Question 1

Refer to the accompanying figure. Growing 1,000 bushels of wheat and no bushels of corn each year is:

Accepted Answer

A) inefficient and unattainable. 
B) inefficient but attainable. 
C) efficient but unattainable. 
D) efficient and attainable. 
A) inefficient and unattainable. 
B) inefficient but attainable. 
C) efficient but unattainable. 
D) efficient and attainable. D

Question 2

According to the accompanying table, Martha has the absolute advantage in making: $$\begin{array} { | l | c | c | } 
\hline & \text { Time ta Make a Pie } & \text { Tirne to Muke a Cake } \
\hline \text { Martha } & 60 \text { minutes } & 80 \text { minutes } \
\hline \text { Julia } & 50 \text { minutes } & 60 \text {minutes } \
\hline
\end{array}$$

Accepted Answer

A) pies. 
B) neither pies nor cakes. 
C) cakes. 
D) both pies and cakes. 
A) pies. 
B) neither pies nor cakes. 
C) cakes. 
D) both pies and cakes. B

Question 3

The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts.    
Relative to point X, at point Y:

Accepted Answer

A) more dresses and more skirts are produced. 
B) more skirts and fewer dresses are produced. 
C) more dresses and fewer skirts are produced. 
D) fewer skirts and fewer dresses are produced. 
A) more dresses and more skirts are produced. 
B) more skirts and fewer dresses are produced. 
C) more dresses and fewer skirts are produced. 
D) fewer skirts and fewer dresses are produced. B

Question 4

You have noticed that your next-door neighbor, Mary, always works in the garden, and her husband, Joe, always walks the dog. You conclude that if Joe and Mary are efficient, then it must be the case that:

Accepted Answer

A) Mary has an absolute advantage in gardening. 
B) Joe has a comparative advantage in walking the dog. 
C) Mary's opportunity cost of walking the dog is lower than Joe's. 
D) Joe experiences increasing opportunity costs when he gardens, but not when he walks the dog. 
A) Mary has an absolute advantage in gardening. 
B) Joe has a comparative advantage in walking the dog. 
C) Mary's opportunity cost of walking the dog is lower than Joe's. 
D) Joe experiences increasing opportunity costs when he gardens, but not when he walks the dog.

Question 5

Refer to the accompanying table. Julia's opportunity cost of making a cake is: $$\begin{array} { | l | c | c | } 
\hline & \text { Time ta Make a Pie } & \text { Tirne to Muke a Cake } \
\hline \text { Martha } & 60 \text { minutes} & 80 \text { minutes } \
\hline \text { Julia } & 50 \text { minutes} & 60 \text { minutes} \
\hline
\end{array}$$

Accepted Answer

A) 60 cakes. 
B) 6 cakes. 
C) 6/5 of a cake. 
D) 5/6 of a cake. 
A) 60 cakes. 
B) 6 cakes. 
C) 6/5 of a cake. 
D) 5/6 of a cake.

Question 6

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. What is the opportunity cost to Cathy of making a cake?

Accepted Answer

A) 2/3 of a pie. 
B) 1 pie. 
C) 1.5 pies. 
D) 1.33 pies. 
A) 2/3 of a pie. 
B) 1 pie. 
C) 1.5 pies. 
D) 1.33 pies.

Question 7

Lou and Alex live together and share household chores. They like to cook some meals ahead of time and eat leftovers. The accompanying table shows the number of rooms they can each clean and the number of meals they can each cook in an hour. $$\begin{array} { | l | c | c | } 
\hline & \text { Ronrs Cleaned Per Haur } & \text { Meals Caked Per Haur } \
\hline \text { Lou } & 5 & 4 \
\hline \text { Alex } & 3 & 3 \
\hline
\end{array}$$ Which of the following is true?

