Deck 8: Trade

Question 1

The following figure shows the production possibilities curve for a software engineer who has to divide her available time between producing computer programs and Web sites.

Refer to the figure above.If the engineer spends her entire time producing computer programs,how many computer programs can she produce?

A) 12
B) 30
C) 45
D) 50

Answer 1

50

Question 2

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
Refer to the scenario above.If you draw the production possibilities curves (PPCs)of the two lawyers where the number of IP cases handled is measured on the x-axis,then ________.

A) Zeek's PPC lies above Yasmin's
B) Zeek's PPC has the same slope as Yasmin's
C) Zeek's PPC is flatter than Yasmin's
D) Zeek's PPC is steeper than Yasmin's

Answer 2

Zeek's PPC is flatter than Yasmin's

Question 3

Which of the following best describes a production possibilities curve?

A) How much of one good an economy can produce if they forgo production of another good
B) The rate at which an economy can trade production of one good for another
C) The total amount of goods an economy can produce
D) A relationship showing the maximum production of one good for a given level of production of another good

Answer 3

A relationship showing the maximum production of one good for a given level of production of another good

Question 4

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
Refer to the scenario above.If Yasmin spent all her time on CF cases,how many CF cases can she finish?

A) 16
B) 12
C) 8
D) 4

Question 5

A curve that shows the various combinations of goods and services that are possible for an economy to produce with a given amount of resources is referred to as a(n)________.

A) supply curve
B) indifference curve
C) budget constraint
D) production possibilities curve

Question 6

The following figure shows the production possibilities curve for a software engineer who has to divide her available time between producing computer programs and Web sites.

Refer to the figure above.Which of the following combinations is unattainable?

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

Question 7

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
Refer to the scenario above.What is Yasmin's opportunity cost of handling an IP case?

A) 6 hours
B) 40 minutes
C) Two-thirds of a CF case
D) One and a half IP cases

Question 8

Scenario: Jack takes 3 hours to complete a painting and 6 hours to create a sculpture. He has 30 hours of time to spend on both activities.
Refer to the scenario above.Which of the following combinations will lie above Jack's production possibilities curve?

A) 2 paintings and 3 sculptures
B) 5 sculptures only
C) 10 paintings only
D) 3 paintings and 5 sculptures

Question 9

The underlying motivation for trade,relies on one simple principle.What is it?

A) Trade creates employment.
B) Trade allows total production to be maximized.
C) Trade will increase the profit for firms.
D) Trade maximizes the opportunity costs.

Question 10

The following figure shows the production possibilities curve for a software engineer who has to divide her available time between producing computer programs and Web sites.

Refer to the figure above.Which of the following combinations is attainable but inefficient?

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

Question 11

A machine can manufacture 1 unit of Good X in 2 hours and 1 unit of Good Y in 1 hour.Assuming that the machine is used for 10 hours,which of the following combinations will lie on the production possibilities curve?

A) 5 units of Good X and 2 units of Good Y
B) 3 units of Good X and 4 units of Good Y
C) 2 units of Good X and 2 units of Good Y
D) 6 units of Good X only

Question 12

Scenario: Jack takes 3 hours to complete a painting and 6 hours to create a sculpture. He has 30 hours of time to spend on both activities.
Refer to the scenario above.If Jack has to decide between the number of paintings and sculptures he wants to make in the given time,which of the following will best represent his options?

A) A budget constraint
B) An indifference curve
C) A production possibilities curve
D) A supply curve

Question 13

The following figure shows the production possibilities curve for a software engineer who has to divide her available time between producing computer programs and Web sites.

Refer to the figure above.If the engineer spends her entire time on producing Web sites,how many Web sites can she produce?

A) 2
B) 5
C) 10
D) 12

Question 14

Scenario: Jack takes 3 hours to complete a painting and 6 hours to create a sculpture. He has 30 hours of time to spend on both activities.
Refer to the scenario above.Which of the following combinations will lie on Jack's production possibilities curve?

A) 10 paintings and 6 sculptures
B) 5 paintings and 1 sculpture
C) 10 paintings only
D) 10 sculptures only

Question 15

Trade between two nations ________.

A) results in the maximization of total production
B) reduces global production
C) leads to a maximization of production in one nation and a minimization of production in the other
D) is inefficient compared to a situation where both nations do not engage in international trade

Question 16

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
Refer to the scenario above.If Zeek spent all his time on IP cases,how many IP cases can he finish?

