Question 1

Generally, on a linear two-good production possibilities curve, the opportunity cost of the good measured on the vertical axis is:

Accepted Answer

A)  one minus the opportunity cost of the good measured on the horizontal axis. 
B)  the reciprocal of the opportunity cost of the good measured on the horizontal axis. 
C)  the slope of the production possibilities line. 
D)  the negative of the opportunity cost of the good measured on the horizontal axis. 
A)  one minus the opportunity cost of the good measured on the horizontal axis. 
B)  the reciprocal of the opportunity cost of the good measured on the horizontal axis. 
C)  the slope of the production possibilities line. 
D)  the negative of the opportunity cost of the good measured on the horizontal axis.

Question 2

You are the Minister of Trade for a small island country in the South Pacific with the following annual production possibilities curve:   You are negotiating a deal with a neighboring island that has the following annual PPC:   Refer to the figure above. Both islands specialize exclusively in the product for which they have a comparative advantage. You have agreed to sell the other island 350 coconuts in exchange for 1,300 fish. After the trade the other island has a total of _____ coconuts and _____ fish.

Accepted Answer

A)  850; 1,200 
B)  500; 1,200 
C)  350; 1,500 
D)  350; 1,200 
A)  850; 1,200 
B)  500; 1,200 
C)  350; 1,500 
D)  350; 1,200

Question 3

Between the U.S. and Nepal, Nepal invests less in new factories and equipment. This will likely cause:

Accepted Answer

A)  Nepal's production possibilities curve to shift outward faster than the U.S.'s. 
B)  The U.S.'s production possibilities curve to shift inward faster than Nepal's. 
C)  The U.S.'s production possibilities curve to shift outward faster than Nepal's. 
D)  Nepal's production possibilities curve to shift inward faster than the U.S's. 
A)  Nepal's production possibilities curve to shift outward faster than the U.S.'s. 
B)  The U.S.'s production possibilities curve to shift inward faster than Nepal's. 
C)  The U.S.'s production possibilities curve to shift outward faster than Nepal's. 
D)  Nepal's production possibilities curve to shift inward faster than the U.S's.

Question 4

The Principle of Increasing Opportunity Costs implies that:

Accepted Answer

A)  productive people do the hardest tasks first, while they are fresh. 
B)  to increase production, you should use the resources with the lowest opportunity cost first. 
C)  the cost-benefit principle does not apply to increasing productivity. 
D)  specialization increases productivity. 
A)  productive people do the hardest tasks first, while they are fresh. 
B)  to increase production, you should use the resources with the lowest opportunity cost first. 
C)  the cost-benefit principle does not apply to increasing productivity. 
D)  specialization increases productivity.

Question 5

If a nation can produce a good more quickly than any other nation, that nation has a(n):

Accepted Answer

A)  comparative advantage. 
B)  absolute advantage. 
C)  relative advantage. 
D)  specialization advantage. 
A)  comparative advantage. 
B)  absolute advantage. 
C)  relative advantage. 
D)  specialization advantage.

Question 6

An inefficient point on a production possibilities curve is:

Accepted Answer

A)  necessarily also an attainable point. 
B)  not necessarily an attainable point. 
C)  necessarily an unattainable point. 
D)  possibly an unattainable point. 
A)  necessarily also an attainable point. 
B)  not necessarily an attainable point. 
C)  necessarily an unattainable point. 
D)  possibly an unattainable point.

Question 7

You are the Minister of Trade for a small island country in the South Pacific with the following annual production possibilities curve:   You are negotiating a deal with a neighboring island that has the following annual PPC:   Refer to the figure above. Both islands specialize exclusively in the product for which they have a comparative advantage. You have agreed to sell the other island 350 coconuts in exchange for 1,300 fish. After the trade your island has a total of _____ coconuts and _____ fish.

