Question 1

The main reason that firms outsource is that:

Accepted Answer

A)  low-wage workers in other countries are more productive than are U.S. workers. 
B)  hiring low-wage workers reduces firms' costs. 
C)  hiring low-wage workers provides a tax deduction to firms. 
D)  U.S. workers cannot perform the tasks performed by workers in other countries. 
A)  low-wage workers in other countries are more productive than are U.S. workers. 
B)  hiring low-wage workers reduces firms' costs. 
C)  hiring low-wage workers provides a tax deduction to firms. 
D)  U.S. workers cannot perform the tasks performed by workers in other countries. B

Question 2

Which of the following statements is NOT true about specialization?

Accepted Answer

A)  Total economic output is larger due to specialization. 
B)  After specialization, worker skills are better matched with tasks. 
C)  Specialization focuses experience and increases comparative advantage. 
D)  The variety of tasks associated with a particular job grows over time due to specialization. 
A)  Total economic output is larger due to specialization. 
B)  After specialization, worker skills are better matched with tasks. 
C)  Specialization focuses experience and increases comparative advantage. 
D)  The variety of tasks associated with a particular job grows over time due to specialization. D

Question 3

In general, individuals and nations should specialize in producing those goods for which they have a(n):

Accepted Answer

A)  absolute advantage. 
B)  comparative advantage. 
C)  absolutely comparative advantage. 
D)  absolute advantage and a comparative advantage. 
A)  absolute advantage. 
B)  comparative advantage. 
C)  absolutely comparative advantage. 
D)  absolute advantage and a comparative advantage. B

Question 4

The benefits to specialization are enhanced when two trading partners have:

Accepted Answer

A)  absolute advantages in producing the same goods. 
B)  similar consumption preferences. 
C)  very similar opportunity costs. 
D)  large comparative advantages in different goods. 
A)  absolute advantages in producing the same goods. 
B)  similar consumption preferences. 
C)  very similar opportunity costs. 
D)  large comparative advantages in different goods.

Question 5

The United States generally has a comparative advantage in the development of technology because of:

Accepted Answer

A)  larger amounts of natural resources. 
B)  a high concentration of the best research universities. 
C)  tax incentives. 
D)  the existence of patent law, which no other country provides. 
A)  larger amounts of natural resources. 
B)  a high concentration of the best research universities. 
C)  tax incentives. 
D)  the existence of patent law, which no other country provides.

Question 6

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. $\begin{array}{lccc}
\text { Good } &\text { Smith } &  \text { Jones } \
\text { Computers } & 10 & 6 \
\text { Calculators } & 100 & 120
\end{array}$ Refer to the table above. By coordinating their production decisions, the maximum number of computers Smith and Jones can produce in an hour is:

Accepted Answer

A)  120. 
B)  6. 
C)  16. 
D)  10. 
A)  120. 
B)  6. 
C)  16. 
D)  10.

Question 7

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. $\begin{array}{lccc}
\text { Good } &\text { Smith } &  \text { Jones } \
\text { Computers } & 10 & 6 \
\text { Calculators } & 100 & 120
\end{array}$ Refer to the table above. If Smith and Jones are dividing their time efficiently and producing more than 10 computers and fewer than 120 calculators per hour, Smith will __________ and Jones will __________.

Accepted Answer

A)  produce only computers; produce only calculators 
B)  produce only computers; split his time between computers and calculators 
C)  split his time between computers and calculators; produce only computers 
D)  produce only calculators; produce only computers 
A)  produce only computers; produce only calculators 
B)  produce only computers; split his time between computers and calculators 
C)  split his time between computers and calculators; produce only computers 
D)  produce only calculators; produce only computers

Question 8

Pat has 4 hours to spend either studying for a test or playing a new video game. If Pat spends all of that time studying, Pat can score a 92 on the test. If Pat plays for 1 hour, Pat's test score falls 5 points. For playing a second hour, Pat's score falls by another 7 points. Playing for a third hour will lower Pat's score by another 10 points. Refer to the information above. The opportunity cost of playing video games:

Accepted Answer

A)  decreases the longer Pat plays. 
B)  increases the longer Pat plays. 
C)  is greater than the value of earning a higher grade on the test. 
D)  is equal to the value of earning a higher grade on the test. 
A)  decreases the longer Pat plays. 
B)  increases the longer Pat plays. 
C)  is greater than the value of earning a higher grade on the test. 
D)  is equal to the value of earning a higher grade on the test.