A) 16
B) 12
C) 8
D) 4

Question 17

Scenario: Jack takes 3 hours to complete a painting and 6 hours to create a sculpture. He has 30 hours of time to spend on both activities.
Refer to the scenario above.Which of the following combinations will lie below Jack's production possibilities curve?

A) 10 paintings and 6 sculptures
B) 5 paintings and 1 sculpture
C) 10 paintings only
D) 10 sculptures only

Question 18

A production possibilities curve shows the ________.

A) relationship between the price of a good and its quantity supplied
B) maximum production of one good for a given level of production of another good
C) different combinations of two inputs used to produce a given quantity of output
D) quantity of output produced and the amount of inputs required for the production of the output

Question 19

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
Refer to the scenario above.What is Zeek's opportunity cost of handling a CF case?

A) Two IP cases
B) One and a half IP cases
C) 30 minutes
D) 6 hours

Question 20

The following figure shows the production possibilities curve for a software engineer who has to divide her available time between producing computer programs and Web sites.

Refer to the figure above.Which of the following combinations is attainable as well as efficient?

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

Question 21

Scenario: The following production possibilities schedules and curves represent the amount of corn and alfalfa that can be produced on an acre of land in Idaho and Iowa.

These production possibilities schedules are shown in the following figure.

Refer to the scenario above.The opportunity cost of a ton of alfalfa in Idaho is ________.

A) of a bushel of corn
B) 1 bushel of corn
C) 15 bushels of corn
D) 120 bushels of corn

Question 22

The following figure depicts a nonlinear production possibilities curve.

Refer to the figure above.If the market economy moves from point A to point C,________.

A) there is unemployment in the computer programs industry
B) the opportunity cost of producing an additional Web site increases
C) technological change has made the production of Web sites more efficient
D) society values Web sites more than computer programs

Question 23

The following figure depicts a nonlinear production possibilities curve.

Refer to the figure above.With currently available resources,point F represents a situation that ________.

A) results if resources are not fully employed
B) can be achieved if consumers demand fewer Web sites than at point C
C) is currently attainable, given available resources
D) is currently unattainable, given available resources

Question 24

If an economy is producing on the production possibilities curve,then that economy ________.

A) is making full use of its resources
B) is not making full use of its resources
C) must have the government allocating resources
D) is maximizing profits

Question 25

Scenario: Suppose a country produces only two goods: Good X and Good Y.
Refer to the scenario above.The opportunity cost of producing Good X equals ________.

A) loss in Good Y/loss in Good X
B) loss in Good Y/gain in Good X
C) loss in Good X/loss in Good Y
D) loss in Good X/gain in Good Y

Question 26

Scenario: Suppose a country produces only two goods: Good X and Good Y.
Refer to the scenario above.The opportunity cost of producing Good Y equals ________.

A) gain in Good Y/gain in Good X
B) loss in Good X/gain in Good Y
C) loss in Good X/loss in Good Y
D) gain in Good X/gain in Good Y

Question 27

How is a production possibilities curve similar to a budget constraint?

Question 28

Scenario: The following production possibilities schedules and curves represent the amount of corn and alfalfa that can be produced on an acre of land in Idaho and Iowa.

These production possibilities schedules are shown in the following figure.

Refer to the scenario above.The opportunity cost of a bushel of corn in Iowa is ________.

A) of a ton of alfalfa
B) 1 ton of alfalfa
C) 6 tons of alfalfa
D) 40 tons of alfalfa

Question 29

Even though points inside a production possibilities curve are attainable,why are they not preferred?

Question 30

Points inside a production possibilities curve are ________.

A) inefficient, because more goods can be produced with the available resources
B) inefficient, because they represent the production of only one good
C) efficient, because the combinations represented by those points are attainable
D) efficient, because production is maximum at those points with the available resources

Question 31

Points on a production possibilities curve are ________ and ________.

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

Question 32

The following figure depicts a nonlinear production possibilities curve.

Refer to the figure above.Assuming that the initial situation is point B,which one of the following represents a reallocation of resources away from Web sites to computer programs production?

A) Point A
B) Point C
C) Point D
D) Point E

Question 33

Points inside a production possibilities curve are ________ and ________.

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

Question 34

The slope of a production possibility curve represents ________.

