Question 1

Mara manages a yogurt factory where four main tasks are performed to produce the yogurt. What basis should she use to assign workers to the tasks if she wants to produce as much yogurt as possible?

Accepted Answer

A) Workers should specialize in the task for which they have a comparative advantage. 
B) Workers should specialize in the task for which they have an absolute advantage. 
C) Workers should be cross-trained in all tasks to maximize flexibility in assignments. 
D) Each task should be done by the worker who can do it fastest.

Question 2

How does price aggregate information?

Accepted Answer

A) Price reflects the preferences of the dominant market. 
B) The actions of many buyers and sellers impact the price in the market. 
C) If the purchasing power of currency changes, the price will change in response. 
D) Prices across markets allow for comparisons.

Question 3

If they spend all night writing poems, Leticia can write 10 poems, and Isabella can write five. If they spend all night making necklaces, Leticia can make six, and Isabella can make four. We know that:

Accepted Answer

A) Leticia's opportunity cost of writing poems is less than Isabella's. 
B) Leticia's opportunity costs of writing poems and of making necklaces are less than Isabella's. 
C) Isabella's opportunity costs of writing poems and of making necklaces are less than Leticia's. 
D) Isabella's opportunity cost of writing poems is less than Leticia's.

Question 4

Which of the following pieces of advice is consistent with the principle of comparative advantage?

Accepted Answer

A) If someone else is faster than you at a task, trade with them, so they do it for you. 
B) Focus on what you do best. 
C) Focus on what you are relatively good at doing, even if you are not the best at it. 
D) Relative preferences are key to understanding who should do what.

Question 5

(Table: Matcha Tea and Coho Salmon Production Possibilities) Use Table: Matcha Tea and Coho Salmon Production Possibilities. The table shows the maximum amounts of matcha tea and Coho salmon that Oregon and Washington can produce if each produces just one good. The opportunity cost of producing 1 unit of Coho salmon for Washington is _____ matcha tea(s).
?
?
 $${ \text { Table: Matcha Tea and Coho Salmon } } \
\begin{array} { | l | l | l | } 
\hline & \text { Matcha Tea } & \text { Coho Salmon } \
\hline \text { Oregon } & 40 & 20 \
\hline \text { Washington } & 10 & 10 \
\hline
\end{array}$$

Accepted Answer

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

Question 6

The price of macadamia nuts falls. This conveys all of the following signals EXCEPT

Accepted Answer

A) that macadamia nuts are in plentiful supply, so consumers should buy more. 
B) that demand for macadamia nuts is low, so producers should produce less. 
C) that the price change will be understood in every language and helps coordinate the macadamia market. 
D) that the price of almonds is rising.

Question 7

Which of the following statements is TRUE regarding comparative advantage and absolute advantage?

Accepted Answer

A) People can have a comparative advantage without having an absolute advantage in a task. 
B) People can have a comparative advantage only if they also have an absolute advantage in a task. 
C) People can have an absolute advantage only if they also have a comparative advantage in a task. 
D) People can have no comparative and no absolute advantages in any of the tasks.

Question 8

(Table: Eray and Ata's opportunity cost) Data for Eray's and Ata's cake decorating is given, which statement explains who has the absolute advantage in decorating cakes? $$\begin{array}{l}
\text { Eray and Ata Decorate Cakes and Cupcakes }\
\begin{array} { | l | l | l | } 
\hline & \begin{array} { l } 
\text { Minutes to } \
\text { decorate a cake }
\end{array} & \begin{array} { l } 
\text { Number of cupcakes that can be decorated } \
\text { in time it takes to decorate a cake }
\end{array} \
\hline \text { Eray } & 120 & 24 \
\hline \text { Ata } & 130 & 20 \
\hline
\end{array}
\end{array}$$

Accepted Answer

A) Eray can decorate a cake in 120 minutes. 
B) Ata can decorate a cake in 130 minutes. 
C) Eray gives up decorating 24 cupcakes when he decorates a cake. 
D) Ata gives up decorating 20 cupcakes when he decorates a cake.

