Question 1

Figure 2-18 
-Refer to Figure 2-18. Which two arrows in the diagram depict the following transaction: Carter earns a $400 commission for selling men's designer shoes at Brooks Brothers.

Accepted Answer

A)  J and M 
B)  K and G 
C)  K and M 
D)  J and G

Question 2

Scarcity

Accepted Answer

A)  stems from the incompatibility between limited resources and unlimited wants. 
B)  can be overcome by discovering new resources. 
C)  can be eliminated by rationing products. 
D)  is a bigger problem in market economies than in socialist economies.

Question 3

Figure 2-14  Figure 2-14 shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles.
-Refer to Figure 2-14. Which country has a comparative advantage in the production of snow cones?

Accepted Answer

A)  Greenland 
B)  They have equal productive abilities. 
C)  Iceland 
D)  neither country

Question 4

The opportunity cost of taking an on-line history class is

Accepted Answer

A)  the knowledge and enjoyment you receive from taking the class. 
B)  the value of the time spent on line. 
C)  equal to the highest value of an alternative use of the time and money spent on the class. 
D)  zero because there is no classroom time involved if you are enrolled in the course. 
E)  the cost of tuition and fees only.

Question 5

If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods.

Accepted Answer

A) True 
 B)False

Question 6

On a diagram of a production possibilities frontier, opportunity cost is represented by the production possibilities frontier shifting outward.

Accepted Answer

A) True 
 B)False

Question 7

In a two-good, two country world, if one country has a comparative advantage in the production of one good, it can benefit by trading with the other country.

Accepted Answer

A) True 
 B)False

Question 8

In the circular flow model, producers

Accepted Answer

A)  sell goods and services in the input market. 
B)  and households spend earnings from resource sales on goods and services in the factor market. 
C)  hire resources sold by households in the factor market. 
D)  spend earnings from resource sales on goods and services in the product market.

Question 9

A production possibilities frontier with a ________ shape indicates increasing opportunity costs as more and more of one good is produced.

Accepted Answer

A)  linear 
B)  bowed inward 
C)  bowed outward 
D)  perfectly horizontal

Question 10

Table 2-1
Production choices for Tomaso's Trattoria
 
-Refer to Table 2-1. Assume that Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 30 calzones would appear

Accepted Answer

A)  along Tomaso's production possibilities frontier. 
B)  inside Tomaso's production possibilities frontier. 
C)  outside Tomaso's production possibilities frontier. 
D)  at the horizontal intercept of Tomaso's production possibilities frontier.

Question 11

Figure 2-8  Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids.
-Refer to Figure 2-8. Suppose Vidalia is currently producing 60 dozen orchids per period. How many roses is it also producing, assuming that resources are fully utilized?

Accepted Answer

A)  40 dozen roses 
B)  50 dozen roses 
C)  60 dozen roses 
D)  100 dozen roses

Question 12

Figure 2-4  Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
-Refer to Figure 2-4. Consider the following movements:
a.	from point V to point W
b.	from point W to point Y
c.	from point Y to point Z

Which of the movements listed above represents economic growth?

Accepted Answer

A)  a, b, and c 
B)  b and c only 
C)  a only 
D)  b only

Question 13

Figure 2-10 
-Refer to Figure 2-10. If the economy is currently producing at point E, what is the gain in production if the economy moves to point D?

Accepted Answer

A)  26 thousand forks 
B)  20 thousand forks 
C)  16 thousand spoons 
D)  0 spoons

Question 14

Table 2-18
  Table 2-18 shows the output per week of two people, Minnie and Mickey. They can either devote their time to making hats or making umbrellas.
-Refer to Table 2-18. What is Mickey's opportunity cost of making an umbrella?