Accepted Answer

A) Lou has both an absolute advantage and a comparative advantage over Alex in both tasks. 
B) Alex has a comparative advantage over Lou in cleaning. 
C) Lou has a comparative advantage over Alex in cleaning. 
D) Alex has both an absolute advantage and a comparative advantage over Lou in both tasks. 
A) Lou has both an absolute advantage and a comparative advantage over Alex in both tasks. 
B) Alex has a comparative advantage over Lou in cleaning. 
C) Lou has a comparative advantage over Alex in cleaning. 
D) Alex has both an absolute advantage and a comparative advantage over Lou in both tasks.

Question 8

The downward slope of the production possibilities curve illustrates the:

Accepted Answer

A) Scarcity Principle. 
B) Cost-Benefit Principle. 
C) Incentive Principle. 
D) Principle of Comparative Advantage. 
A) Scarcity Principle. 
B) Cost-Benefit Principle. 
C) Incentive Principle. 
D) Principle of Comparative Advantage.

Question 9

If country A can produce more of practically everything than can country B, then which of the following statements is true?

Accepted Answer

A) Country A has no incentive to trade with country B. 
B) Country B cannot have a comparative advantage in the production of any good that country A wants to buy. 
C) Trade can benefit both countries. 
D) Country B has no incentive to trade with country A. 
A) Country A has no incentive to trade with country B. 
B) Country B cannot have a comparative advantage in the production of any good that country A wants to buy. 
C) Trade can benefit both countries. 
D) Country B has no incentive to trade with country A.

Question 10

Dent 'n' Scratch Used Cars and Trucks employs 3 salesmen. Data for their sales last month are shown in this table: $\begin{array}{l|r|r|r}
\hline & \text { Cars Sold } & \text { Trucks Sold } \
\hline \text { Larry } & 10 & 5 \
\hline \text { Joe } & 9 & 9 \
\hline \text { Ralph } & 3 & 12 \
\hline
\end{array}$  
Based on last month's data, ________ has an absolute advantage in selling cars and ________ has an absolute advantage in selling trucks.

Accepted Answer

A) Joe; Joe 
B) Larry; Ralph 
C) Ralph; Larry 
D) Larry; Joe 
A) Joe; Joe 
B) Larry; Ralph 
C) Ralph; Larry 
D) Larry; Joe

Question 11

If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Suppose that Ana and Leo decide to work together as a team. Can they produce 2 pounds of fudge and 4.5 pounds of toffee each hour?

Accepted Answer

A) Yes, this point is both attainable and efficient. 
B) No, this point is not attainable. 
C) Yes, this point is attainable, but inefficient. 
D) No, this point is not attainable and inefficient. 
A) Yes, this point is both attainable and efficient. 
B) No, this point is not attainable. 
C) Yes, this point is attainable, but inefficient. 
D) No, this point is not attainable and inefficient.

Question 12

If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Which of the following statements is correct?

Accepted Answer

A) Ana has both an absolute advantage and the comparative advantage in fudge. 
B) Ana has the comparative advantage in toffee, but Leo has the absolute advantage in toffee. 
C) Ana has the comparative advantage in fudge, but Leo has the absolute advantage in fudge. 
D) Leo has both the absolute advantage and the comparative advantage in fudge. 
A) Ana has both an absolute advantage and the comparative advantage in fudge. 
B) Ana has the comparative advantage in toffee, but Leo has the absolute advantage in toffee. 
C) Ana has the comparative advantage in fudge, but Leo has the absolute advantage in fudge. 
D) Leo has both the absolute advantage and the comparative advantage in fudge.

Question 13

You are the Minister of Trade for a small island country with the following annual PPC:   You are negotiating a trade agreement with a neighboring island with the following annual PPC:
   
As soon as you see the other island's PPC, you realize there are:

Accepted Answer

A) no gains from trade because you both have the same comparative advantage. 
B) no gains from trade because there is no difference in your ability to harvest coconuts. 
C) no gains from trade because the other island has an absolute advantage. 
D) gains from trade because your island has a comparative advantage in coconuts. 
A) no gains from trade because you both have the same comparative advantage. 
B) no gains from trade because there is no difference in your ability to harvest coconuts. 
C) no gains from trade because the other island has an absolute advantage. 
D) gains from trade because your island has a comparative advantage in coconuts.