Question 9

How do rice farmers in rural Indonesian villages figure out that they need to produce more rice when the demand for it has risen in other parts of the world?

Accepted Answer

A) A decrease in sales communicates to them that they need to advertise more. 
B) An increase in sales communicates to them that inventories are rising. 
C) A decrease in the price of rice gives them a signal that there is insufficient quantity. 
D) An increase in the price of rice gives them a signal that rice is more valuable.

Question 10

Otto manages a consulting firm. If Otto wants his employees to produce as much as possible from the resources available, how should tasks be assigned?

Accepted Answer

A) The employee who is best at each task should be the one assigned to do it. 
B) Each task should be assigned to the employee who can do it at the lowest opportunity cost. 
C) Each employee should be cross-trained in all tasks to increase flexibility in assignments. 
D) Each task should be assigned to the employee who can do it at the highest absolute advantage.

Question 11

Which of the following is NOT used in identifying who has a comparative advantage in a particular task when multiple people can perform that task and another one? (Note: The tasks are not necessarily listed in chronological order.)

Accepted Answer

A) Identify who has the lowest opportunity cost in performing the task. 
B) For each person, calculate how much of the alternative task could have been done in the time it takes to perform the desired task. 
C) For each person, calculate the total time it takes to perform both tasks consecutively. 
D) Identify how long it takes each person to perform each task.

Question 12

A prediction market is a market where:

Accepted Answer

A) signals lead to future actions. 
B) information is disaggregated. 
C) payoffs are linked to whether an uncertain event occurs. 
D) information is missing to make a good decision.

Question 13

When price functions as an incentive, it

Accepted Answer

A) encourages companies to develop new types of products. 
B) communicates with buyers and sellers about the market. 
C) collects information about the market. 
D) encourages buyers and sellers to change the quantity they will buy and sell.

Question 14

The price of coffee goes up, and Stella cuts back on her coffee consumption. This illustrates price functioning as

Accepted Answer

A) a signal. 
B) an incentive. 
C) a bundle of information. 
D) a producer.

Question 15

A person is said to have a _____ in the production of a good if it can produce that good _____.

Accepted Answer

A) comparative advantage; with more resources than another person 
B) absolute advantage; at a higher opportunity cost than another person 
C) absolute advantage; outside its production possibility frontier 
D) comparative advantage; at a lower opportunity cost than another person

Question 16

Internal markets can be used to _____ and _____.

Accepted Answer

A) make predictions; allocate resources 
B) get better prices in input markets; reduce the customer base 
C) set the product price; gain customers 
D) reduce costs; increase demand

Question 17

(Table: Comparative Advantage for Mia and Juanita) The table provides data on how long it takes Maia and Juanita to mow the lawn and weed the flower beds.
Maia's opportunity cost for mowing the lawn is _____, and Juanita's opportunity cost for mowing the lawn is _____.

Accepted Answer

A) weeding three flower beds; weeding two flower beds 
B) weeding one flower bed; weeding two flower beds 
C) weeding one-third of a flower bed; weeding one-half of a flower bed 
D) weeding one-half of a flower bed; weeding three-quarters of a flower bed

Question 18

The price of celery rises, but nothing has changed on the supply side of the market. What does this mean to celery farmers?

Accepted Answer

A) Celery production should be increased because the number of producers has fallen. 
B) Celery production should be reduced because the number of producers has risen. 
C) It is a signal that celery is more valuable to consumers than it was before. 
D) It is a signal that they should reduce celery production because it is too expensive for consumers.

Question 19

Which statement is TRUE?

Accepted Answer

A) Some people have a comparative advantage in everything they do. 
B) Some people have a comparative advantage in nothing they do. 
C) Some people have a very low opportunity cost in everything they do. 
D) It is possible to have no absolute advantage but a comparative advantage in the production of some good.