Accepted Answer

A)  150; 2,800 
B)  500; 1,300 
C)  150; 1,300 
D)  500; 1,500 
A)  150; 2,800 
B)  500; 1,300 
C)  150; 1,300 
D)  500; 1,500

Question 8

Point A on a linear production possibilities curve represents a combination of 12 coffees and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose coffees are on the vertical axis and cappuccinos are on the horizontal axis. The absolute value of the slope of the production possibilities curve between points A and B equals:

Accepted Answer

A)  6 
B)  4 
C)  3 
D)  1/3 
A)  6 
B)  4 
C)  3 
D)  1/3

Question 9

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. $$\begin{array} { | l | l | l | } 
\hline \text { Mine } & \text { Tons } & \begin{array} { l } 
\text { Number of } \
\text { Miners }
\end{array} \
\hline \text { Mother Lode } & 100 & 25 \
\hline \text { Scraping Bottom } & 30 & 10 \
\hline \text { Middle Drift } & 75 & 15 \
\hline
\end{array}$$ By taking the first tons from ______, Earth Movers & Shakers is producing consistent with the _____ Principle.

Accepted Answer

A)  Mother Lode; Low Hanging Fruit 
B)  Middle Drift; Compromise 
C)  Middle Drift; Low Hanging Fruit 
D)  Scraping Bottom; Cost Minimizing 
A)  Mother Lode; Low Hanging Fruit 
B)  Middle Drift; Compromise 
C)  Middle Drift; Low Hanging Fruit 
D)  Scraping Bottom; Cost Minimizing

Question 10

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 fewer than 10 computers and more than 120 calculators per hour, Smith will __________ and Jones will __________.

Accepted Answer

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

Question 11

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. According to Moe's PPF, moving from a grade of 80 in economics to a grade of 90 in economics:

Accepted Answer

A)  is inefficient. 
B)  comes at a lower opportunity cost than moving from a 90 to a 100 in economics. 
C)  is not feasible. 
D)  comes at a higher opportunity cost than moving from a 90 to a 100 in economics. 
A)  is inefficient. 
B)  comes at a lower opportunity cost than moving from a 90 to a 100 in economics. 
C)  is not feasible. 
D)  comes at a higher opportunity cost than moving from a 90 to a 100 in economics.

Question 12

The core principle that is illustrated by the production possibilities curve is:

Accepted Answer

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

Question 13

The United States was unable to maintain its dominance in the production of televisions because:

Accepted Answer

A)  the highly technical skills necessary to produce televisions are greater in other countries. 
B)  the raw materials necessary to build televisions became scarce in the United States. 
C)  the product designs evolved too rapidly for United States engineers to keep up. 
D)  automated production allowed production to be outsourced to countries with less-skilled workers. 
A)  the highly technical skills necessary to produce televisions are greater in other countries. 
B)  the raw materials necessary to build televisions became scarce in the United States. 
C)  the product designs evolved too rapidly for United States engineers to keep up. 
D)  automated production allowed production to be outsourced to countries with less-skilled workers.

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 daily opportunity cost of moving one miner from Mother Lode to Scraping Bottom is:

Accepted Answer

A)  2 tons. 
B)  3 tons. 
C)  4 tons. 
D)  1 ton. 
A)  2 tons. 
B)  3 tons. 
C)  4 tons. 
D)  1 ton.

Question 15

The production possibilities curve shows:

Accepted Answer

A)  the minimum production of one good for every possible production level of the other good. 
B)  how increasing the inputs used for one good increases the production of the other good. 
C)  the maximum production of one good for every possible production level of the other good. 
D)  how increasing the production of one good allows production of the other good to also rise. 
A)  the minimum production of one good for every possible production level of the other good. 
B)  how increasing the inputs used for one good increases the production of the other good. 
C)  the maximum production of one good for every possible production level of the other good. 
D)  how increasing the production of one good allows production of the other good to also rise.

Question 16

You have noticed that your next-door neighbor, Mary, always works in the garden and her husband, Joe, always walks the dog. Based on this observation, you conclude that:

Accepted Answer

A)  Mary has an absolute advantage in gardening. 
B)  Joe has a comparative advantage in walking the dog. 
C)  Mary does not understand the principle of low-hanging fruit. 
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 does not understand the principle of low-hanging fruit. 
D)  Joe experiences increasing opportunity costs when he gardens, but not when he walks the dog.