Question 9

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. $\begin{array}{lccc}
\text { Good } &\text { Smith } &  \text { Jones } \
\text { Computers } & 10 & 6 \
\text { Calculators } & 100 & 120
\end{array}$ Refer to the table above. Suppose Smith and Jones begin by producing 100 calculators per hour; as Smith and Jones choose to efficiently produce fewer computers and more calculators, __________ devotes more time to calculators because his __________.

Accepted Answer

A)  Smith; absolute advantage is larger 
B)  Jones; absolute advantage is smaller 
C)  Jones; opportunity costs are lower 
D)  Smith; opportunity costs are lower 
A)  Smith; absolute advantage is larger 
B)  Jones; absolute advantage is smaller 
C)  Jones; opportunity costs are lower 
D)  Smith; opportunity costs are lower

Question 10

Earth Movers & Shakers operates 3 iron ore mines. This table shows their daily production rates and the current number of miners at each mine. All of the miners work for the same wage and each miner in any given mine produces the same number of tons as each other miner in that mine. $$\begin{array} { | l | l | l | } 
\hline \text { Mine } & \text { Tons } & \begin{array} { l } 
\text { Number of } \
\text { Miners }
\end{array} \
\hline \text { Mother Lode } & 100 & 25 \
\hline \text { Scraping Bottom } & 30 & 10 \
\hline \text { Middle Drift } & 75 & 15 \
\hline
\end{array}$$ Refer to the table above. Earth Movers & Shakers needs to fill an order for 100 tons of ore in a single day, and has no other orders to fill that day. It should:

Accepted Answer

A)  take it all from Mother Lode. 
B)  take 75 tons from Middle Drift and 25 tons from Mother Lode. 
C)  take 75 tons from Middle Drift and 25 tons from Scraping Bottom. 
D)  take 30 tons from Scraping Bottom and 70 tons from Mother Lode. 
A)  take it all from Mother Lode. 
B)  take 75 tons from Middle Drift and 25 tons from Mother Lode. 
C)  take 75 tons from Middle Drift and 25 tons from Scraping Bottom. 
D)  take 30 tons from Scraping Bottom and 70 tons from Mother Lode.

Question 11

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. $\begin{array}{lccc}
\text { Good } &\text { Smith } &  \text { Jones } \
\text { Computers } & 10 & 6 \
\text { Calculators } & 100 & 120
\end{array}$ Refer to the table above. Suppose Smith and Jones begin by producing 0 computers and 220 calculators per hour. If they wish to produce 2 computers and 200 calculators per hour, then Smith will spend __________ and Jones will spend __________.

Accepted Answer

A)  30 minutes on each; 30 minutes on each 
B)  48 minutes on computers and 12 minutes on calculators; 1 hour on calculators 
C)  1 hour on calculators; 10 minutes on computers and 50 minutes on calculators 
D)  12 minutes on computers and 48 minutes on calculators; 1 hour on calculators 
A)  30 minutes on each; 30 minutes on each 
B)  48 minutes on computers and 12 minutes on calculators; 1 hour on calculators 
C)  1 hour on calculators; 10 minutes on computers and 50 minutes on calculators 
D)  12 minutes on computers and 48 minutes on calculators; 1 hour on calculators

Question 12

Moe divides his time between studying Physics and studying Economics. He has discovered that he can earn grades as shown on this production possibilities curve.   Refer to the figure above. Which of the following is evidence that the low-hanging fruit principle applies to Moe's study habits?