Accepted Answer

A)  1/5 of a hat 
B)  5 hats 
C)  10 hats 
D)  50 hats

Question 15

Table 2-8
 
-Refer to Table 2-8. The Nut House produces only cashews and almonds. The table above shows the maximum possible output combinations of the two nuts using all resources and currently available technology.

a. 	Graph the Nut House's production possibilities frontier. Put almonds on the horizontal axis and cashews on the vertical axis. Be sure to identify the output combination points on your diagram.
b. 	Suppose the Nut House is currently producing at point C. What is the opportunity cost of producing an additional 12,000 pounds of almonds?
c. 	Suppose the Nut House is currently producing at point C. What happens to the opportunity cost of producing more and more almonds? Does it increase, decrease or remain constant? Explain your answer.
d. 	Suppose the Nut House is currently producing at point F. What happens to the opportunity cost of producing more and more cashews? Does it increase, decrease or remain constant? Explain your answer.
e. 	Suppose the Nut House is plagued by a variety of white root-rot disease, which destroys cashew trees but not almond trees. Show in a graph what happens to its PPF.

Accepted Answer

The answer of Table 2-8
 
-Refer to Table 2-8. The...

Question 16

Figure 2-12  Figure 2-12 shows the production possibilities frontiers for Tahiti and Bora Bora. Each country produces two goods, milk and honey.
-Refer to Figure 2-12. What is the opportunity cost of producing one gallon of milk in Tahiti?

Accepted Answer

A)  1/2 of a gallon of honey 
B)  5/6 of a gallon of honey 
C)  1.2 gallons of honey 
D)  1.5 gallons of honey

Question 17

Table 2-16
  Table 2-16 shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland.
-Refer to Table 2-16. What is Estonia's opportunity cost of producing one board foot of lumber?

Accepted Answer

A)  0.2 cell phones 
B)  5 cell phones 
C)  8 cell phones 
D)  32 cell phones

Question 18

A decrease in the unemployment rate may be represented as a movement from a point inside the production possibilities frontier to a point on the frontier.

Accepted Answer

A) True 
 B)False

Question 19

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

Accepted Answer

A)  bowed out 
B)  bowed in 
C)  non-linear 
D)  linear

Question 20

The unattainable points in a production possibilities frontier are

Accepted Answer

A)  the points within the production possibilities frontier. 
B)  the points along the production possibilities frontier. 
C)  the points of the horizontal and vertical intercepts. 
D)  the points outside the production possibilities frontier.

Exam 2: Trade-Offs, Comparative Advantage, and the Market System

Figure 2-18 -Refer to Figure 2-18. Which two arrows in the diagram depict the following transaction: Carter earns a $400 commission for selling men's designer shoes at Brooks Brothers.

Scarcity

Figure 2-14 Figure 2-14 shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. -Refer to Figure 2-14. Which country has a comparative advantage in the production of snow cones?

The opportunity cost of taking an on-line history class is

If a country produces only two goods, it is possible to have a comparative advantage in the production of both those goods.

On a diagram of a production possibilities frontier, opportunity cost is represented by the production possibilities frontier shifting outward.

In a two-good, two country world, if one country has a comparative advantage in the production of one good, it can benefit by trading with the other country.

In the circular flow model, producers

A production possibilities frontier with a ________ shape indicates increasing opportunity costs as more and more of one good is produced.

Table 2-1 Production choices for Tomaso's Trattoria -Refer to Table 2-1. Assume that Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 30 calzones would appear

Figure 2-10 -Refer to Figure 2-10. If the economy is currently producing at point E, what is the gain in production if the economy moves to point D?

Table 2-18 Table 2-18 shows the output per week of two people, Minnie and Mickey. They can either devote their time to making hats or making umbrellas. -Refer to Table 2-18. What is Mickey's opportunity cost of making an umbrella?

Figure 2-12 Figure 2-12 shows the production possibilities frontiers for Tahiti and Bora Bora. Each country produces two goods, milk and honey. -Refer to Figure 2-12. What is the opportunity cost of producing one gallon of milk in Tahiti?

Table 2-16 Table 2-16 shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. -Refer to Table 2-16. What is Estonia's opportunity cost of producing one board foot of lumber?

A decrease in the unemployment rate may be represented as a movement from a point inside the production possibilities frontier to a point on the frontier.

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

The unattainable points in a production possibilities frontier are