Question 17

The political concern expressed about the North American Free Trade Agreement (NAFTA) was that:

Accepted Answer

A)  prices to U.S. consumers would fall. 
B)  wages in Mexico would rise. 
C)  highly skilled workers in the United States would lose their jobs. 
D)  unskilled workers in the United States would lose their jobs. 
A)  prices to U.S. consumers would fall. 
B)  wages in Mexico would rise. 
C)  highly skilled workers in the United States would lose their jobs. 
D)  unskilled workers in the United States would lose their jobs.

Question 18

If a producer is operating at an inefficient point on a production possibilities curve using currently available resources, that producer:

Accepted Answer

A)  cannot produce more of one good without giving up some of the other good. 
B)  can produce more of one good without producing less of the other good. 
C)  must be at an unattainable point on the production possibilities curve. 
D)  must be specializing in activities for which it has a comparative advantage. 
A)  cannot produce more of one good without giving up some of the other good. 
B)  can produce more of one good without producing less of the other good. 
C)  must be at an unattainable point on the production possibilities curve. 
D)  must be specializing in activities for which it has a comparative advantage.

Question 19

If Scout has an absolute advantage over Dill:

Accepted Answer

A)  Scout has more money than Dill. 
B)  the problem of scarcity applies to Dill, but not to Scout. 
C)  the problem of scarcity applies to Scout, but not to Dill. 
D)  Scout can accomplish more in a given period of time than can Dill. 
A)  Scout has more money than Dill. 
B)  the problem of scarcity applies to Dill, but not to Scout. 
C)  the problem of scarcity applies to Scout, but not to Dill. 
D)  Scout can accomplish more in a given period of time than can Dill.

Question 20

Working efficiently, Jordan can write 3 essays and outline 4 chapters each week. It must be true that:

Accepted Answer

A)  6 essays and 0 chapter outlines would be unattainable. 
B)  2 essays and 3 chapter outlines would be efficient. 
C)  3 essays and 5 chapter outlines would be unattainable. 
D)  4 essays and 3 chapter outlines would be both attainable and efficient. 
A)  6 essays and 0 chapter outlines would be unattainable. 
B)  2 essays and 3 chapter outlines would be efficient. 
C)  3 essays and 5 chapter outlines would be unattainable. 
D)  4 essays and 3 chapter outlines would be both attainable and efficient.

Generally, on a linear two-good production possibilities curve, the opportunity cost of the good measured on the vertical axis is:

Between the U.S. and Nepal, Nepal invests less in new factories and equipment. This will likely cause:

The Principle of Increasing Opportunity Costs implies that:

If a nation can produce a good more quickly than any other nation, that nation has a(n):

An inefficient point on a production possibilities curve 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. According to Moe's PPF, moving from a grade of 80 in economics to a grade of 90 in economics:

The core principle that is illustrated by the production possibilities curve is:

The United States was unable to maintain its dominance in the production of televisions because:

The production possibilities curve shows:

You have noticed that your next-door neighbor, Mary, always works in the garden and her husband, Joe, always walks the dog. Based on this observation, you conclude that:

The political concern expressed about the North American Free Trade Agreement (NAFTA) was that:

If a producer is operating at an inefficient point on a production possibilities curve using currently available resources, that producer:

If Scout has an absolute advantage over Dill:

Working efficiently, Jordan can write 3 essays and outline 4 chapters each week. It must be true that:

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

Generally, on a linear two-good production possibilities curve, the opportunity cost of the good measured on the vertical axis is:

Between the U.S. and Nepal, Nepal invests less in new factories and equipment. This will likely cause:

The Principle of Increasing Opportunity Costs implies that:

If a nation can produce a good more quickly than any other nation, that nation has a(n):

An inefficient point on a production possibilities curve 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. According to Moe's PPF, moving from a grade of 80 in economics to a grade of 90 in economics:

The core principle that is illustrated by the production possibilities curve is:

The United States was unable to maintain its dominance in the production of televisions because:

The production possibilities curve shows:

You have noticed that your next-door neighbor, Mary, always works in the garden and her husband, Joe, always walks the dog. Based on this observation, you conclude that:

The political concern expressed about the North American Free Trade Agreement (NAFTA) was that:

If a producer is operating at an inefficient point on a production possibilities curve using currently available resources, that producer:

If Scout has an absolute advantage over Dill:

Working efficiently, Jordan can write 3 essays and outline 4 chapters each week. It must be true that:

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