Question 1

Ollie proposes that Kukla give Zola 2 tables in exchange for 2 rugs. What are Kukla's and Zola's reactions?

Accepted Answer

A)  Kukla likes the proposal, but Zola does not. 
B)  Zola likes the proposal, but Kukla does not. 
C)  Kukla and Zola both like the proposal. 
D)  Neither Kukla nor Zola likes the proposal. 
E)  Ollie's proposal is not feasible.

Question 2

Mikhail and Stefan are both artists who can create sculptures or paintings each day. The following
table describes their maximum outputs per day. Use this table to answer the  question
$\begin{array}{lll}
\hline &\text { Sculptures} & \text {Paintings }\
\hline\text { Mikhail }& 10 & 5 \
\text {Stefan }& 6 & 2 \
\hline
\end{array}$
-What is Stefan's opportunity cost of a sculpture?

Accepted Answer

A)  1/2 painting 
B)  1/3 painting 
C)  3 paintings 
D)  1/3 sculpture 
E)  3/5 sculpture

Question 3

Even though person A has an absolute advantage over person B both at producing good X and at producing good Y, it can still make sense for persons A and B to engage in trade involving goods X and Y. Explain why this is so.

Accepted Answer

The answer of Even though person A has an absolute...

Question 4

Economic growth can be depicted on a production possibilities frontier PPF) as an

Accepted Answer

A)  inward shift of the PPF. 
B)  outward shift of the PPF. 
C)  inward rotation along the x axis. 
D)  inward rotation along the y axis. 
E)  increase in opportunity cost.

Question 5

Explain why, ultimately, the opportunity cost of producing consumer goods instead of capital goods must be defined in terms of consumer goods.

Accepted Answer

The answer of Explain why, ultimately, the opportunity cost of...

Question 6

Specialization and trade allow individuals to

Accepted Answer

A)  consume outside their own production possibilities frontiers PPFs). 
B)  shift their PPFs outward. 
C)  produce more goods with less technology. 
D)  eliminate scarcity. 
E)  produce fewer goods with less technology.

Question 7

Is there an opportunity cost to increased investment in capital goods today?

Accepted Answer

A)  Yes, increased production of capital goods means fewer consumer goods today. 
B)  Yes, increased production of capital goods today means less economic growth in the future. 
C)  No, increased production of capital goods today does not mean fewer consumer goods today. 
D)  No, increased production of capital goods today guarantees more consumption today. 
E)  No, if society is producing at an efficient point on the production possibilities frontier PPF), then there is no opportunity cost to investment in capital goods.

Question 8

Refer to the following figure
 
-In the figure, point E is

Accepted Answer

A)  an efficient point. 
B)  unattainable with current resources. 
C)  an inefficient point. 
D)  the equilibrium. 
E)  evidence that trade does not enrich society.

Question 9

For a phenomenon to be investigated by means of experiments, the phenomenon must

Accepted Answer

A)  involve human beings. 
B)  have observable effects. 
C)  have occurred in the past. 
D)  be well understood. 
E)  be quantitatively measurable.

Question 10

Ollie proposes that Kukla give Zola 2 tables in exchange for 1 rug. What are Kukla's and Zola's reactions?

Accepted Answer

A)  Kukla likes the proposal, but Zola does not. 
B)  Zola likes the proposal, but Kukla does not. 
C)  Kukla and Zola both like the proposal. 
D)  Neither Kukla nor Zola likes the proposal. 
E)  Ollie's proposal is not feasible.

Question 11

Someone has a comparative advantage in producing a good whenever

Accepted Answer

A)  one enjoys producing that good. 
B)  one can produce more of the good than someone else using the same resources. 
C)  one's opportunity cost is constant. 
D)  one's opportunity cost of producing that good is lower than that of other producers. 
E)  one has specific training in the production of that good.

Question 12

A graph that shows the maximum attainable combinations of two goods when society efficiently uses its productive resources is called

Accepted Answer

A)  a production possibilities frontier PPF). 
B)  a supply curve. 
C)  opportunity cost. 
D)  a consumer demand curve. 
E)  absolute advantage.

Question 13

Suppose that, during an afternoon at Hambre's favorite ski resort, Hambre could either make additional runs down the slopes or produce and sip hot chocolate by the fire in the lodge. Draw a production possibilities frontier PPF) that describes his production trade-offs between runs skied by riding the chairlift to the top and skiing down the slope) versus cups of hot chocolate produced and sipped. Hambre's production of each of these goods is subject to constant marginal opportunity costs in production, so be sure that, in the graph, the opportunity cost of one activity in terms of the other is the same at any point on the PPF.
Now suppose that a new superfast ski lift reduces the time it takes to get to the top of the mountain. Show, on the same graph, how this changes the PPF.

Accepted Answer

The answer of Suppose that, during an afternoon at Hambre's...

Question 14

The production possibilities frontier PPF) shows

Accepted Answer

A)  the trade-off between the efficient production of two different goods. 
B)  the difference between microanalysis and macroanalysis. 
C)  the difference between normative and positive analysis. 
D)  how a firm should price a new product. 
E)  how price and quantity are related for a single good.

Question 15

Think of the production possibilities frontier PPF) model. When society is producing the largest possible output from its resources, it is operating

Accepted Answer

A)  inefficiently. 
B)  efficiently. 
C)  with no opportunity cost. 
D)  inside within) the PPF. 
E)  beyond its opportunity cost.

Question 16

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the question

-What is DiNozzo's opportunity cost for solving a crime?

Accepted Answer

A)  20 solved crimes 
B)  30 solved crimes 
C)  5 solved crimes 
D)  1/20 of a boat 
E)  1/10 of a boat

Question 17

efer to the accompanying figure to answer the next questions.
 
-Given the current resources, one would need even more hours in each day in order to attain

Accepted Answer

A)  point A. 
B)  point B. 
C)  point C. 
D)  point D. 
E)  point E.

Question 18

When one producer has a comparative advantage in production, he or she

Accepted Answer

A)  can produce more output than someone else using the same quantity of resources. 
B)  can produce a good at a lower opportunity cost than someone else. 
C)  does not benefit from trade with other producers. 
D)  is unable to reach his or her production possibilities frontier PPF). 
E)  trades only with others who have the same comparative advantage.

Question 19

The figure depicts a shift in a society’s production possibilities frontier (PPF) for the manufacture of trains and planes: train-manufacturing capacity expands while plane-manufacturing capacity shrinks.Refer to this figure to answer the next questions

-Which point represents an output that was efficient before the shift but is inefficient afterward?

Accepted Answer

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

Question 20

Greater investment in capital goods today leads to

Accepted Answer

A)  greater growth in the production possibilities frontier PPF) in the future. 
B)  greater consumption today. 
C)  the end of scarcity. 
D)  less opportunity cost. 
E)  scarcity.

Exam 2: Model Building and Gains From Trade