Macro-Economic The Economic Problem.docx

Macroeconomics The Economic Problem Production Possibilities and Opportunity Cost The production possibilities frontier is the boundary between A those combinations of goods and services that can be produced and those that can be consumed B those resources that are limited and those that are unlimited C those combinations of goods and services that can be produced and those that cannot D those wants that are limited and those that are unlimited Answer C The production possibilities frontier is A upward sloping and reflects unlimited choices B upward sloping and reflects tradeoffs in choices C downward sloping and reflects unlimited choices D downward sloping and reflects tradeoffs in choices Answer D The production possibilities frontier A depicts the boundary between those combinations of goods and services that can be produced and those that cannot given resources and the current state of technology B shows how many goods and services are consumed by each person in a country C is a model that assumes there is no scarcity and no opportunity cost D is a graph with price on the vertical axis and income on the horizontal axis Answer A The production possibilities frontier itself illustrates A all goods that can be produced by an economy B the combination of goods and services that can be produced efficiently C all goods and services that are desired but cannot be produced due to scarce resources D all possible production of capital goods Answer B Question history Previous edition Chapter The production possibilities frontier is the boundary between those combination of goods and services that can be A produced and those that can be consumed B consumed domestically and those that can be consumed by foreigners C produced and those that cannot be produced D consumed and those that cannot be produced Answer C The production possibilities frontier itself shows A the maximum amount of resources available at any given time B combinations of goods and services that do not fully use available resources C the maximum rate of growth of output possible for an economy D the maximum levels of production that can be attained Answer D The production possibilities frontier represents A the maximum amount of labor and capital available to society B combinations of goods and services among which consumers are indifferent C the maximum levels of production that can be attained D the maximum rate of growth of capital and labor in a country Answer C Which of the following is NOT true concerning a society's production possibilities frontier PPF A It reveals the maximum amount of any two goods that can be produced from a given quantity of resources B Tradeoffs occur when moving along a PPF C Production efficiency occurs when production is on the frontier itself D Consumers will receive equal benefits from the two goods illustrated in the PPF Answer D The production possibilities frontier separates A the goods and services that people want from those that they do not want B the types of goods that can be attained from those that can't be attained C the quantities of goods and services that can be produced from those that cannot be produced D the combinations of goods that people value and those that they don't Answer C When producing at a production efficient point A our choice of the goods can be either on or within the production possibilities frontier B we can satisfy our all wants C the opportunity cost of another good is zero D we face a tradeoff and incur an opportunity cost Answer D Question history Modified th edition Harry produces balloon rides and boat rides an hour Harry could produce more balloon rides but to do so he must produce fewer boat rides Harry is his production possibilities frontier A producing inside B producing on C producing outside D producing either inside or on Answer B Question history Modified th edition Production efficiency occurs when production A is at a point beyond the production possibilities frontier B is on the production possibilities frontier or inside it C is at any attainable point D is on the production possibilities frontier Answer D A point outside a production possibilities frontier indicates A that resources are not being used efficiently B an output combination that society cannot attain given its current level of resources and technology C that resources are being used very efficiently D that both goods are characterized by increasing costs Answer B Which of the following is NOT illustrated by a production possibilities frontier A scarcity B opportunity cost C necessity for choice D who gets the goods Answer D A production possibilities frontier figure does NOT illustrate A the limits on production imposed by our limited resources and technology B the exchange of one good or service for another C opportunity cost D attainable and unattainable points Answer B Any production point outside the production possibilities frontier is A unattainable B associated with unused resources C attainable only if prices fall D attainable only if prices rise Answer A Which of the following statements regarding the production possibilities frontier is true A Points outside the frontier are attainable B Points inside the frontier are attainable C Points on the frontier are less efficient than points inside the frontier D None of the above because all of the above statements are false Answer B Jane produces only corn and cloth Taking account of her preferences for corn and cloth A makes her production possibilities frontier straighter B makes her production possibilities frontier steeper C makes her production possibilities frontier flatter D does not affect her production possibilities frontier Answer D On the vertical axis the production possibilities frontier shows on the horizontal axis the production possibilities frontier shows A the quantity of a good the number of workers employed to produce the good B the quantity of a good the price of the good C the quantity of a good a weighted average of resources used to produce the good D the quantity of one good the quantity of another good Answer D Scarcity is represented on a production possibilities frontier figure by A the amount of the good on the horizontal axis forgone B the fact that there are only two goods in the diagram C technological progress D the fact there are attainable and unattainable points Answer D The figure above shows Roger's production possibilities frontier Point a is an point and at that point production is A attainable efficient B attainable inefficient C unattainable inefficient D unattainable efficient Answer B Question history Modified th edition The above figure illustrates that if this country wishes to move from its current production point labeled Current and have more tons of food it can do this by producing A more tons of clothing B fewer tons of clothing C more tons of clothing D fewer tons of clothing Answer D Topic Production Possibilities Suppose the country of Popcorn produces only jets and corn If Popcorn cannot produce any more jets without giving up corn we say that Popcorn has achieved A the highest marginal benefit B production efficiency C the lowest marginal cost D the highest opportunity cost Answer B A society that is producing on its production possibilities frontier is A not utilizing all of its resources B not being technologically efficient C producing too much output D fully utilizing all of its productive resources Answer D If a country must decrease current consumption to increase the amount of capital goods it produces today then it must A be using resources inefficiently today but will be more efficient in the future B be producing along the production possibilities frontier today and its production possibilities frontier will shift outward if it produces more capital goods C must be producing outside the production possibilities frontier and will continue to do so in the future D must not have private ownership of property and will have to follow planning authorities' decisions today and in the future Answer B A country that must decrease production of one good in order to increase the production of another A must be using resources inefficiently B must be producing on its production possibilities frontier C must be producing beyond its production possibilities frontier D must have private ownership of property Answer B Question history Modified th edition If an economy is operating at a point inside the production possibilities frontier then A society's resources are being inefficiently utilized B the PPF curve will shift inward C society's resources are being used to produce too many consumer goods D economic policy must retard further growth of the economy Answer A Any point on a production possibilities frontier PPF itself is A production efficient B unattainable C inefficient D equitable Answer A Question history Modified th edition If production point is inside the production possibilities frontier A it is not possible to produce more of both goods B production is inefficient C in order to produce more of one good less of the other must be produced D production is in the unattainable region Answer B Question history Modified th edition If a society is operating at a point inside its production possibilities frontier then this society's A resources are being inefficiently utilized B production possibilities frontier will shift rightward C resources are being used in the most efficient manner D economy will grow too fast Answer A A president of the United States promises to produce more defense goods without any decreases in the production of other goods This promise can be valid A if the United States is producing at a point on its production possibilities frontier B if the United States is producing at a point inside its production possibilities frontier C if the United States is producing at a point beyond its production possibilities frontier D only if the production possibilities frontier shifts rightward Answer B Using the production possibilities frontier model unemployment is described as producing at a point A on the exact middle of the PPF curve B on either end of the PPF curve C inside the PPF curve D outside the PPF curve Answer C A reduction in the amount of unemployment A shifts the production possibilities frontier outward B moves the economy's point of production closer to the production possibilities frontier C moves the economy's point of production along the production possibilities frontier D moves the economy's point of production further away from the production possibilities frontier Answer B A point inside a production possibilities frontier A could indicate that some resources are unemployed B is unattainable C is more efficient than points on the production possibilities frontier D implies that too much capital and not enough labor are being used Answer A A point inside a production possibilities frontier A could indicate that resources are misallocated B is more efficient than a point on the production possibilities frontier C reflects the fact that more technology needs to be developed to fully employ all resources D implies that