Question 14

A graph that illustrates the maximum amount of one good that can be produced for every possible level of production of the other good is called a:

Accepted Answer

A) production possibilities curve. 
B) consumption possibilities curve. 
C) production function. 
D) supply curve. 
A) production possibilities curve. 
B) consumption possibilities curve. 
C) production function. 
D) supply curve.

Question 15

The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts.    
Point U is:

Accepted Answer

A) attainable. 
B) efficient. 
C) unattainable. 
D) inefficient. 
A) attainable. 
B) efficient. 
C) unattainable. 
D) inefficient.

Question 16

If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. What is Leo's opportunity cost of making a pound of fudge?

Accepted Answer

A) 0.8 of a pound of toffee 
B) 1.25 pounds of toffee 
C) 4 pounds of toffee 
D) 5 pounds of toffee 
A) 0.8 of a pound of toffee 
B) 1.25 pounds of toffee 
C) 4 pounds of toffee 
D) 5 pounds of toffee

Question 17

The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts.    
Point T is:

Accepted Answer

A) attainable. 
B) efficient. 
C) both attainable and efficient. 
D) neither attainable nor efficient. 
A) attainable. 
B) efficient. 
C) both attainable and efficient. 
D) neither attainable nor efficient.

Question 18

Refer to the accompanying figure. If this restaurant goes from producing 20 to 25 pizzas per hour, then which of the following statements is true?

Accepted Answer

A) It has to give up exactly 25 salads. 
B) It has to give up more than 12.5 salads. 
C) It has to give up exactly 12.5 salads. 
D) It has to give up fewer than 12.5 salads. 
A) It has to give up exactly 25 salads. 
B) It has to give up more than 12.5 salads. 
C) It has to give up exactly 12.5 salads. 
D) It has to give up fewer than 12.5 salads.

Question 19

If a country is producing at point where an increase in the production of one good requires a reduction in the production of another good, then it must be producing at an:

Accepted Answer

A) inefficient point. 
B) efficient point. 
C) unattainable point. 
D) undesirable point. 
A) inefficient point. 
B) efficient point. 
C) unattainable point. 
D) undesirable point.

Question 20

Refer to the accompanying figure. For Chris, the opportunity cost of planting one bulb is removing:

Accepted Answer

A) 25 bags of trash. 
B) 1/25 of a bag of trash. 
C) 3 bags of trash. 
D) 1/3 of a bag of trash. 
A) 25 bags of trash. 
B) 1/25 of a bag of trash. 
C) 3 bags of trash. 
D) 1/3 of a bag of trash.

Exam 2: Comparative Advantage

Refer to the accompanying figure. Growing 1,000 bushels of wheat and no bushels of corn each year is:

According to the accompanying table, Martha has the absolute advantage in making: Time ta Make a Pie Tirne to Muke a Cake Martha 60 minutes 80 minutes Julia 50 minutes 60 minutes

The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts. Relative to point X, at point Y:

You have noticed that your next-door neighbor, Mary, always works in the garden, and her husband, Joe, always walks the dog. You conclude that if Joe and Mary are efficient, then it must be the case that:

Refer to the accompanying table. Julia's opportunity cost of making a cake is: Time ta Make a Pie Tirne to Muke a Cake Martha 60 minutes 80 minutes Julia 50 minutes 60 minutes

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. What is the opportunity cost to Cathy of making a cake?

The downward slope of the production possibilities curve illustrates the:

If country A can produce more of practically everything than can country B, then which of the following statements is true?

You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: As soon as you see the other island's PPC, you realize there are:

A graph that illustrates the maximum amount of one good that can be produced for every possible level of production of the other good is called a:

The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts. Point U is:

The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts. Point T is:

Refer to the accompanying figure. If this restaurant goes from producing 20 to 25 pizzas per hour, then which of the following statements is true?

If a country is producing at point where an increase in the production of one good requires a reduction in the production of another good, then it must be producing at an:

Refer to the accompanying figure. For Chris, the opportunity cost of planting one bulb is removing:

Thinking Like an Economist

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters