Question 1

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 2

Which of the following is an examples of spending on factors of production in the circular flow model?

Accepted Answer

A)  Tuan purchases a cappuccino at the student union. 
B)  Laurence rents a car to drive to a wedding in San Diego. 
C)  Yvette pays $50 to join a softball league. 
D)  The "Lucky Ducky" casino buys a new craps table for the casino floor.

Question 3

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 4

Table 2-15
  Table 2-15 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens.
-Refer to Table 2-15. What is Jack's opportunity cost of cultivating a garden?

Accepted Answer

A)  half a garden cultivated 
B)  two lawns mowed 
C)  two-thirds of a garden cultivated. 
D)  one and a half lawns mowed

Question 5

Figure 2-13  Figure 2-13 shows the production possibilities frontiers for Tahiti and Bora Bora. Each country produces two goods, milk and honey.
-Refer to Figure 2-13. If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage in the production of milk?

Accepted Answer

A)  Bora Bora 
B)  They have the same advantage. 
C)  Tahiti 
D)  cannot be determined

Question 6

The payment received by suppliers of entrepreneurial skills is called interest.

Accepted Answer

A) True 
 B)False

Question 7

Figure 2-2  Figure 2-2 above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables.
-Refer to Figure 2-2. What is the opportunity cost of one pound of meat?

Accepted Answer

A)   pound of vegetables 
B)   pounds of vegetables 
C)  1.6 pounds of vegetables 
D)  16 pounds of vegetables

Question 8

An inward shift of a nation's production possibilities frontier can occur due to

Accepted Answer

A)  a reduction in unemployment. 
B)  a natural disaster like a hurricane or bad earthquake. 
C)  a change in the amounts of one good desired. 
D)  an increase in the labor force.

Question 9

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 10

Table 2-12
  Table 2-12 shows the number of labor hours required to produce a canoe and a sailboat in Guatemala and Honduras.
-Refer to Table 2-12. Does either Guatemala or Honduras have an absolute advantage and if so, in what product?

Accepted Answer

A)  Guatemala only has an absolute advantage in producing canoes. 
B)  Honduras only has an absolute advantage in producing canoes. 
C)  Guatemala has an absolute advantage in producing both products. 
D)  Honduras only has an absolute advantage in producing sailboats.

Question 11

Table 2-15
  Table 2-15 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens.
-Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

Accepted Answer

A)  never have to engage in trade with other nations 
B)  increase the variety of products that it can produce with a decrease in resources 
C)  consume a combination of goods that lies outside its own production possibilities frontier 
D)  produce a combination of goods that lies outside its own production possibilities frontier

Question 12

Figure 2-12  Figure 2-12 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.
-Refer to Figure 2-12. What is the opportunity cost of producing 1 pound of cashews in Pakistan?

Accepted Answer

A)  3/8 of a bolt of cotton 
B)  5/8 of a bolt of cotton 
C)  1 3/5 bolts of cotton 
D)  240 bolts of cotton

Question 13

Figure 2-12  Figure 2-12 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.
-Refer to Figure 2-12. Which country has a comparative advantage in the production of cashews?

Accepted Answer

A)  Indonesia 
B)  They have equal productive abilities. 
C)  Pakistan 
D)  neither country

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

If a nation changes its laws to more actively enforce intellectual property rights, all of the following will most likely take place except

Accepted Answer

A)  more software companies will choose to export their products to that country. 
B)  more film makers will choose to do business in that country. 
C)  the black market for intellectual property will become more prosperous in in that country. 
D)  foreign investment in that country will increase.

Question 16

Figure 2-15  Figure 2-15 shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles.
-Refer to Figure 2-15. 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 17

Table 2-11
  Table 2-11 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 2-11. If the two countries specialize and trade, who should export wheat?

Accepted Answer

A)  There is no basis for trade between the two countries. 
B)  China 
C)  South Korea 
D)  They should both be exporting wheat.

Question 18

Any output combination along a production possibility frontier is associated with overused or unattainable resources.

Accepted Answer

A) True 
 B)False

Question 19

Table 2-17
  Table 2-17 shows the output per week of two people, James and Lucy. They can either devote their time to making wagons or making tricycles.
-Refer to Table 2-17. What is Lucy's opportunity cost of making a wagon?

Accepted Answer

A)  3/4 of a wagon 
B)  3 wagons 
C)  1 1/3 tricycles 
D)  2 tricycles

Question 20

Figure 2-15  Figure 2-15 shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles.
-Refer to Figure 2-15. Which country has a comparative advantage in the production of popsicles?

Accepted Answer

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

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

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

Which of the following is an examples of spending on factors of production in the circular flow model?

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.

Table 2-15 Table 2-15 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens. -Refer to Table 2-15. What is Jack's opportunity cost of cultivating a garden?

The payment received by suppliers of entrepreneurial skills is called interest.

Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables. -Refer to Figure 2-2. What is the opportunity cost of one pound of meat?

An inward shift of a nation's production possibilities frontier can occur due to

Table 2-12 Table 2-12 shows the number of labor hours required to produce a canoe and a sailboat in Guatemala and Honduras. -Refer to Table 2-12. Does either Guatemala or Honduras have an absolute advantage and if so, in what product?

Table 2-15 Table 2-15 shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens. -Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

Figure 2-12 Figure 2-12 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. -Refer to Figure 2-12. What is the opportunity cost of producing 1 pound of cashews in Pakistan?

Figure 2-12 Figure 2-12 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews. -Refer to Figure 2-12. Which country has a comparative advantage in the production of cashews?

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?

If a nation changes its laws to more actively enforce intellectual property rights, all of the following will most likely take place except

Figure 2-15 Figure 2-15 shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. -Refer to Figure 2-15. Which country has a comparative advantage in the production of snow cones?

Table 2-11 Table 2-11 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 2-11. If the two countries specialize and trade, who should export wheat?

Any output combination along a production possibility frontier is associated with overused or unattainable resources.

Table 2-17 Table 2-17 shows the output per week of two people, James and Lucy. They can either devote their time to making wagons or making tricycles. -Refer to Table 2-17. What is Lucy's opportunity cost of making a wagon?

Figure 2-15 Figure 2-15 shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. -Refer to Figure 2-15. Which country has a comparative advantage in the production of popsicles?