too much labor and not enough capital is being used Answer A Production points inside the production possibilities frontier A are unattainable B are attainable only with the full utilization of all resources C are associated with unused or misallocated resources D result in more rapid growth Answer C When resources are assigned to inappropriate tasks that is tasks for which they are not the best match the result will be producing at a point A where the slope of the PPF is positive B where the slope of the PPF is zero C inside the PPF D outside the PPF Answer C Some time ago the government of China required many highly skilled technicians and scientists to engage in unskilled agricultural labor in order to develop proper social attitudes This policy probably caused China to produce A at an inappropriate point along its production possibilities frontier B outside its production possibilities frontier with respect to food but inside with respect to high-technology goods C inside its production possibilities frontier with respect to food but outside with respect to high-technology goods D inside its production possibilities frontier Answer D Sam's production possibilities frontier has good A on the horizontal axis and good B on the vertical axis If Sam is producing at a point inside his frontier then he A can increase production of both goods with no increase in resources B is fully using all his resources C values good A more than good B D values good B more than good A Answer A A situation in which some resources are NOT fully utilized is represented in a production possibilities frontier diagram by A any point on either the horizontal or the vertical axis B the midpoint of the production possibilities frontier C a point outside the production possibilities frontier D a point inside the production possibilities frontier Answer D Consider the PPF for office buildings and housing shown in the figure above Which point in the diagram shows that resources to produce office buildings and housing are being misallocated unused or both A Point F B Point G C Point H D Point I Answer A Refer to the production possibilities frontier in the figure above Which production point indicates that resources are NOT fully utilized or are misallocated A Point a B Point b C Point c D Point e Answer C Refer to the production possibilities frontier in the figure above Which production point is unattainable A Point a B Point b C Point c D Point e Answer D Refer to the production possibilities frontier in the figure above Production point represents an production point A b unattainable B c unattainable C e inefficient D c inefficient Answer D In the figure above moving from production at point d to production at point a requires A technological change B a decrease in unemployment C decreasing the output of consumer goods in order to boost the output of capital goods D both capital accumulation and a decrease in unemployment Answer C Topic Tradeoffs Refer to the production possibilities frontier in the figure above Suppose a country is producing at point a A movement to point means that the country A d must give up million capital goods B e is not operating efficiently C d gives up million consumer goods D b is producing at an inefficient point Answer A Refer to the production possibilities frontier in the figure above If the country moves from point a to point c the opportunity cost of the move is A million capital goods B million capital goods C million capital goods D million consumption goods Answer B Point C on the production possibilities frontier in the above diagram illustrates A a point that achieves production efficiency B a combination of goods and services that cannot be produced efficiently C all goods and services that are desired but cannot be produced due to scarce resources D a production point that has underutilization of resources Answer A Question history Modified th edition In the above figure which point represents an unattainable production combination of the two goods A Point C B Point L C Point D D Point N Answer B In the above figure which point represents an attainable but inefficient production point A Point C B Point N C Point L D Point D Answer B A tradeoff is A represented by a point inside a PPF B represented by a point outside a PPF C a constraint that requires giving up one thing to get another D a transaction at a price either above or below the equilibrium price Answer C Topic Tradeoffs When producing goods and services along a PPF tradeoffs exist because A not all production is efficient B society has only a limited amount of productive resources C buyers and sellers often must negotiate prices D human wants and needs are limited at a particular point in time Answer B Topic Tradeoffs Question history Modified th edition A tradeoff is illustrated by A a point inside the PPF B a point outside the PPF C a change in the slope of the PPF D the negative slope of the PPF Answer D Topic Tradeoffs Moving from one point on the production possibilities frontier to another A involves a tradeoff but does not incur an opportunity cost B involves an opportunity cost but no tradeoff C involves a tradeoff and incurs an opportunity cost D involves no tradeoff but it does incur an opportunity cost Answer C and Tradeoff When we choose a particular option we must give up alternative options The highest-valued alternative forgone is the of the option chosen A opportunity cost B comparative advantage C nonmonetary cost D absolute advantage Answer A Ted can study for his economics exam or go to a concert He decides to study for his economics exam instead of going to the concert The concert he will miss is Ted's of studying for the exam A opportunity cost B explicit cost C implicit cost D discretionary cost Answer A Opportunity cost is best defined as A the amount of money that an individual is willing to pay to purchase a good that means a great deal to that person B the amount of money lost by one individual in an exchange process so that another individual might gain C the highest-valued alternative that is forgone when choosing among various alternatives D a situation in which one individual cannot have an absolute advantage over another individual in the production of all goods Answer C Most students attending college pay tuition and are unable to hold a full-time job For these students tuition is A part of the opportunity cost of going to college So are their forgone earnings from not holding a full-time job B part of the opportunity cost of going to college Their forgone earnings from not holding a full-time job are not part of the opportunity cost of attending college C not part of the opportunity cost of going to college but their forgone earnings from not holding a full-time job are part of the opportunity cost of attending college D not part of the opportunity cost of going to college Neither are their forgone earnings from not holding a full-time job Answer A If Sam is producing at a point on his production possibilities frontier then he A cannot produce any more of either good B can produce more of one good only by producing less of the other C will be unable to gain from trade D is not subject to scarcity Answer B Opportunity cost is illustrated in a production possibilities frontier PPF by a movement A from the region within the PPF to a point on the PPF B from the region within the PPF to the region outside of the PPF C from the region outside of the PPF to a point on the PPF D along the PPF where to gain more of one good it is necessary to give some of another good Answer D When moving along the production possibilities frontier opportunity cost is measured as the A increase in the quantity produced of one good divided by the decrease in the quantity produced of another good B decrease in the quantity produced of one good divided by the increase in the quantity produced of another good C quantity produced of one good divided by the quantity produced of another good D quantity produced of one good multiplied by the quantity produced of another good Answer B While producing on the production possibilities frontier if additional units of a good could be produced at a constant opportunity cost the production possibilities frontier would be A bowed outward B bowed inward C positively sloped D a straight line Answer D Opportunity cost is represented on the production possibilities frontier by A attainable and unattainable points B efficient and inefficient points C the amount of good Y forgone when more of good X is produced D technological progress Answer C At one point along a PPF tons of coffee and tons of bananas are produced At another point along the same PPF tons of coffee and tons of bananas are produced The opportunity cost of a ton of coffee between these points is A of a ton of bananas per ton of coffee B of a ton of bananas per ton of coffee C of a ton of bananas per ton of coffee D tons of bananas per ton of coffee Answer D Question history Modified th edition When operating on its PPF a country can produce tons of butter and cars OR tons of butter and cars The opportunity cost of ton of butter is cars per ton of butter A B C D Answer C In one day Sue can change the oil on cars or change the tires on cars In one day Fred can change the oil on cars or change the tires on cars Sue's opportunity cost of changing oil is than Fred's and her opportunity cost for changing tires is than Fred's A greater less B less greater C less less D greater greater Answer A At one point along a PPF pizzas and sandwiches can be produced At another point along the same PPF pizzas and sandwiches can be produced The opportunity cost of a pizza between these points is per pizza A of a sandwich B of a sandwich C of a sandwich D sandwiches Answer D At one point along a PPF tons of wheat are produced while tons of rice are produced At another point along the same PPF tons of wheat are produced while tons of rice are produced The opportunity cost of producing a ton of wheat between these points is per ton of wheat A ton of rice B tons of rice C ton of rice D ton of rice Answer B Point Production of grain tons Production of cars cars A B C D E F The table above lists six points on the production possibilities frontier for grain and cars Given this information which of the following combinations is unattainable A tons of grain and cars B tons of grain and cars C tons of grain and cars D tons of grain and cars Answer B The table above lists six points on the production possibilities frontier for grain and cars From this information you can conclude that production is inefficient if this economy produces A tons of grain and cars B tons of grain and cars C tons of grain and cars D tons of grain and cars Answer C The table above lists six points on the production possibilities frontier for grain and cars What is the opportunity cost of producing the th ton of grain A cars per ton of grain B cars per ton of grain C cars per ton of grain D cars per ton of grain Answer C Question history Modified th edition The table above lists six points on the production possibilities frontier for grain and cars What is the opportunity cost of producing the th