A) the total cost of producing a given level of output
B) the opportunity cost of producing one more unit of a good in terms of the forgone production of the other good
C) the rate at which people in an economy would like to trade one good for another
D) combinations of two goods that are not attainable with existing technology

Question 35

The slope of a production possibilities curve represents the ________.

A) marginal cost of producing the good measured on the x-axis
B) marginal cost of producing the good measured on the y-axis
C) opportunity cost of producing the goods
D) ratio of the average cost of producing both goods

Question 36

Christine is a chef.She can cook a meal in 1 hour and make a cake in 2 hours.She works 10 hours per day.Which of the four lines in the following figure represents her production possibilities curve?

A) Line 1
B) Line 2
C) Line 3
D) Line 4

Question 37

The following figure depicts a nonlinear production possibilities curve.

Refer to the figure above.Point E represents a situation that ________.

A) is currently unattainable and can be expected to remain so
B) will be attainable only if there is economic growth
C) results from inefficient use of resources or failure to use all available resources
D) has a higher opportunity cost than do points on the boundary itself

Question 38

Which of the following causes an outward shift in the Production Possibilities Curve?

A) A decrease in unemployment.
B) A loss in the productive capacity of agricultural acreage caused by a prolonged drought.
C) An increase in the productivity of all factors of production.
D) Shifting resources away from the production of one good toward another.

Question 39

Assume that a machine is used to produce calculators and cell phones.The machine can be used for a maximum of 10 hours.The productivity table of the machine is shown below.

a)Draw the production possibilities curve from the information given in the table.
b)Calculate the opportunity cost of producing either good.

Question 40

Points outside a production possibilities curve are ________.

A) feasible and maximize efficiency
B) not feasible because of resource constraints
C) feasible but not preferred, because they are inefficient
D) not feasible, because they do not utilize all of the available resources

Question 41

Increasing opportunity cost can arise if ________.

A) there are economies of scale in production
B) marginal costs of production are constant
C) production of the good is characterized by diminishing returns
D) the production possibility curve is linear

Question 42

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
Refer to the scenario above.Suppose that the two lawyers' boss wants the total number of IP cases worked on by them to equal the total number of CF cases worked on by them.So long as the total number of IP cases equals the total number of CF cases,their boss does not care which lawyer works on how many of which type of case.So Yasmin and Zeek decide to take advantage of their comparative advantages.How would they divide the tasks?

A) Yasmin specializes in IP cases, while Zeek specializes in CF cases.
B) Yasmin specializes in CF cases, while Zeek specializes in IP cases.
C) Yasmin specializes in IP cases, while Zeek works on both types of cases.
D) Yasmin specializes in CF cases, while Zeek works on both types of cases.

Question 43

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
Refer to the scenario above.Zeek's supervisor wants him to handle equal number of IP and CF cases.How much time would Zeek spend on each type of case? (Hint: Assume that he can work on a fraction of a case.)

A) 32 hours on IP cases and 16 hours on CF cases
B) 28 hours on IP cases and 20 hours on CF cases
C) 24 hours each on IP cases and CF cases
D) 16 hours on IP cases and 32 hours on CF cases

Question 44

Alexander Selkirk lives on Juan Fernandez Island.He spends his days gathering coconuts and spiny lobsters.If he spends all day gathering coconuts,he can collect 40 coconuts.If he spends all day collecting spiny lobsters,he can capture 20 in a day.His production possibilities curve is shown in the figure below.

As Selkirk collects more coconuts,the opportunity cost of a coconut is ________.

A) decreasing
B) constant
C) increasing
D) unpredictable

Question 45

The following figure shows the production possibilities curve for Sheena, who has to split her time between producing Web sites and computer programs.

Refer to the figure above.What is the opportunity cost of producing 1 Web site?

A) 0.2 computer programs
B) 5 computer programs
C) 12 computer programs
D) 60 computer programs

Question 46

Scenario: With her available resources, Wendy can produce 20 greeting cards or 10 earrings. Sarah, with the resources she has, can produce 5 greeting cards or 15 earrings.
Refer to the scenario above.What is Sarah's opportunity cost of producing one greeting card?

A) 0.33 earrings
B) 0.5 earrings
C) 1 earring
D) 3 earrings

Question 47

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
Refer to the scenario above.Suppose that the two lawyers' boss wants the total number of IP cases worked on by them to be equal the total number of CF cases worked on by them.So long as the total number of IP cases equals the total number of CF cases,their boss does not care which lawyer works on how many of which type of case.So Yasmin and Zeek decide to take advantage of their comparative advantages.How many IP and CF cases would they finish? (Hint: Assume that they can work on a fraction of a case.)

