B to engage in trade involving goods X and Y. Explain why this is so.

Explain how scarcity is the root cause of the trade-offs and opportunity cost illustrated in the production possibilities frontier PPF).

Goods that are produced now so that they can be used to produce other goods in the future are called _______goods.

Which of the following is an important characteristic of good economic models?

Mikhail and Stefan are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the next questions -What is Mikhail's opportunity cost of a painting?

A town on the Gulf Coast is battered by a massive hurricane that destroys most of its productive resources. The community's production possibilities frontier PPF) would show an

On the television show MythBusters, the hosts design experiments, collect data, and test theories based on popular myths. This is an example of

Why has India's economy grown faster than the United States' in recent years?

One reason that economists make assumptions when designing models is to

Five Foundations of Economics

The Market at Work: Supply and Demand

Market Outcomes and Tax Incidence

Price Controls

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings, Interest Rates, and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy Learning Objectives

International Trade

International Finance

Filters