car A tons of grain per car B tons of grain per car C tons of grain per car D tons of grain per car Answer D Question history Modified th edition Point Production chocolate bars Production cans of cola A B C D E The above table shows production points on Sweet-Tooth Land's production possibilities frontier Which of the following statements is TRUE A Producing chocolate bars and cans of cola is both attainable and efficient B Producing chocolate bars and cans of cola is attainable but inefficient C Producing chocolate bars and cans of cola is only attainable with an increase in technology D Producing chocolate bars and cans of cola is unattainable and inefficient Answer A The above table shows production points on Sweet-Tooth Land's production possibilities frontier Which of the following is an example of a point that is inefficient A chocolate bars and cans of cola B chocolate bars and cans of cola C chocolate bars and cans of cola D chocolate bars and cans of cola Answer D The above table shows production points on Sweet-Tooth Land's production possibilities frontier What is the opportunity cost of one chocolate bar if Sweet-tooth Land moves from point C to point D A cans of cola per chocolate bar B cans of cola per chocolate bar C cans of cola per chocolate bar D can of cola per chocolate bar Answer C Question history Modified th edition The above table shows production points on Sweet-Tooth Land's production possibilities frontier What is the opportunity cost of one can of cola if Sweet-tooth Land moves from point C to point B A chocolate bars per can of cola B chocolate bars per can of cola C chocolate bars per can of cola D chocolate bars per can of cola Answer D Question history Modified th edition The above table shows production points on Sweet-Tooth Land's production possibilities frontier A movement from represents the greatest opportunity cost of increasing cola production A point E to point D B point D to point C C point C to point B D point B to point A Answer D Point Production of X Production of Y A B C D E The above table shows production combinations on a country's production possibilities frontier Which of the following is an example of a point that is unattainable A units of good X and units of good Y B units of good X and units of good Y C units of good X and units of good Y D units of good X and units of good Y Answer C The above table shows production combinations on a country's production possibilities frontier Which of the following is an example of a production point that is inefficient A units of good X and units of good Y B units of good X and units of good Y C units of good X and units of good Y D units of good X and units of good Y Answer D The above table shows production combinations on a country's production possibilities frontier Which of the following points signifies efficient production A units of good X and units of good Y B units of good X and units of good Y C units of good X and units of good Y D units of good X and unit of good Y Answer A The above table shows production combinations on a country's production possibilities frontier The opportunity cost of increasing the production of Y from to units is units of good X per unit of good Y A B C D There is no opportunity cost when moving from one point to another along a production possibilities frontier so none of the above answers is correct Answer C Question history Modified th edition The above table shows production combinations on a country's production possibilities frontier What is the opportunity cost of one unit of Y when the production of good Y increases from to units A units of good X per unit of good Y B units of good X per unit of good Y C unit of good X per unit of good Y D There is no opportunity cost when moving from one point to another along a production possibilities frontier Answer C Question history Modified th edition The above table shows production combinations on a country's production possibilities frontier What is the opportunity cost of increasing the production of X from to units A units of good Y per unit of good X B units of good Y per unit of good X C units of good Y per unit of good X D units of good Y per unit of good X Answer C Question history Modified th edition The above table shows production combinations on a country's production possibilities frontier A movement from involves the greatest opportunity cost of increasing the production of good Y A point E to point D B point D to point C C point C to point B D point B to point A Answer D The opportunity cost of moving from point a to point b in the above figure is A zero B pairs of socks per sweater C pairs of socks D sweaters Answer A The opportunity cost of producing a unit of consumption at point b in the figure point a A is greater than at B is less than at C cannot be compared with D is the same as Answer B In the above figure which of the following is TRUE regarding the movements from point A to B and from point C to D I The movement from point A to B shows that the economy has chosen to produce more jets II The movement from point C to D shows that the economy has chosen to produce more jets III The movement from point A to B and from point C to D have the same opportunity cost A I and II B I and III C II and III D I II and III Answer A Molly just graduated from high school The figure shows her possibilities frontier If Molly goes to college she will move from point M to point K In terms of consumption goods Molly's opportunity cost of going to college is A MK B OL C KL D LM Answer D In the figure above the curve is known as the A production possibilities frontier B substitution options frontier C production function D opportunity cost curve Answer A The figure above illustrates that if this country wishes to have F - F additional food by moving from point A to point B it will A have to find additional workers because the country already is operating on its production possibilities frontier B be unable to do so until additional technological progress is made C have to sacrifice C - C clothing in order to free the resources necessary to produce the additional food D require that all the unemployed resources in the country be put to work Answer C The bowed outward shape of the production possibilities frontier in the above figure indicates that A some resources are better suited for producing computers B the opportunity cost of producing more computers decreases as more computers are produced C computer technology is subject to the principle of decreasing costs D All of the above answers are correct Answer A According to the figure above the opportunity cost of producing another computer is A higher at A B higher at B C the same at every point along the frontier D different at most points along the frontier but equal at points A and B because they are equally distant from the axes Answer B In the production possibilities frontier depicted in the figure above which of the following combinations of hats and bananas is unattainable A million pounds of bananas and million hats B million pounds of bananas and million hats C pounds of bananas and million hats D million pounds of bananas and million hats Answer A In the production possibilities frontier depicted in the figure above which of the following combinations of hats and bananas is inefficient A million pounds of bananas and million hats B million pounds of bananas and million hats C pounds of bananas and million hats D million pounds of bananas and million hats Answer D In the production possibilities frontier depicted in the figure above what is the opportunity cost of increasing the production of bananas from two million pounds to three million pounds A hat per pound of bananas B hat per pound of bananas C hats per pound of bananas D hats per pound of bananas Answer B Question history Modified th edition Jane produces only corn measured in tons and cloth measured in bolts For her the opportunity cost of one more ton of corn is A the same as the opportunity cost of one more bolt of cloth B the inverse of the opportunity cost of one more bolt of cloth C the ratio of all the bolts of cloth she produces to all the tons of corn she produces D the ratio of all the tons of corn she produces to all the bolts of cloth she produces Answer B is a Ratio The principle of increasing opportunity cost leads to A a production possibilities frontier PPF that is bowed inward from the origin B a production possibilities frontier PPF that is bowed outward from the origin C an inward shift of the production possibilities frontier PPF D an outward shift of the production possibilities frontier PPF Answer B A PPF bows outward because A not all resources are equally productive in all activities B consumers prefer about equal amounts of the different goods C entrepreneurial talent is more abundant than human capital D resources are used inefficiently Answer A Generally opportunity costs increase and the production possibilities frontier bows outward Why A Unemployment is inevitable B Resources are not equally useful in all activities C Technology is slow to change D Labor is scarcer than capital Answer B Increasing opportunity cost occurs along a production possibilities frontier because A resources are not equally productive in all activities B increasing wants need to be satisfied C in order to produce more of one good decreasing amounts of another good must be sacrificed D production takes time Answer A Increasing opportunity cost while moving along a production possibilities frontier is the result of A taxes B firms' needs to produce profits C the fact that it is more difficult to use resources efficiently the more society produces D the fact that resources are not equally productive in alternative uses Answer D Increasing opportunity cost implies that A producing additional units of one good results in proportionately smaller reductions in the output of the other good B producing additional units of one good results in increasing amounts of lost output of the other good C the production possibilities frontier will be a straight line D the society will be producing inside its production possibilities frontier Answer B When the production possibilities frontier is bowed outwards the opportunity cost of producing more of one good A increases in terms of the amount foregone of the other good B decreases in terms of the amount foregone of the other good C remains constant D cannot be determined Answer A As a country that has a bowed-out production possibilities frontier produces more of one good the opportunity cost of a unit of that good A might increase or decrease B remains the same C increases D decreases Answer C As we move along a bowed-out production possibility frontier producing more tacos and less pizza the opportunity cost of a pizza A increases B remains the same C decreases D increases and then decreases Answer C The production possibilities frontier bows outward because A opportunity costs are decreasing as the production of a good increases B opportunity costs are increasing as the production of a good increases C opportunity costs are fixed as the production of a good increases D resources are of uniform quality Answer B The fact of increasing opportunity costs means that a production possibilities frontier will A be a straight line B reach a maximum and then gradually decrease C bow outward D shift outward over time Answer C A bowed outward production possibilities frontier occurs when A opportunity costs are constant B resources are not scarce C as more of a good is produced producing additional units of it require greater reductions in the other good D the society is operating on the production possibilities frontier Answer C When the production possibilities frontier bows outward from the origin A some of society's resources are unemployed B opportunity costs are constant C opportunity costs are increasing D opportunity costs are decreasing Answer C The slope of a production possibilities frontier that displays increasing opportunity cost is A positive and constant B negative and constant C steeper near the horizontal intercept than near the vertical intercept D steeper near the vertical intercept than near the horizontal intercept Answer C The fact that individual productive resources are NOT equally useful in all activities A implies that a production possibilities frontier will be bowed outward B implies that gain from specialization and trade is unlikely C follows from the law of demand D implies a linear production possibilities frontier Answer A Consider a PPF for tapes and soda If the opportunity cost of a tape increases as the quantity of tapes produced increases and also the opportunity cost of a soda increases as the quantity of soda produced increases then the PPF between the two goods will be A a straight downward-sloping line B a straight upward-sloping line C bowed outward D All of the above are possible and more information is needed to determine which answer is correct Answer C One point on a PPF shows production levels at tons of coffee and tons of bananas Remaining on the PPF an increase of banana production to tons shows coffee production at tons Still remaining on the PPF coffee production at tons allows banana production at tons The opportunity cost of a ton of bananas is A constant because coffee production decreased by the same amount each time B decreasing since the increase in banana production is less at each point considered C to that is every ton of coffee given up will result in more tons of bananas D increasing from ton of coffee per ton of bananas to ton of coffee per ton of bananas Answer D The nation's production possibilities frontier is bowed outward Suppose that the government decides to increase the production of armaments by billion and that as a result the output of consumer goods falls by billion If a further billion increase beyond the initial billion increase in armaments output is sought we can expect that the output of consumer goods and services will fall further by A less than billion B billion C more than billion D There is not enough information to determine the answer Answer C Production possibilities Possibility Pizza per hour Soda cases per hour A B C D E F In the above table the production of pizzas and cases of soda is A impossible unless more resources become available or technology improves B feasible but would involve unemployed or misallocated resources C possible only if the economy produces with maximum efficiency D possible only if there is inflation Answer A In the above table the production of pizzas and cases of soda is A impossible unless more resources become available B feasible but would involve unemployed or misallocated resources C possible only if the economy produces with maximum efficiency D possible only if there is inflation Answer B In the above table the opportunity cost of the nd pizza is A cases of soda per pizza B cases of soda per pizza C cases of soda per pizza D cases of soda per pizza Answer B Question history Modified th edition Based on the above table as the production of pizza increases the opportunity cost of pizza in terms of forgone cases of soda A increases B decreases C does not change D initially increases then decreases Answer A As Rainclouds Inc moves downward along its production possibilities frontier illustrated in the figure above the opportunity cost of a raincoat A decreases B depends on the initial quantity produced C increases D remains the same Answer A In the figure above the point labeled C in the production possibilities frontier A is unattainable it is beyond the productive capability of this country B represents a highly desirable output level in the long run because it conserves scarce resources C represents either unemployed or inefficiently utilized resources D represents the maximum sustainable output level for this nation in the long run Answer C The country whose production possibilities frontier is illustrated above is currently at position A on the production possibilities frontier If it wishes to move to position B it will A find this change impossible to achieve given the resources it currently possesses B have to employ all currently unemployed resources to accomplish this C incur an opportunity cost of having to give up some butter in order to make the additional amount of guns desired D be able to make the desired switch only if there is a significant improvement in the technology available to the nation Answer C In the figure above moving from point B to point D A has an opportunity cost of one ton of butter per month B has an opportunity cost of one ton of guns per month C requires an increase in technology D is impossible Answer A In the figure above which of the following movements has the largest opportunity cost A from point C to point B B from point C to point A C from point B to point A D from point A to point E Answer D A PPF such as the one above that bows outward illustrates A decreasing opportunity cost B increasing opportunity cost C that technology is improving D that productivity is falling Answer B In the figure above A moving from point a to point b would require new technology B production at point b is efficient whereas production at point a is not efficient C some resources must be unemployed at point c D opportunity costs are decreasing Answer B As we increase the production of computers we find that we must give up larger and larger amounts of DVD players per computer A This situation illustrates increasing opportunity cost B As a result we should specialize in the production of DVD players C The production possibilities frontier for computers and DVD players is a straight line D DVD players will be more highly regarded by consumers than computers Answer A As output moves from point a to point b to point c along the PPF in the above figure the opportunity cost of one more unit of good X A rises The opportunity cost of one more unit of good Y also rises B rises The opportunity cost of one more unit of good Y falls C falls The opportunity cost of one more unit of good Y rises D falls The opportunity cost of one more unit of good Y also falls Answer B Refer to the production possibilities frontier in the figure above More of good X must be given up per unit of good Y gained when moving from point b to point a than when moving from point c to point b This fact A illustrates decreasing opportunity cost B illustrates increasing opportunity cost C indicates that good X is more capital intensive than good Y D indicates that good Y is more capital intensive than good X Answer B The figure above illustrates Mary's production possibilities frontier If Mary wants to move from point b to point c she must A improve technology B increase the accumulation of capital C give up some of good Y in order to obtain more of good X D give up some of good X in order to obtain more of good Y Answer C The above figure illustrates Mary's production possibilities frontier If Mary wants to move from point d to point c she must A improve technology B increase her accumulation of capital C give up some of good X in order to obtain more of good Y D give up some of good Y in order to obtain more of good X Answer C The above figure illustrates Mary's production possibilities frontier Which of the following movements show opportunity costs increasing A point a to point b to point c B point a to point f C point f to point a D point c to point f to point d Answer A Refer to the production possibilities frontier figure above Which of the following movements requires the largest opportunity cost in terms of good X forgone per extra unit of good Y A from point e to point d B from point d to point c C from point c to point b D from point b to point a Answer D Refer to the production possibilities frontier in the figure above Which of the following movements requires the largest opportunity cost in terms of good Y forgone per extra unit of good X A from point a to point b B from point b to point c C from point c to point d D from point d to point e Answer D Point Production of X Production of Y a b c d e Refer to the table above which gives five points on a nation's PPF The production of units of X and units of Y is A impossible given the available resources B possible but leaves some resources less than fully used or misallocated C on the production possibilities frontier between points c and d D on the production possibilities frontier between points b and c Answer B Refer to the table above which gives five points on a nation's PPF The opportunity cost of increasing the production of Y from to units is a total of A unit of X per unit of Y B unit of X per unit of Y C unit of X per unit of Y D unit of X per unit of Y Answer B Question history Modified th edition Refer to the table above which gives five points on a nation's PPF As we increase the production of X A the output of Y increases B unemployment increases C the opportunity cost of each new unit of X increases D the opportunity cost of each new unit of X decreases Answer C If the United States can increase its production of automobiles without decreasing its production of any other good the United States must have been producing at a point A within its PPF B on its PPF C beyond its PPF D None of the above is correct because increasing the production of one good without decreasing the production of another good is impossible Answer A Topic Study Guide Question Production Possibilities Frontier Production points inside the PPF are A efficient but not attainable B efficient and attainable C inefficient and not attainable D inefficient and attainable Answer D Topic Study Guide Question Production Possibilities Frontier In the above figure at point a what is the opportunity cost of producing one more audio tape A video tape per audio tape B video tapes per audio tape C video tapes per audio tape D There is no opportunity cost Answer A Topic Study Guide Question Opportunity Cost Question history Modified th edition In the above figure at point b what is the opportunity cost of producing more audio tapes A video tape per audio tape B video tape per audio tape C video tapes per audio tape D There is no opportunity cost Answer A Topic Study Guide Question Opportunity Cost Question history Modified th edition Production efficiency means that A scarcity is no longer a problem B producing more of one good is possible only if the production of some other good is decreased C as few resources as possible are being used in production D producing another unit of the good has no opportunity cost Answer B The existence of the tradeoff along the PPF means that the PPF is A bowed outward B linear C negatively sloped D positively sloped Answer C The bowed-outward shape of a PPF A is due to capital accumulation B reflects the unequal application of technology in production C illustrates the fact that no opportunity cost is incurred for increasing the production of the good measured on the horizontal axis but it is incurred to increase production of the good measured along the vertical axis D is due to the existence of increasing opportunity cost Answer D Topic Study Guide Question Opportunity Cost Moving along a bowed-out PPF between milk and cotton as more milk is produced the marginal cost of an additional gallon of milk A rises B does not change C falls D probably changes but in an ambiguous direction Answer A Topic Study Guide Question Increasing Opportunity Cost A nation can produce at a point outside its PPF A when it trades with other nations B when it produces inefficiently C when its PPF is bowed out D never Answer D Topic Study Guide Question Production Possibilities Frontier In the above figure point A is and point B is A attainable attainable B attainable unattainable C unattainable attainable D unattainable unattainable Answer A Topic Parallel MyEconLab Questions Production Possibilities Frontier Abe can catch pounds of fish an hour or pick pounds of fruit an hour He works an -hour day spending hours picking fruit and hours catching fish Calculate Abe's opportunity cost of a pound of fruit A minutes B hours a day C pounds of fish D pounds of fish Answer D Topic Parallel MyEconLab Questions Opportunity Cost In the figure above if the quantity of yogurt produced increases from gallons an hour to gallons an hour the opportunity cost of a gallon of yogurt in terms of ice cream is A half a gallon B gallon C gallons D gallons Answer B Topic Parallel MyEconLab Questions Opportunity Cost Claire and Dag are farmers who produce beef and corn In a year Claire can produce tons of beef or bushels of corn while Dag can produce tons of beef or bushels of corn The opportunity cost of producing a ton of beef is A bushels of corn for Dag and bushels of corn for Claire B bushels of corn for Dag and bushels of corn for Claire C bushels of corn for Dag and bushels of corn for Claire D days for Dag and days for Claire Answer B Topic Parallel MyEconLab Questions Opportunity Cost Abe can catch pounds of fish an hour or pick pounds of fruit Zeb can catch pounds of fish an hour or pick pounds of fruit The opportunity cost of fish is for Abe than for Zeb and the opportunity cost of fruit is for Abe than for Zeb A higher lower B lower higher C higher higher D lower lower Answer A Topic Parallel MyEconLab Questions Opportunity Cost Using Resources Efficiently Marginal cost is the opportunity cost A that your activity imposes on someone else B that arises from producing one more unit of a good or service C of a good or service that exceeds its benefit D of a good or service divided by the number of units produced Answer B Topic Marginal Cost Marginal cost is the one more unit of a good and of the good increases A opportunity cost of producing increases as production B opportunity cost of producing decreases as production C price that must be paid to consume increases as consumption D price that must be paid to consume decreases as consumption Answer A Topic Marginal Cost Question history Modified th edition Moving along a PPF marginal cost is A the cost of producing the first unit of a good or service B the total cost less the production of the other good or service C greater than the opportunity cost D equal to the opportunity cost of producing one more unit of a good or service Answer D Topic Marginal Cost The quantity of shoes produced is measured along the horizontal axis of a PPF and the quantity of shirts is measured along the vertical axis As you move down toward the right along the PPF the marginal cost of A shoes decreases B shoes increases C shirts increases D shoes and shirts is equal at the midpoint between the vertical and horizontal axis Answer B and Marginal Cost Marginal cost A increases as more is produced B remains constant as more is produced C decreases as more is produced D decreases as marginal benefits decrease Answer A Topic Marginal Cost Question history Modified th edition When the opportunity cost of producing more of a good is increasing the marginal cost of producing more of the good is A decreasing B constant C increasing D More information is needed to answer the question Answer C Topic Marginal Cost A marginal cost curve A is upward sloping B shows that as more of a good is produced opportunity costs of producing another unit increase C is bowed inward so that its slope can become negative D Both answers A and B are correct Answer D Topic Marginal Cost Quantity of beans bushels Quantity of carrots bushels The table above represents different points along a production possibilities curve What is the marginal cost of moving from bushels to bushels of beans A bushels of carrots per bushel of beans B bushels of carrots per bushel of beans C bushels of carrots per bushel of beans D bushels of carrots per bushel of beans Answer C Topic Marginal Cost Victor currently produces nuts and bolts at point a in the figure Victor's marginal cost of producing an additional nut is A bolt per nut B bolt per nut C bolts per nut D bolts per nut Answer A Topic Marginal Cost In the figure above the marginal cost of producing a computer A increases as more computers are produced B stays the same as more computers are produced C decreases as more computers are produced D is the same as the marginal cost of producing a television set Answer A Topic Marginal Cost In the figure above the marginal cost of the second computer is A television sets per computer B television sets per computer C television sets per computer D television sets per computer Answer B Topic Marginal Cost Question history Modified th edition In the figure above the marginal cost of the fifth computer is A television sets per computer B television sets per computer C television sets per computer D television sets per computer Answer C Topic Marginal Cost Question history Modified th edition Marginal cost curves slope A upward because of increasing opportunity cost B upward because of decreasing opportunity cost C downward because of increasing opportunity cost D downward because of decreasing opportunity cost Answer A Topic Marginal Cost Question history Modified th edition Marginal benefit is the benefit A that your activity provides to someone else B of producing a good or service when the total benefit from the good or service exceeds its total cost C that is received from consuming one more unit of a good or service D of consuming another good or service divided by the total number of goods or services produced Answer C Marginal benefit is the A benefit that a person receives from consuming one more unit of a good or service B amount of one good or service that a person gains when another good or service is consumed C minimum amount a person is willing to pay for one more unit of a good or service D dollars sacrificed to purchase a good or service Answer A The marginal benefit from a good is the amount a person is willing to pay for A all of the good the person consumes B one more unit of the good C all of the units of the good the person consumes divided by the number of units he or she purchases D one more unit of the good divided by the number of units purchased Answer B Question history Modified th edition We measure the marginal of a good by what a for another unit of the good A benefit person must pay B cost person is willing to pay C benefit person is willing to pay D cost person's preferences are Answer C The marginal benefit of a good or service A increases as more is consumed B decreases as more is consumed C remains constant as more is consumed D decreases as less is consumed Answer B Question history Modified th edition The principle of decreasing marginal benefit means that as the quantity of a good consumed A decreases its marginal benefit decreases B increases its marginal benefit decreases C increases its total benefit decreases D None of the above answers is correct Answer B As a person consumes more of a good the A marginal benefit increases B marginal benefit decreases C marginal benefit increases or decreases depending whether or not the economy is on the PPF D price of the good falls Answer B Question history Modified th edition The principle of decreasing marginal benefit implies that the A additional benefit from obtaining one more of a good or service decreases as more is consumed B additional benefit from obtaining one more of a good or service increases as more is consumed C total benefit from obtaining more of a good or service decreases as more is consumed D total benefit from obtaining more of a good or service remains the same as more is consumed Answer A Which of the following is TRUE regarding marginal benefit I The marginal benefit curve shows the benefit firms receive by producing another unit of a good II Marginal benefit increases as more of a good is consumed A I and II B I only C II only D neither I nor II Answer D Question history Modified th edition Susan likes to drink sodas The soda Susan drinks the of the last soda A more higher the marginal benefit B less higher the opportunity cost C less lower the marginal benefit D more lower the marginal benefit Answer D Marginal benefit is the benefit one more unit of the good and of the good increases A of producing increases as production B of producing decreases as production C from consuming increases as consumption D from consuming decreases as consumption Answer D A marginal benefit curve shows A the efficient use of resources B the quantity of one good that must be forgone to get more of another good C the quantity of one good that people are willing to forgo to get another unit of another good D there are increasing opportunity costs Answer C Marginal benefit curves slope A upward because of increasing opportunity cost B upward but not because of increasing opportunity cost C downward because of increasing opportunity cost D downward but not because of increasing opportunity cost Answer D Marginal benefit curves slope and marginal cost curves slope A upward upward B upward downward C downward downward D downward upward Answer D Question history Modified th edition Suppose that the government is trying to decide between allocating its resources to build more dams or to build more freeways In terms of forgone dams as more freeways are constructed the marginal benefit of additional freeways and the marginal cost of additional freeways A increases increases B increases decreases C decreases increases D decreases decreases Answer C and Marginal Cost Television sets millions per year Willingness to pay computers per television