A) 12 and three halves of each type of case
B) 13 and a third of each type of case
C) 16 and a half of each type of case
D) 24 of each type of case

Question 48

Scenario: Viola and Davis are two students who are taking a math class and an English class. The graph below shows the production possibilities curves for each of them.

Refer to the scenario above.What is the opportunity cost of one math homework assignment for Viola?

A) 9 English essays
B) 3 English essays
C) 0.5 English essays
D) 0.33 English essays

Question 49

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
Refer to the scenario above.Yasmin's supervisor wants her to handle equal numbers of IP and CF cases.How much time would Yasmin spend on each type of case? (Hint: Assume that she can work on a fraction of a case.)

A) 24 hours each on IP cases and CF cases
B) 28 hours and 48 minutes on IP cases, and 19 hours and 12 minutes on CF cases
C) 32 hours and 24 minutes on IP cases and 15 hours and 36 minutes on CF cases
D) 36 hours on IP cases and 12 hours on CF cases

Question 50

Scenario: With her available resources, Wendy can produce 20 greeting cards or 10 earrings. Sarah, with the resources she has, can produce 5 greeting cards or 15 earrings.
Refer to the scenario above.What is Wendy's opportunity cost of producing one earring?

A) 0.33 greeting cards
B) 0.50 greeting cards
C) 1 greeting card
D) 2 greeting cards

Question 51

The ability of an individual,firm,or country to produce a certain good at a lower opportunity cost than other producers is referred to as ________.

A) marginal advantage
B) absolute advantage
C) cardinal advantage
D) comparative advantage

Question 52

Scenario: Viola and Davis are two students who are taking a math class and an English class. The graph below shows the production possibilities curves for each of them.

Refer to the scenario above.What is the opportunity cost of one English essay for Viola?

A) 9 math homework assignments
B) 3 math homework assignments
C) 0.5 math homework assignments
D) 0.33 math homework assignments

Question 53

Scenario: With her available resources, Wendy can produce 20 greeting cards or 10 earrings. Sarah, with the resources she has, can produce 5 greeting cards or 15 earrings.
Refer to the scenario above.What is Sarah's opportunity cost of producing 1 earring?

A) 0.33 greeting cards
B) 1 greeting card
C) 1.45 greeting cards
D) 3 greeting cards

Question 54

The following figure illustrates the production possibilities curve of a farmer who has to decide on the quantities of wheat and rice to produce for a given amount of resources.Three possible production combinations-A,B,and C-are marked on the figure.

a)Which of the three combinations of wheat and rice,marked on the graph,is both efficient and attainable? Explain your answer.
b)Calculate the opportunity cost of producing both wheat and rice.

Question 55

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours.
Refer to the scenario above.Who has a comparative advantage in handling CF cases and why?

A) Yasmin, because her opportunity cost of handling a CF case is a third of Zeek's
B) Yasmin, because her opportunity cost of handling a CF case is half of Zeek's
C) Zeek, because his opportunity cost of handling a CF case is a third of Yasmin's
D) Zeek, because his opportunity cost of handling a CF case is half of Yasmin's

Question 56

Scenario: Viola and Davis are two students who are taking a math class and an English class. The graph below shows the production possibilities curves for each of them.

Refer to the scenario above.Davis has a ________ opportunity cost of doing math homework assignments and a ________ opportunity cost of writing English essays compared to Viola.

A) lower; higher
B) higher; higher
C) lower; lower
D) higher; lower

Question 57

Scenario: A machine that can be used to print both notebooks and magazines is available for use for a fixed period of time. If it is used only to print notebooks, 30 notebooks can be printed. If it is used only to print magazines, 15 magazines can be printed.
Refer to the scenario above.What is the opportunity cost of printing 1 notebook?

A) 0.5 magazines
B) 1 magazine
C) 2 magazines
D) 30 magazines

Question 58

The following figure shows the production possibilities curve for Sheena, who has to split her time between producing Web sites and computer programs.

Refer to the figure above.What is the opportunity cost of producing 1 computer program?

A) 0.2 Web sites
B) 5 Web sites
C) 8 Web sites
D) 12 Web sites

Question 59

Scenario: A machine that can be used to print both notebooks and magazines is available for use for a fixed period of time. If it is used only to print notebooks, 30 notebooks can be printed. If it is used only to print magazines, 15 magazines can be printed.
Refer to the scenario above.What is the opportunity cost of printing 1 magazine?

