Question 1

Figure 2-7
  
Figure 2-7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.
-Refer to Figure 2-7.What is the opportunity cost of producing 1 pound of cashews in Indonesia?

Accepted Answer

A)  3/8 of a bolt of cotton 
B)  5/8 of a bolt of cotton 
C)  2 2/3 bolts of cotton 
D)  320 bolts of cotton

Question 2

Figure 2-4
  
Figure 2-4 shows various points on three different production possibilities frontiers for a nation.
-Refer to Figure 2-4.A movement from X to Y

Accepted Answer

A)  could be due to a change in consumers' tastes and preferences. 
B)  could occur because of an influx of immigrant labor. 
C)  is the result of advancements in food production technology only, with no change in the technology for plastic production. 
D)  is the result of advancements in plastic production technology only, with no change in food production technology.

Question 3

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves.If she now produces 60 silk roses and 80 silk leaves,what is the opportunity cost of producing an additional 10 silk roses?

Accepted Answer

A)  2.5 silk leaves 
B)  10 silk leaves 
C)  25 silk leaves 
D)  55 silk leaves

Question 4

Figure 2-2. 
 
-Refer to Figure 2-2.What is the opportunity cost of one pound of vegetables?

Accepted Answer

A)   
B)   
C)   
D)

Question 5

The principle of opportunity cost is that

Accepted Answer

A)  in a market economy, taking advantage of profitable opportunities involves some money cost. 
B)  the economic cost of using a factor of production is the alternative use of that factor that is given up. 
C)  taking advantage of investment opportunities involves costs. 
D)  the cost of production varies depending on the opportunity for technological application.

Question 6

Table 2-3
  
Table 2-3 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces.
-Refer to Table 2-3.What is Serena's opportunity cost of making a bracelet?

Accepted Answer

A)  2 necklaces 
B)  1/2 of a bracelet 
C)  1/2 of a necklace 
D)  3/4 of a bracelet

Question 7

Table 2-3
  
Table 2-3 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces.
-Refer to Table 2-3.Which of the following statements is true?

Accepted Answer

A)  Haley has an absolute advantage in making both products. 
B)  Serena has an absolute advantage in making both products. 
C)  Haley has an absolute advantage in making bracelets and Serena in making necklaces. 
D)  Haley has an absolute advantage in making necklaces and Serena in making bracelets.

Question 8

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 9

Economic decline (negative growth)is represented on a production possibilities frontier model by the production possibility frontier

Accepted Answer

A)  shifting outward. 
B)  shifting inward. 
C)  becoming steeper. 
D)  becoming flatter.

Question 10

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 events:
A.an increase in the unemployment rate
B.a decrease in a nation's money supply
C.a war that kills a significant portion of a nation's population
Which of the events listed above could cause a movement from Y to W ?

Accepted Answer

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

Question 11

If society decides it wants more of one good and all resources are fully utilized,then

Accepted Answer

A)  it is unable to do this unless technology advances. 
B)  additional resource supplies will have to be found. 
C)  it has to give up some of another good and incur some opportunity costs. 
D)  more unemployment will occur.

Question 12

In a two-good,two country world,if one country has an absolute advantage in the production of both goods,it cannot benefit by trading with the other country.

Accepted Answer

A) True 
 B)False

Question 13

The attainable production points on a production possibility curve are

Accepted Answer

A)  the horizontal and vertical intercepts. 
B)  the points along the production possibilities frontier. 
C)  the points outside the area enclosed by the production possibilities frontier. 
D)  the points along and inside the production possibility frontier.

Question 14

In a production possibilities frontier model,a point ________ the frontier is productively inefficient.

Accepted Answer

A)  along 
B)  inside 
C)  outside 
D)  at either intercept of

Question 15

Table 2-4
  
Table 2-4 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea.
-Refer to Table 2-4.What is China's opportunity cost of producing one pound of wheat?

Accepted Answer

A)  0.04 units of a digital camera 
B)  4 digital cameras 
C)  25 digital cameras 
D)  40 digital cameras

Question 16

Table 2-3
  
Table 2-3 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces.
-Refer to Table 2-3.What is Haley's opportunity cost of making a bracelet?

Accepted Answer

A)  3/4 of a bracelet 
B)  3 bracelets 
C)  1 1/3 necklaces 
D)  2 necklaces

Question 17

An example of a factor of production is

Accepted Answer

A)  stock issued by Dell. 
B)  the computers exported by Dell. 
C)  a computer produced by an Dell. 
D)  a worker hired by Dell.

Question 18

________ marginal opportunity cost implies that the more resources already devoted to any activity,the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

Accepted Answer

A)  Increasing 
B)  Decreasing 
C)  Constant 
D)  Negative

Question 19

BMW recently decided to build a manufacturing plant in Shenyang,China.At this plant,BMW is able to take advantage of paying lower wages to its Chinese workers than it pays its German workers,but it also sacrifices the high levels of technical training possessed by its German workers.In deciding to open the Shenyang plant,BMW

Accepted Answer

A)  faced no trade-offs because employing lower-wage workers increased efficiency. 
B)  faced a trade-off between higher cost and lower precision. 
C)  adopted a negative technological change because it replaced high-skilled workers with low-skilled workers. 
D)  eroded some of its competitiveness in the luxury car market because of its decreased cost of production.

Question 20

The Great Depression of the 1930s with a large number of workers and factories unemployed would be represented in a production possibilities frontier graph by

Accepted Answer

A)  a point inside the frontier. 
B)  a point outside the frontier. 
C)  a point on the frontier. 
D)  an intercept on either the vertical or the horizontal axis.

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

Figure 2-7 Figure 2-7 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. -Refer to Figure 2-7.What is the opportunity cost of producing 1 pound of cashews in Indonesia?

Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. -Refer to Figure 2-4.A movement from X to Y

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves.If she now produces 60 silk roses and 80 silk leaves,what is the opportunity cost of producing an additional 10 silk roses?

Figure 2-2. -Refer to Figure 2-2.What is the opportunity cost of one pound of vegetables?

The principle of opportunity cost is that

Table 2-3 Table 2-3 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. -Refer to Table 2-3.What is Serena's opportunity cost of making a bracelet?

Table 2-3 Table 2-3 shows the output per week of two jewelers, Serena and Haley. They can either devote their time to making bracelets or making necklaces. -Refer to Table 2-3.Which of the following statements is true?