set In the table above the marginal benefit of the millionth television set is A negative computers per television set B computers per television set C computers per television set D computer per television set Answer D Resource use is allocatively efficient when A we produce the goods with the highest opportunity cost B we produce the goods with the lowest opportunity cost C we cannot produce more goods and services D we produce the amount of the different goods we value most highly Answer D Topic Allocatively Efficient Use of Resources When we cannot produce more of any good without giving up some other good that we value more highly we have achieved A production B equity C allocative efficiency D the production point where the marginal benefit exceeds the marginal cost by as much as possible Answer C Topic Allocatively Efficient Use of Resources Question history Modified th edition If the marginal benefit of a good exceeds its marginal cost A we've achieved efficient resource use B we should produce more to achieve the allocatively efficient use of resources C we should produce less to achieve the allocatively efficient use of resources D we cannot tell if more or less should be produced to achieve the allocatively efficient use of resources Answer B Topic Allocatively Efficient Use of Resources When an economy produces at its allocatively efficient production point A scarcity is not a problem B resources are not limited C a society can increase the production of all goods D a society can increase the production of one good only by decreasing the production of some other good that is valued more highly Answer D Topic Allocatively Efficient Use of Resources Allocative efficiency occurs when A we cannot produce more of any good without giving up some other good that we value more highly B we cannot produce more of any one good without giving up some other good C marginal benefit exceeds marginal cost D opportunity costs are decreasing Answer A Topic Allocatively Efficient Use of Resources Resource use is allocatively efficient when marginal benefit is A greater than marginal cost B equal to marginal cost C less than marginal cost D at its maximum value Answer B Topic Allocatively Efficient Use of Resources Resource use is allocatively efficient A when marginal benefit equals marginal cost B whenever marginal benefit exceeds marginal cost C whenever marginal cost exceeds marginal benefit D when the maximum possible quantity is being produced Answer A Topic Allocatively Efficient Use of Resources Resource use is allocatively efficient if the A total cost of what the resource produces is less than the total benefit of what is produced B total cost of what the resource produces is equal to the total benefit of what is produced C marginal benefit of what the resource produces has diminished to zero D marginal cost of what the resource produces is equal to the marginal benefit of what is produced Answer D Topic Allocatively Efficient Use of Resources A country produces only pencils and erasers Pencil production is allocatively efficient if the marginal of a pencil equals the marginal of A cost benefit an eraser B cost cost an eraser C benefit benefit an eraser D benefit cost a pencil Answer D Topic Allocatively Efficient Use of Resources If the marginal benefit of consuming another unit of a good is positive then to reach the allocatively efficient level of output more of the good should be produced and consumed A no matter what B as long as the consumer can afford to pay for it C if the total benefit of the good is greater than its total cost D if the marginal benefit of the good is greater than its marginal cost Answer D Topic Allocatively Efficient Use of Resources Question history Modified th edition Quantity pizzas per day Marginal benefit cans per day Marginal cost cans per day The table above shows the marginal benefit from pizza and the marginal cost of pizza in cans of soda forgone If pizzas are produced the quantity of soda that people are willing to give up to get an additional pizza is more than the quantity of soda that they must give up to get that additional pizza A any quantity other than B C more than D fewer than Answer D Topic Allocatively Efficient Use of Resources The table above shows the marginal benefit from pizza and the marginal cost of pizza in cans of soda forgone The allocatively efficient quantity of pizza is pizzas per day A B C more than D Answer D Topic Allocatively Efficient Use of Resources Question history New th edition Camel rides per day Marginal benefit tubes of sunscreen Marginal cost tubes of sunscreen Leisure Land produces only sun screen and camel rides The table shows the marginal benefit and marginal cost schedules for sun screen and camel rides The allocatively efficient number of camel rides is A ride per day because the marginal benefit exceeds the marginal cost by as much as possible B rides per day C rides per day D rides per day because that is the maximum number of rides Answer C Topic Allocatively Efficient Use of Resources Quantity of pizza Marginal benefit Marginal cost The table above represents the marginal cost and marginal benefit associated with pizza in terms of movies What quantity of pizza should be produced if resources are to be used efficiently A pizzas B pizzas C pizzas D pizzas Answer C Topic Allocatively Efficient Use of Resources According to the diagram in the above figure what is the marginal benefit of consuming the millionth gallon of gasoline per month A pounds of shrimp per gallon of gasoline B pounds of shrimp per gallon of gasoline C pounds of shrimp per gallon of gasoline D pound of shrimp per gallon of gasoline Answer D Question history Modified th edition According to the diagram in the figure above what is the marginal cost of producing the millionth gallon of gasoline per month A pounds of shrimp per gallon of gasoline B pounds of shrimp per gallon of gasoline C pounds of shrimp per gallon of gasoline D pound of shrimp per gallon of gasoline Answer A Topic Marginal Cost Question history Modified th edition According to the diagram in the figure above an allocatively efficient use of resources requires that production and consumption of gasoline be A million gallons of gasoline per month B million gallons of gasoline per month C million gallons of gasoline per month D million gallons of gasoline per month Answer B Topic Allocatively Efficient Use of Resources Question history Modified th edition In the above figure the curve labeled a is the curve and the curve labeled b is the curve A marginal cost marginal benefit B marginal cost trade line C marginal benefit trade line D production possibilities frontier trade line Answer A and Marginal Cost In the above figure curve b shows the A bottles of soda that people are willing to forgo to get another bicycle B bottles of soda that people must forgo to get another bicycle C benefits of producing more bicycles is greater than the benefits of producing more soda D benefits of producing more soda is greater than the benefits of producing more bicycles Answer A In the above figure when bicycles are produced each month we can see that A the marginal benefit from another bicycle is greater than the marginal cost of another bicycle B more bicycles should be produced to reach the allocatively efficient level of output C the economy is very efficient at the production of bicycles because the marginal benefit exceeds the marginal cost D Both answers A and B are correct Answer D Topic Allocatively Efficient Use of Resources In the above figure if bicycles are produced per month A marginal benefit is greater than marginal cost B fewer bicycles should be produced to reach the allocatively efficient level of output C the marginal cost of production is bottles of soda per bicycle D Both answers A and B are correct Answer B Topic Allocatively Efficient Use of Resources In the above figure if million computers are produced per year then the should be produced to achieve the allocatively efficient use of resources A marginal cost of a computer exceeds the marginal benefit of a computer so more computers B marginal cost of a computer exceeds the marginal benefit of a computer so fewer computers C marginal benefit of a computer exceeds the marginal cost of a computer so more computers D marginal benefit of a computer exceeds the marginal cost of a computer so fewer computers Answer C Topic Allocatively Efficient Use of Resources In the figure above if million computers are produced per year then the should be produced to achieve the allocatively efficient use of resources A marginal cost of a computer exceeds the marginal benefit of a computer so more computers B marginal cost of a computer exceeds the marginal benefit of a computer so fewer computers C marginal benefit of a computer exceeds the marginal cost of a computer so more computers D marginal benefit of a computer exceeds the marginal cost of a computer so fewer computers Answer B Topic Allocatively Efficient Use of Resources In the figure above the allocatively efficient output of computers is A million per year B million per year C million per year D the largest amount possible Answer B Topic Allocatively Efficient Use of Resources In the figure above at the allocatively efficient level of computer production consumers are willing to give up A televisions per computer B between and televisions per computer C televisions per computer D more than televisions per computer Answer C Topic Allocatively Efficient Use of Resources In the figure above at the allocatively efficient level of computer production the marginal cost of producing a computer is A televisions per computer B between and televisions per computer C televisions per computer D more than televisions per computer Answer C Topic Allocatively Efficient Use of Resources The most anyone is willing to pay for another purse is Currently the price of a purse is and the cost of producing another purse is The marginal benefit of a purse is A B C D an amount not given in the answers above Answer C Topic Study Guide Question Marginal Benefit If the marginal benefit from another computer exceeds the marginal cost of the computer then to use resources allocatively efficiently A more resources should be used to produce computers B fewer resources should be used to produce computers C if the marginal benefit exceeds the marginal cost by as much as possible the efficient amount of resources are being used to produce computers D None of the above is correct because marginal benefit and marginal cost have nothing to do with using resources allocatively efficiently Answer A Topic Study Guide Question Efficient Use of Resources Economic Growth An expansion of the production possibilities frontier is A called economic growth B proof that scarcity is not a binding constraint C a free gift of nature D something that has occurred only rarely in history Answer A Economic growth can be represented by A a movement down the production possibilities frontier PPF B a movement up the production possibilities frontier PPF C an inward shift of the production possibilities frontier PPF D an outward shift of the production