Deck 2: Production, Economic Growth, and Trade

Question 1

(Figure: PPF of Econia (a small nation)) Looking at the production possibilities frontier (PPF) of Econia, assume that the country is producing at point

A) Econia is producing wheat and cotton in amounts that are as efficient as possible.
B) Econia would have greater production efficiency if it moved from D to B
C) Econia is neither productively nor technically efficient.
D) Econia would have greater allocative efficiency if it moved from D to B

Answer 1

D

Question 2

(Figure: Tanks and Health Care) Which points in the graph and table are considered attainable and why?
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Answer 2

All points on the production possibilities frontier (PPF) curve (points a, b, c, d, e) are considered attainable by our economy. Everything to the left of the PPF curve (point f) is also attainable but is an inefficient use of resources-the economy can always do better. Everything to the right of the curve (point g) is considered unattainable. Therefore, the PPF maps out the economy's limits; it is impossible for the economy to produce at levels beyond the PPF.

Question 3

Which question would be considered one of three basic economic questions every society must answer?

A) Where should the next Amazon headquarters be located?
B) How often should roads and bridges be replaced?
C) What is the best way to maximize soybean production?
D) How high should interest rates be?

Answer 3

C

Question 4

In which market system does the government play the smallest role in regulating businesses?

A) capitalist
B) socialist
C) planned
D) communist

Question 5

Which would not be considered one of the primary factors of production?

A) entrepreneurial ability
B) financial securities
C) capital
D) land

Question 6

Suppose France has achieved the ability to produce baseball bats at the lowest possible resource cost, but hardly anyone in France plays baseball. This means that France has achieved

A) both production and allocative efficiency.
B) neither production nor allocative efficiency.
C) production efficiency but not allocative efficiency.
D) allocative efficiency but not production efficiency.

Question 7

Which combination between factors of production and their payment is INCORRECT?

A) land - rent
B) labor - wages
C) capital - interest
D) entrepreneurial ability - dividends

Question 8

If a country's PPF is linear, this means that _____ along the PPF.

A) the opportunity cost changes as one moves upward
B) the opportunity cost changes as one moves downward
C) diminishing returns to production sets in as one moves in either direction
D) the opportunity cost remains constant at all points

Question 9

If the following two bundles (10, 5) and (7, 9) are located on a country's concave PPF, which bundles could also be on that country's PPF?

A) (8, 3)
B) (10, 9)
C) (9, 5)
D) (3, 12)

Question 10

Which factor is MOST likely to shift an entire PPF outward?

A) a natural disaster that disrupts production
B) a general increase in the price of inputs
C) a technology improvement in one key industry
D) a general increase in educational attainment

Question 11

Which point on the following PPF best represents production efficiency?

A) A
B) B
C) C
D) D

Question 12

A country's choice of producing capital goods versus consumption goods today

A) has no effect on the country's PPF over time because resources are fixed.
B) would have the same effect on PPF over time since both drive economic growth evenly.
C) would expand PPF more over time if more consumption goods are produced today.
D) would expand PPF more over time if more capital goods are produced today.

Question 13

The table shows the amount of corn or wheat that Mexico and Canada can produce using one day of labor. The country with an absolute advantage in producing corn is _____, and the country with an absolute advantage in producing wheat is _____.
$\begin{array}{c}\hline\quad\quad\quad\quad {\text { Output per Worker per Day }} \\\begin{array}{|c|c|c|}\hline \text { Country } & \text { Corn }\quad\quad\quad & \text { Wheat }\quad\quad\quad\quad \\\hline \text { Mexico } & 100 & 50 \\\hline \text { Canada } & 90 & 60 \\\hline\end{array}\end{array}$

A) Mexico; Canada
B) Canada; Mexico
C) Mexico; Mexico
D) Canada; Canada

Question 14

The table shows the amount of cherries or apples that Chile and Argentina can produce using one day of labor. The opportunity cost of producing 1 cherry is _____ in Chile and _____ in Argentina. _____ has a comparative advantage in cherry production.
$\begin{array}{c}\hline\quad\quad\quad\quad {\text { Output per Worker per Day }} \\\begin{array}{|c|c|c|}\hline \text { Country } & \text { Cherries } \quad\quad\quad& \text { Apples }\quad\quad\quad \\\hline \text { Chile } & 80 & 40 \\\hline \text { Argentina } & 60 & 20 \\\hline\end{array}\end{array}$

A) 2 apples; 3 apples; Chile
B) 2 apples; 3 apples; Argentina
C) 0.5 apple; 0.33 apple; Chile
D) 0.5 apple; 0.33 apple; Argentina

Question 15

When two countries specialize and trade based on their comparative advantage

A) both countries would move to a different point on the existing PPF.
B) the country with the greater comparative advantage moves beyond its PPF while the other falls below it.
C) both countries remain at their original point on the PPF because trade primarily affects consumption.
D) both countries are able to consume at a point beyond the original PPF.

Question 16

Which group is most likely to be harmed by international trade?

A) consumers who buy imported goods for consumption
B) businesses who buy imported raw materials for production
C) businesses who produce goods that compete against imports
D) businesses that produce goods primarily for export

Question 17

Which factor does NOT limit the benefits from trade?

A) transportation and communications costs
B) an increase in product variety and brand choices
C) increasing opportunity costs from specialization
D) import restrictions such as tariffs