A) 1 notebook
B) 2 notebooks
C) 15 notebooks
D) 30 notebooks

Question 60

Scenario: With her available resources, Wendy can produce 20 greeting cards or 10 earrings. Sarah, with the resources she has, can produce 5 greeting cards or 15 earrings.
Refer to the scenario above.What is Wendy's opportunity cost of producing 1 greeting card?

A) 0.25 earrings
B) 0.5 earrings
C) 1 earring
D) 2 earrings

Question 61

In Lithasia,the opportunity cost of producing a chair is 2 tables and in Barylia,the opportunity cost of producing a chair is 1/2 table.Which of the following statements is true?

A) Barylia has a comparative advantage in producing chairs.
B) Lithasia has a comparative advantage in producing chairs.
C) Barylia has a comparative advantage in producing tables.
D) Lithasia has a comparative disadvantage in producing tables.

Question 62

The following figure depicts the production possibilities curve when Ann and Bob engage in trade. With all her resources, Ann can either produce two computer programs or one Web site. With all his resources, Bob can either produce one computer program or three Web sites.

Refer to the figure above.What is the value of A?

A) 1
B) 2
C) 3
D) 4

Question 63

The following figure depicts the production possibilities curve when Ann and Bob engage in trade. With all her resources, Ann can either produce two computer programs or one Web site. With all his resources, Bob can either produce one computer program or three Web sites.

Refer to the figure above.The flatter portion of this curve has a slope equal to ________.

A) Ann's PPC
B) Bob's PPC
C) Ann's minus Bob's PPC
D) Ann's plus Bob's PPC

Question 64

Scenario: Meryl and Steve are two classmates who form a study group. The graph below shows the production possibilities curves for each of them.

Refer to the scenario above.________ has comparative advantage in doing math homework,and ________ has comparative advantage in writing Econ essays.

A) Meryl; Meryl
B) Steve; Steve
C) Steve; Meryl
D) Meryl; Steve

Question 65

The following figure shows the production possibilities curves (PPCs) of two individuals, Ryan and Tom.

Refer to the figure above.Which of the following statements is true?

A) Ryan's opportunity cost of producing Good 1 is higher than that of Tom, whereas Tom's opportunity cost of producing Good 2 is higher than that of Ryan.
B) Ryan's opportunity cost of producing Good 2 is higher than Tom's opportunity cost of producing it.
C) Ryan has a comparative disadvantage in the production of both goods.
D) Tom has a comparative disadvantage in the production of both goods.

Question 66

Which of the following statements best describes absolute advantage?

A) The party who has the higher opportunity cost of producing the good
B) The party who has the lower opportunity cost of producing the good
C) The party who can produce more of the good
D) The party who can produce less of the good

Question 67

The following figure depicts the production possibilities curve when Ann and Bob engage in trade. With all her resources, Ann can either produce two computer programs or one Web site. With all his resources, Bob can either produce one computer program or three Web sites.

Refer to the figure above.What is the value of B?

A) 1
B) 2
C) 3
D) 4

Question 68

A firm producing calculators and cell phones purchases new machinery that increases the productivity of producing calculators.Assuming that the number of calculators produced is measured on the x-axis and the number of cell phones produced is measured on the y-axis,how will the introduction of the new machinery change the firm's production possibilities curve?

A) The production possibilities curve will shift to the left.
B) The production possibilities curve will shift to the right.
C) The production possibilities curve will pivot rightward about the y-axis.
D) The production possibilities curve will pivot rightward about the x-axis.

Question 69

Scenario: Meryl and Steve are two classmates who form a study group. The graph below shows the production possibilities curves for each of them.

Refer to the scenario above.If Meryl and Steve decide to join forces to do school work and trade,then ________.

A) Meryl should specialize in doing Econ homework assignments, and Steve should specialize in writing lab reports
B) Steve should specialize in doing Econ homework assignments, and Meryl should specialize in writing lab reports
C) Meryl should do half the Econ homework assignments and write half the lab reports, and Steve should do the same
D) Meryl should do ¾ of the Econ homework assignments and ¼ of the lab reports, and Steve should complete the rest

Question 70

Which of the following statements is true?