possibilities frontier PPF Answer D When economic growth occurs the A economy moves along its production possibilities frontier B production possibilities frontier shifts outward C production possibilities frontier becomes steeper D production possibilities frontier shifts outward but no longer limits the amount that can be produced Answer B After Hurricane Katrina devastated parts of Mississippi and New Orleans in we can be sure that the production possibilities frontier for that area temporarily A shifted inward toward the origin B shifted outward away from the origin C became flatter D became steeper Answer A Economic growth is the result of all of the following except A technological change B capital accumulation C opportunity cost D investment in human capital Answer C A key factor that leads to economic growth is A human capital accumulation B increasing current consumption C avoiding the opportunity cost of investment D Both answers A and B are correct Answer A Technological progress makes the production possibilities frontier A shift inward toward the origin B become more linear and less bowed C shift outward from the origin D become less linear and more bowed Answer C Economic growth is shown on the production possibilities frontier as A a movement from one point on the PPF to another B an outward shift in the PPF C an inward shift in the PPF D the curvature of the PPF Answer B Economic growth can be pictured in a production possibilities frontier diagram by A making the production possibilities frontier more bowed out B making the production possibilities frontier less bowed out C shifting the production possibilities frontier outward D shifting the production possibilities frontier inward Answer C Using a production possibilities frontier economic growth is illustrated by a A point inside the curve B point on the curve C movement from one point on the curve to another point on the curve D rightward shift of the curve Answer D Capital accumulation definitely A has no impact on the production possibilities frontier B shifts the production possibilities frontier inward C makes the production possibilities frontier steeper D shifts the production possibilities frontier outward Answer D Question history Modified th edition Economic growth comes from A people willing to increase their skills in which case economic growth is free B producing more goods than people want to consume C capital accumulation and the avoidance of opportunity cost D capital accumulation and technological advance Answer D The production possibilities frontier shifts as A tastes and preferences change B the money supply grows or shrinks C technology changes D the unemployment rate changes Answer C Technological change A generates economic growth B shifts the PPF leftward C creates inefficiency D Both answers A and C are correct Answer A As an economy's capital stock increases the economy A generally experiences increased unemployment of other resources such as labor B generally decides to engage in international trade C experiences economic growth D gains an absolute advantage in the production of capital goods Answer C An increase in the production of capital goods A must increase the current production of consumer goods B must decrease the future production of consumer goods C shifts the production possibilities frontier inward in the future D shifts the production possibilities frontier outward in the future Answer D Suppose a scientific breakthrough made free solar power available in unlimited quantities in the United States The effect of this invention would be to move the A United States beyond its production possibilities frontier B United States inside its production possibilities frontier C U S production possibilities frontier outward D U S production possibilities frontier inward Answer C In March a factory used new technology to produce its output Then in August a fire destroys half the factory The new technology shifted the factory's PPF and the fire shifted it A inward outward B outward inward C outward outward D inward inward Answer B Suppose the United States discovers a way to produce clean nuclear fuel The effect of this discovery would be to A lead the United States to produce less nuclear fuel B force the United States to produce at a point inside its PPF C shift the U S PPF outward D shift the U S PPF inward Answer C Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal Unusually good weather for growing corn shifts A the horizontal intercept rightward and the vertical intercept upward B the horizontal intercept rightward but does not shift the vertical intercept C the vertical intercept upward but does not shift the horizontal intercept D neither the horizontal intercept nor the vertical intercept Answer C In the figure above how can the economy represented by the production possibilities frontier move from point C to point F A Increase the available amount of resources B Increase the level of technology C Redistribute the existing resources to produce more apples and fewer oranges D First move to point B and then move to point F Answer C In the figure above a point showing an inefficient production point is point A A B B C C D D Answer D In the figure above what can be said about point B A It can be reached only after economic growth occurs B It can be attained only if some resources are left unused C It represents all resources being devoted to the production of apples D It represents all resources being devoted to the production of oranges Answer A In the figure above point D is A less production efficient than point C B production efficient and point A is not production efficient C not production efficient and point B is production efficient D production efficient and point B is not production efficient Answer B In the figure above point A is undesirable because A there is an inefficient use of resources B too much health care is being produced C the opportunity costs of health care is too high D point E is a more realistic option in this economy Answer A In the figure above the opportunity cost of moving from point C to point D is A the loss in production in the health care sector B the increase in production in the education sector C zero D the loss in production in the education sector Answer A In the figure above point E could be obtained if A resources were shifted from education to health care B resources were used more efficiently C society's resources increased D resources were shifted from health care to education Answer C Two countries Alpha and Beta have identical production possibilities frontiers If Alpha produces at point a and Beta produces at point b then A Beta's economic growth rate will exceed Alpha's B Alpha consumes less than Beta today but it will grow faster than Beta C Alpha's and Beta's economic growth rates will be the same D Beta's future consumption will be greater than Alpha's Answer B In the figure above an economy would grow fastest if it produces at point A A B B C C D D Answer A In Country X and Country Y had the same production possibilities illustrated in the figure above Country X chose to produce at point A while country Y chose to produce at point B In most likely Country X will be at point such as while Country Y will be at point such as A A B B B A C N Q D Q N Answer C In the above figure in order for this country to move from production possibilities frontier PPF to PPF it might A increase the skills and productivity of its work force B put all unemployed resources to work producing desired output C engage in exchange with other nations D increase the average level of prices for all goods produced and consumed Answer A In the above figure once on PPF a country would grow slowest by producing at point A A B B C C D D Answer D The figure above shows the production possibilities frontiers for four nations that have identical production possibilities frontiers in the present The one that will grow most rapidly in the future is most likely to be producing at point A A B B C C D D Answer C Based on the above which figure shows the impact of a decrease in the population available to work A Figure A B Figure B C Figure C D Figure D Answer D Question history Modified th edition Which graph shows the impact of scientists developing a more powerful fertilizer A Figure A B Figure B C Figure C D Figure D Answer A Economic growth A leads to less consumption in the present and increased consumption in the future B is free C is the major reason we face scarcity D allows us to increase our consumption in the present and in the future Answer A Topic The Cost of Economic Growth Question history Modified th edition The opportunity cost of more capital goods today is A fewer capital goods in the future B fewer consumer goods in the future C fewer consumer goods today D more unemployed resources in the future Answer C Topic The Cost of Economic Growth The opportunity cost of economic growth is A future consumption that a nation gets if it gives up some present consumption B future consumption that a nation gives up to consume more today C present consumption that a nation gives up to accumulate capital D present investment that a nation gives up to increase its economic growth Answer C Topic The Cost of Economic Growth An opportunity cost of economic growth is A essentially zero because economic growth leads to such large gains in the long run B the decrease in production of consumption goods in the present time period C decreased by the creation of capital goods rather than consumption goods D so high that places such as Hong Kong have had to do without it Answer B Topic The Cost of Economic Growth The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between A the future production of capital goods and future consumption of goods B economic growth and technological change C satisfying today the needs of the poor and the wants of the wealthy D current consumption and future consumption Answer D Topic The Cost of Economic Growth Economic growth A creates unemployment B has no opportunity cost C shifts the PPF outward D makes it more difficult for a nation to produce on its PPF Answer C Topic Study Guide Question Economic Growth The PPF shifts if A the unemployment rate falls B people decide they want more of one good and less of another C the prices of the goods and services produced rise D the resources available to the nation change Answer D Topic Study Guide Question Economic Growth An increase in the nation's capital stock will A shift the PPF outward B cause a movement along the PPF upward and leftward C cause a movement along the PPF downward and rightward D move the nation from producing within the PPF to producing at a point closer to the PPF Answer A Topic Study Guide Question Economic Growth One of the opportunity costs of economic growth is A capital accumulation B technological change C reduced current consumption D the gain in future consumption Answer C Topic Study Guide Question Economic Growth In general the more resources that are devoted to technological research the A greater is current consumption B higher is the unemployment rate C faster the PPF shifts outward D more the