Exam 1: First Principles

A typical, bowed-out production possibility frontier between two goods-guns and butter -shows that the opportunity cost of butter in terms of guns increases as more butter is produced.This implies that the opportunity cost of guns in terms of butter decreases as more guns are produced.

Absolute advantage is the basis for gains from trade.

(Table: Production Possibilities Schedule II) Look at the figure Production Possibilities Schedule II.The production of 14 units of consumer goods and 1 unit of capital goods per period would: A.result in full employment.result in no unused resources. B.result in some unused or inefficiently used resources. C.increase economic growth.

(Table: Wheat and Aluminum) Look at the table Wheat and Aluminum.The United States and Germany can produce both wheat and aluminum.The table shows, in tonnage, the maximum annual output combinations of wheat and aluminum that can be produced.Which of the following choices would represent a possible trade based upon specialization and comparative advantage?

The importance of an economic model is that it allows us to:

If Farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier for his farm, the opportunity cost of producing an additional pound of potatoes is ________ pound(s) of cabbage. A.1/2 B.2 C.100 D.200

If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has: A.a zero slope. B.a constant, negative slope. C.an increasing, negative slope. D.a decreasing, negative slope.

Scenario: Linear Production Possibility Frontier Largetown has a linear production possibility frontier, and it produces socks and shirts with 80 hours of labor.The table shows the number of hours of labor necessary to produce one sock or one shirt. (Scenario: Linear Production Possibility Frontier) Look at the scenario Linear Production Possibility Frontier.If Largetown decides to devote half of its labor time to the production of socks and half of the time to the production of shirts, what is the maximum number of socks and shirts it can produce? A.10 shirts and 20 socks B.20 shirts and 10 socks C.30 socks and 30 shirts D.30 socks and zero shirts

Figure: Tom's Production Possibilities (Figure: Tom's Production Possibilities) Look at the figure Tom's Production Possibilities.In the figure, which of the point or points represents the combination of coconuts and fish feasible for Tom to produce at this time? A.A only B.A and B C.A, B, and C D.D only

Alison has a linear production possibility frontier in the production of bracelets and necklaces.In one hour, she can produce 5 bracelets or 10 necklaces.What is the opportunity cost for her to make one necklace? A.5 bracelets B.10 necklaces C.1/2 a bracelet D.2 necklaces

All points inside the production possibility frontier represent:

Greta starts using a new baking technique and she can now do twice as much of everything-in a single day Greta can now make 10 cakes or 8 pies, rather than the 5 cakes and 4 pies she could previously bake.We now know that Greta's production possibility frontier: A.has shifted right, but her opportunity costs of making pies are unchanged. B.has shifted right, but her opportunity costs of making pies have decreased. C.has not changed, but her opportunity costs of making pies have increased. D.has not changed, but her opportunity costs of making pies have decreased.

On any given production possibility frontier, we see the minimum quantity of one good that can be produced for any given production of the other.

Scenario: Linear Production Possibility Frontier Largetown has a linear production possibility frontier, and it produces socks and shirts with 80 hours of labor.The table shows the number of hours of labor necessary to produce one sock or one shirt. (Scenario: Linear Production Possibility Frontier) Look at the scenario Linear Production Possibility Frontier.What is the maximum number of socks Largetown can produce? A.40 socks B.20 socks C.2 socks D.4 socks

If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5.If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4.We know that: A.Laurence has a comparative advantage in programs. B.Laurence has a comparative advantage in both programs and sunglasses. C.Carrie Anne has a comparative advantage in programs. D.Carrie Anne has a comparative advantage in both programs and sunglasses.

Figure: Comparative Advantage Eastland and Westland produce only two goods, boxes of peaches and boxes of oranges, and this figure shows each nation's production possibility frontier for the two goods. (Figure: Comparative Advantage) Look at the figure Comparative Advantage.Westland has an absolute advantage in producing: A.oranges only. B.peaches only. C.both oranges and peaches. D.neither oranges or peaches.

Leaders of a small town are tired of looking at a vacant and dilapidated warehouse that sits on a prime piece of real estate.The town finds an investor who purchases the warehouse and promises to renovate the old building and build condominiums.Is this economic growth?

Figure: Strawberries and Submarines II (Figure: Strawberries and Submarines II) Look at the figure Strawberries and Submarines II.Suppose the economy is now operating at point A.The first submarine, which is achieved at point B, would have an opportunity cost of million tons of strawberries. A.50 B.150 C.400 D.950

The production possibility frontier will shift outward for which of the following reasons?

Positive economics: A.describes opinions and perspectives on how the world should work. B.is based on opinion polls. C.describes how the world does work. D.is the same as normative economics.