A) An economic agent can have a comparative advantage in the production of all goods.
B) The agent with the higher opportunity cost of producing a good has the comparative advantage in producing that good.
C) There are mutually beneficial gains from trade if opportunity costs differ.
D) An economic agent who has the absolute advantage in producing a good also has the comparative advantage in producing that good.

Question 71

The following figure depicts the production possibilities curve when Ann and Bob engage in trade. With all her resources, Ann can either produce two computer programs or one Web site. With all his resources, Bob can either produce one computer program or three Web sites.

Refer to the figure above.What should be the values of C and D?

A) C = 3, D = 4
B) C = 4, D = 3
C) C = 1, D = 1
D) C = 2, D = 3

Question 72

Scenario: Meryl and Steve are two classmates who form a study group. The graph below shows the production possibilities curves for each of them.

Refer to the scenario above.________ has absolute advantage in doing Econ homework assignments,and ________ has absolute advantage in writing lab reports.

A) Meryl; Meryl
B) Steve; Steve
C) Steve; Meryl
D) Meryl; Steve

Question 73

Specialization occurs when each individual,firm,or country ________.

A) produces only a few specific goods and relies on trade for the other goods and services it needs
B) is self-sufficient and produces all goods and services it needs, without relying on imports
C) produces only those goods for which it has a higher opportunity cost of production than that for other nations
D) produces only those goods which are in demand in the global market and allow for high rates of profitability

Question 74

The following figure shows the production possibilities curves (PPCs) of two individuals, Ryan and Tom.

Refer to the figure above.Which of the following statements is true?

A) Tom has an absolute disadvantage in the production of Good 1, whereas Ryan has an absolute disadvantage in the production of Good 2.
B) Ryan has an absolute disadvantage in the production of Good 1, whereas Tom has an absolute disadvantage in the production of Good 2.
C) Tom can produce fewer of both goods given the same amount of resources as Ryan.
D) Ryan can produce fewer of both goods given the same amount of resources as Tom.

Question 75

The following figure shows the production possibilities curves (PPCs) of two individuals, Ryan and Tom.

Refer to the figure above.Which of the following statements is true?

A) Ryan has an absolute advantage in the production of Good 1, whereas Tom has an absolute advantage in the production of Good 2.
B) Tom has an absolute advantage in the production of Good 1, whereas Ryan has an absolute advantage in the production of Good 2.
C) Ryan has an absolute advantage in the production of both goods.
D) Tom has an absolute advantage in the production of both goods.

Question 76

Which of the following statements is true?

A) When two nations specialize and trade, there is a loss of efficiency and both the nations are made worse off.
B) Trade between two nations is most beneficial when neither has a comparative advantage in the production of any goods and services.
C) Trade between nations allows each nation to specialize in the production of goods for which it has comparative advantage.
D) Trade between two nations is possible only when the opportunity costs of producing goods and services in both nations are identical.

Question 77

The following figure depicts the production possibilities curve when Ann and Bob engage in trade. With all her resources, Ann can either produce two computer programs or one Web site. With all his resources, Bob can either produce one computer program or three Web sites.

Refer to the figure above.The steeper portion of this curve has a slope equal to ________.

A) Ann's PPC
B) Bob's PPC
C) Ann's minus Bob's PPC
D) Ann's plus Bob's PPC

Question 78

The following figure shows the production possibilities curves (PPCs) of two individuals, Ryan and Tom.

Refer to the figure above.Which of the following statements is true?

A) Ryan has a comparative advantage in the production of Good 1, whereas Tom has a comparative advantage in the production of Good 2.
B) Ryan has a comparative advantage in the production of Good 2, whereas Tom has a comparative advantage in the production of Good 1.
C) Ryan has a comparative advantage in the production of both goods.
D) Tom has a comparative advantage in the production of both goods.

Question 79

Which of the following statements is true?

A) When two firms have the same opportunity cost of producing two goods, each firm will always have a comparative advantage in the production of both goods.
B) When two firms have different opportunity costs of producing two goods, each firm will always have a comparative advantage in the production of one of the goods.
C) The firm that has a lower opportunity cost of producing a good is said to have a comparative disadvantage in the production of that good.
D) The firm that faces a lower opportunity cost of producing a good is said to have an absolute disadvantage in the production of that good.

Question 80

The figure below shows the production possibilities curves (PPCs)for Viola and Davis.Which of the lines in the graph correctly represents their joint PPC?

A) Line 1
B) Line 2
C) Line 3
D) Line 4