Accepted Answer

A)  Earning the first 65 points in economics has a lower opportunity cost than earning the ten points that moves his score from 90 to 100 in economics. 
B)  Physics is easier to grasp than economics, so it is the "low-hanging fruit" for Moe. 
C)  Economics is easier to grasp than physics, so it is the "low-hanging fruit" for Moe. 
D)  The low-hanging fruit principle applies only to production of goods and services, not to grades. 
A)  Earning the first 65 points in economics has a lower opportunity cost than earning the ten points that moves his score from 90 to 100 in economics. 
B)  Physics is easier to grasp than economics, so it is the "low-hanging fruit" for Moe. 
C)  Economics is easier to grasp than physics, so it is the "low-hanging fruit" for Moe. 
D)  The low-hanging fruit principle applies only to production of goods and services, not to grades.

Question 13

Moe divides his time between studying Physics and studying Economics. He has discovered that he can earn grades as shown on this production possibilities curve.   Refer to the figure above. Moe's PPC is bowed out because:

Accepted Answer

A)  he is better at physics than at economics. 
B)  his studying is subject to the principle of increasing opportunity costs. 
C)  he is better at economics than at physics. 
D)  he has failed to take advantage of his comparative advantage. 
A)  he is better at physics than at economics. 
B)  his studying is subject to the principle of increasing opportunity costs. 
C)  he is better at economics than at physics. 
D)  he has failed to take advantage of his comparative advantage.

Question 14

Earth Movers & Shakers operates 3 iron ore mines. This table shows their daily production rates and the current number of miners at each mine. All of the miners work for the same wage and each miner in any given mine produces the same number of tons as each other miner in that mine. $$\begin{array} { | l | l | l | } 
\hline \text { Mine } & \text { Tons } & \begin{array} { l } 
\text { Number of } \
\text { Miners }
\end{array} \
\hline \text { Mother Lode } & 100 & 25 \
\hline \text { Scraping Bottom } & 30 & 10 \
\hline \text { Middle Drift } & 75 & 15 \
\hline
\end{array}$$ Refer to the table above. The opportunity cost of moving one miner from Middle Drift to Mother Lode is:

Accepted Answer

A)  1 ton. 
B)  3 tons. 
C)  4 tons. 
D)  5 tons. 
A)  1 ton. 
B)  3 tons. 
C)  4 tons. 
D)  5 tons.

Question 15

Application of the Principle of Comparative Advantage leads to:

Accepted Answer

A)  greater specialization of labor and other factors of production. 
B)  less specialization of labor and other factors of production. 
C)  societies without any specialization of labor. 
D)  lower total output. 
A)  greater specialization of labor and other factors of production. 
B)  less specialization of labor and other factors of production. 
C)  societies without any specialization of labor. 
D)  lower total output.

Question 16

Any combination of goods that can be produced with currently available resources defines a(n):

Accepted Answer

A)  attainable point on a production possibilities curve. 
B)  efficient point on a production possibilities curve. 
C)  inefficient point on a production possibilities curve. 
D)  attainable and efficient point on a production possibilities curve. 
A)  attainable point on a production possibilities curve. 
B)  efficient point on a production possibilities curve. 
C)  inefficient point on a production possibilities curve. 
D)  attainable and efficient point on a production possibilities curve.

Question 17

Moe divides his time between studying Physics and studying Economics. He has discovered that he can earn grades as shown on this production possibilities curve.   Moe needs to earn at least an 80 in both economics and physics to keep his scholarship. Given his current PPC, an 80 in both classes is ______.

Accepted Answer

A)  infeasible 
B)  attainable, but only if Moe is efficient 
C)  efficient 
D)  attainable, but inefficient 
A)  infeasible 
B)  attainable, but only if Moe is efficient 
C)  efficient 
D)  attainable, but inefficient

Question 18

The benefits of specialization can be used to explain why:

Accepted Answer

A)  workers prefer to work on a variety of tasks during the day. 
B)  machines are more productive than human workers. 
C)  trade can make both parties to the trade better off. 
D)  big companies take advantage of smaller ones. 
A)  workers prefer to work on a variety of tasks during the day. 
B)  machines are more productive than human workers. 
C)  trade can make both parties to the trade better off. 
D)  big companies take advantage of smaller ones.