Question 20

How do prediction markets illustrate the ways that price aggregates information in a market?

Accepted Answer

The answer of How do prediction markets illustrate the ways...

Exam 8: Gains From Trade

Mara manages a yogurt factory where four main tasks are performed to produce the yogurt. What basis should she use to assign workers to the tasks if she wants to produce as much yogurt as possible?

How does price aggregate information?

If they spend all night writing poems, Leticia can write 10 poems, and Isabella can write five. If they spend all night making necklaces, Leticia can make six, and Isabella can make four. We know that:

Which of the following pieces of advice is consistent with the principle of comparative advantage?

The price of macadamia nuts falls. This conveys all of the following signals EXCEPT

Which of the following statements is TRUE regarding comparative advantage and absolute advantage?

How do rice farmers in rural Indonesian villages figure out that they need to produce more rice when the demand for it has risen in other parts of the world?

Otto manages a consulting firm. If Otto wants his employees to produce as much as possible from the resources available, how should tasks be assigned?

Which of the following is NOT used in identifying who has a comparative advantage in a particular task when multiple people can perform that task and another one? (Note: The tasks are not necessarily listed in chronological order.)

A prediction market is a market where:

When price functions as an incentive, it

The price of coffee goes up, and Stella cuts back on her coffee consumption. This illustrates price functioning as

A person is said to have a _ in the production of a good if it can produce that good _.

Internal markets can be used to _ and _.

(Table: Comparative Advantage for Mia and Juanita) The table provides data on how long it takes Maia and Juanita to mow the lawn and weed the flower beds. Maia's opportunity cost for mowing the lawn is _, and Juanita's opportunity cost for mowing the lawn is _.

The price of celery rises, but nothing has changed on the supply side of the market. What does this mean to celery farmers?

Which statement is TRUE?

How do prediction markets illustrate the ways that price aggregates information in a market?

Exam 8: Gains From Trade

Mara manages a yogurt factory where four main tasks are performed to produce the yogurt. What basis should she use to assign workers to the tasks if she wants to produce as much yogurt as possible?

How does price aggregate information?

If they spend all night writing poems, Leticia can write 10 poems, and Isabella can write five. If they spend all night making necklaces, Leticia can make six, and Isabella can make four. We know that:

Which of the following pieces of advice is consistent with the principle of comparative advantage?

The price of macadamia nuts falls. This conveys all of the following signals EXCEPT

Which of the following statements is TRUE regarding comparative advantage and absolute advantage?

How do rice farmers in rural Indonesian villages figure out that they need to produce more rice when the demand for it has risen in other parts of the world?

Otto manages a consulting firm. If Otto wants his employees to produce as much as possible from the resources available, how should tasks be assigned?

Which of the following is NOT used in identifying who has a comparative advantage in a particular task when multiple people can perform that task and another one? (Note: The tasks are not necessarily listed in chronological order.)

A prediction market is a market where:

When price functions as an incentive, it

The price of coffee goes up, and Stella cuts back on her coffee consumption. This illustrates price functioning as

A person is said to have a _____ in the production of a good if it can produce that good _____.

Internal markets can be used to _____ and _____.

(Table: Comparative Advantage for Mia and Juanita) The table provides data on how long it takes Maia and Juanita to mow the lawn and weed the flower beds. Maia's opportunity cost for mowing the lawn is _____, and Juanita's opportunity cost for mowing the lawn is _____.

The price of celery rises, but nothing has changed on the supply side of the market. What does this mean to celery farmers?

Which statement is TRUE?

How do prediction markets illustrate the ways that price aggregates information in a market?

A person is said to have a _ in the production of a good if it can produce that good _.

Internal markets can be used to _ and _.

(Table: Comparative Advantage for Mia and Juanita) The table provides data on how long it takes Maia and Juanita to mow the lawn and weed the flower beds. Maia's opportunity cost for mowing the lawn is _, and Juanita's opportunity cost for mowing the lawn is _.