Question 19

When firms engage in outsourcing, ________ benefit and ______ are harmed.

Accepted Answer

A)  the firms; consumers 
B)  consumers; the firms 
C)  consumers; the firm's domestic employees 
D)  the firms; the firms' foreign employees 
A)  the firms; consumers 
B)  consumers; the firms 
C)  consumers; the firm's domestic employees 
D)  the firms; the firms' foreign employees

Question 20

Production possibilities curves for large economies generally have an outward bow shape because:

Accepted Answer

A)  specialization gives some producers a comparative advantage. 
B)  opportunity costs tend to decrease with increases in production. 
C)  opportunity costs tend to increase with increases in production. 
D)  as more resources are used to produce the same good, those resources become less and less expensive. 
A)  specialization gives some producers a comparative advantage. 
B)  opportunity costs tend to decrease with increases in production. 
C)  opportunity costs tend to increase with increases in production. 
D)  as more resources are used to produce the same good, those resources become less and less expensive.

The main reason that firms outsource is that:

Which of the following statements is NOT true about specialization?

In general, individuals and nations should specialize in producing those goods for which they have a(n):

The benefits to specialization are enhanced when two trading partners have:

The United States generally has a comparative advantage in the development of technology because of:

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. Good Smith Jones Computers 10 6 Calculators 100 120 Refer to the table above. By coordinating their production decisions, the maximum number of computers Smith and Jones can produce in an hour is:

Moe divides his time between studying Physics and studying Economics. He has discovered that he can earn grades as shown on this production possibilities curve. Refer to the figure above. Which of the following is evidence that the low-hanging fruit principle applies to Moe's study habits?

Moe divides his time between studying Physics and studying Economics. He has discovered that he can earn grades as shown on this production possibilities curve. Refer to the figure above. Moe's PPC is bowed out because:

Application of the Principle of Comparative Advantage leads to:

Any combination of goods that can be produced with currently available resources defines a(n):

The benefits of specialization can be used to explain why:

When firms engage in outsourcing, __ benefit and are harmed.

Production possibilities curves for large economies generally have an outward bow shape because:

Thinking Like an Economist

Supply and Demand

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

Workers, Wages, and Unemployment

Saving and Capital Formation

Money, Prices, and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economics Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: the Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Filters

Exam 2: Comparative Advantage

The main reason that firms outsource is that:

Which of the following statements is NOT true about specialization?

In general, individuals and nations should specialize in producing those goods for which they have a(n):

The benefits to specialization are enhanced when two trading partners have:

The United States generally has a comparative advantage in the development of technology because of:

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. Good Smith Jones Computers 10 6 Calculators 100 120 Refer to the table above. By coordinating their production decisions, the maximum number of computers Smith and Jones can produce in an hour is:

Moe divides his time between studying Physics and studying Economics. He has discovered that he can earn grades as shown on this production possibilities curve. Refer to the figure above. Which of the following is evidence that the low-hanging fruit principle applies to Moe's study habits?

Moe divides his time between studying Physics and studying Economics. He has discovered that he can earn grades as shown on this production possibilities curve. Refer to the figure above. Moe's PPC is bowed out because:

Application of the Principle of Comparative Advantage leads to:

Any combination of goods that can be produced with currently available resources defines a(n):

The benefits of specialization can be used to explain why:

When firms engage in outsourcing, ________ benefit and ______ are harmed.

Production possibilities curves for large economies generally have an outward bow shape because:

Thinking Like an Economist

Supply and Demand

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

Workers, Wages, and Unemployment

Saving and Capital Formation

Money, Prices, and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economics Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: the Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Filters

When firms engage in outsourcing, __ benefit and are harmed.