PPF will bow outward Answer C Topic Study Guide Question Economic Growth An increase in the nation's capital stock will A shift the PPF outward B cause a movement along the PPF up and to the left C cause a movement along the PPF down and to the right D move the nation from producing within the PPF to producing at a point closer to the PPF Answer A Topic Study Guide Question Economic Growth Gains from Trade Because of the existence of comparative advantage the total output of goods is higher when each producer A produces many different goods B produces at the midpoint of its PPF C specializes in the production of one good or a few goods D makes both intermediate and final goods Answer C Question history Modified th edition A person has a comparative advantage in producing a particular good if that person A has higher productivity in producing it than anyone else has B can produce it at lower opportunity cost than anyone else can C has less desire to consume that good than anyone else has D has more human capital related to that good than anyone else has Answer B Comparative advantage is A the ability to perform an activity at a lower opportunity cost than anyone else B the ability to perform an activity at a higher opportunity cost than anyone else C the ability to perform an activity at a zero opportunity cost D another name for absolute advantage Answer A Question history Modified th edition A person has a comparative advantage in an activity if that person can A produce more goods in a given amount of time than another person B produce fewer goods in a given amount of time than another person C perform the activity at a lower opportunity cost than anyone else D perform that activity at a higher opportunity cost than anyone else Answer C A person has a comparative advantage in an activity whenever he or she A has an absolute advantage in the activity B can perform the activity at a lower opportunity cost than can anyone else C can do the activity in less time than anyone else D can do everything better than anyone else Answer B A country possesses a comparative advantage in the production of a good if A the opportunity cost in terms of forgone output of alternative goods is lower for this country than it is for its trading partners B it possesses an absolute advantage in the production of this good C it is able to produce more of this good per hour than can any other country D all of the above Answer A Individuals A and B both produce good X A has a comparative advantage in the production of good X if A A has a lower opportunity cost of producing good X than has B B has a lower opportunity cost of producing good X than of producing good Y C can produce more units of X in a given time period than can B D can produce X using newer technology than can B Answer A Which of the following describes comparative advantage A To produce a bushel of wheat Farmer John must give up bushels of corn whereas Farmer Ben must give up bushels of corn B Company A can produce boxes of cereal in a day whereas Company B can produce boxes of cereal in a day C Firm A can produce a good at a cost of and Firm B can produce the good at a cost of D Jane can type words per minute and Joe can type words per minute Answer A In an eight-hour day Andy can produce either loaves of bread or pounds of butter In an eight-hour day Bob can produce either loaves of bread or pounds of butter Andy has a comparative advantage in the production of A bread while Bob has a comparative advantage in the production of butter B butter while Bob has a comparative advantage in the production of bread C bread and neither has a comparative advantage in the production of butter D both bread and butter Answer A The kitchen manager at an Italian restaurant is deciding what assignments he should give to his two cooks John and David John can make pizzas or servings of pasta per hour and David can make pizzas or servings of pasta Which of the following should be the manager's choice A Fire David because he is not as productive as John John will do both jobs B John will make pizza because he has comparative advantage in making pizza C David will make pizza because he has comparative advantage in making pizza D John and David both will spend half their time making pizza and half their time making pasta because each has a comparative advantage in making pizza Answer C An economy produces only food and shelter There are two individuals in the economy Bill and Mary Mary's opportunity cost of producing unit of shelter is units of food Bill's opportunity cost of producing unit of shelter is units of food A Bill has a comparative advantage over Mary in the production of shelter B Mary has a comparative advantage over Bill in the production of food C Mary has a comparative advantage over Bill in the production of shelter D Bill has an absolute advantage over Mary in the production of shelter Answer C Country A can produce cello by giving up the production of guitars Country B can produce guitar by giving up the production of cellos In which good does country A have a comparative advantage A guitars B cellos C both goods D neither good Answer A The opportunity cost of producing one ton of wheat for Country Gamma is tons of corn The opportunity cost of producing one ton of wheat for Country Beta is tons of corn Which country has the comparative advantage in the production of wheat A Gamma B Beta C Neither country has a comparative advantage D Both countries have the comparative advantage Answer A Suppose that in an hour Joe can prepare sandwiches or pizzas The opportunity cost of Joe producing one sandwich is A pizzas B pizza C pizzas D pizza Answer B Opportunity Cost Suppose Joe can prepare sandwiches or pizzas in an hour and Beth can produce sandwiches or pizzas Which of the following is true A Beth should produce pizza because she has a higher opportunity cost of producing pizza than does Joe B Beth should produce pizza because she has a lower opportunity cost of producing pizza than does Joe C Joe should produce pizza because he has a higher opportunity cost of producing pizza than does Beth D Joe should produce pizza because he has a lower opportunity cost of producing pizza than does Beth Answer B Suppose Joe can prepare sandwiches or pizzas in an hour and Beth can produce sandwiches or pizzas The concept of comparative advantage concludes that A Beth should produce both goods because she can produce more of both goods in an hour than can Joe B Beth should produce sandwiches and Joe should produce pizza C Beth should produce pizza and Joe should produce sandwiches D Beth should produce both goods and Joe should produce sandwiches Answer C Tom takes minutes to cook an egg and minutes to make a sandwich Jerry takes minutes to cook an egg and minutes to make a sandwich Tom has a comparative advantage in and Jerry has a comparative advantage in A cooking eggs making sandwiches B making sandwiches cooking eggs C neither of these activities both activities D both activities neither of these activities Answer A Question history Modified th edition Tom takes minutes to cook an egg and minutes to make a sandwich Jerry takes minutes to cook an egg and minutes to make a sandwich If Tom and Jerry trade A Tom will benefit and Jerry will not B Jerry will benefit and Tom will not C both will benefit D none of them will benefit Answer C Question history Modified th edition Tom takes minutes to cook an egg and minutes to make a sandwich Jerry takes minutes to cook an egg and minutes to make a sandwich Both individuals will be better off if A Tom trades sandwiches in exchange for eggs B Jerry trades sandwiches in exchange for eggs C they trade no matter who trades sandwiches and who eggs D they don't trade Answer B Question history Modified th edition In one week Alice can produce pairs of shoes or bookshelves while Roger can produce pairs of shoes or bookshelves Alice has advantage in producing A an absolute shoes B a comparative shoes C an absolute bookshelves D a comparative bookshelves Answer D In one week Alice can produce pairs of shoes or bookshelves while Roger can produce pairs of shoes or bookshelves Alice should specialize in the production of A shoes B bookshelves C either shoes or bookshelves D neither shoes nor bookshelves Answer B In an hour Andy can make either pizzas or pies and Chris can make either pizzas or pies advantage in making pizzas A Andy has an absolute B Andy has a comparative C Chris has a comparative D None of the above answers is correct Answer B Betty and Ann live on a desert island With a day's labor Ann can produce fish or coconuts Betty can produce fish or coconuts Ann's opportunity cost of producing coconut is and she should specialize in the production of A fish per coconut fish B fish per coconut coconuts C fish per coconut coconuts D fish per coconut coconuts Answer B Question history Modified th edition Betty and Ann live on a desert island With a day's labor Ann can produce fish or coconuts Betty can produce fish or coconut Betty's opportunity cost of producing fish is and she should specialize in the production of A coconut per fish fish B coconut per fish coconuts C coconut per fish fish D coconuts per fish fish Answer A Question history Modified th edition Homer and Teddy are stranded on a desert island To feed themselves each day they can either catch fish or pick fruit In a day Teddy could pick pieces of fruit or catch fish Homer could pick pieces of fruit or catch fish Which of the following is correct A Homer has a comparative advantage in catching fish and Teddy has a comparative advantage in picking fruit B Homer has a comparative advantage in picking fruit and Teddy has a comparative advantage in catching fish C Homer has a comparative advantage in both catching fish and picking fruit D Teddy has a comparative advantage in both catching fish and picking fruit Answer A Blue Violet's Orange Rose's production possibilities production possibilities Teapots number per week Coffeepots number per week Teapots number per week Coffeepots number per week Two countries Blue Violet and Orange Rose produce only two goods teapots and coffeepots The table above gives their production possibilities has a comparative advantage in teapots and has a comparative advantage in coffeepots A Orange Rose Blue Violet B Blue Violet Orange Rose C Blue Violet Blue Violet D Orange Rose Orange Rose Answer B Blue Violet's Sweet Pansy's production possibilities production possibilities Teapots number per week Coffeepots number per week Teapots number per week Coffeepots number per week Two countries Blue Violet and Sweet Pansy produce only two goods teapots and coffeepots The table above gives their production possibilities A Blue Violet has a comparative advantage in teapots B Sweet Pansy has a comparative advantage in teapots C Both have a comparative advantage in teapots D Sweet Pansy has an absolute advantage in teapots Answer A Two countries Blue Violet and Sweet Pansy produce only two goods teapots and coffeepots The table above gives their production possibilities With specialization and trade Sweet Pansy produces and Blue Violet produces A coffeepots teapots B teapots coffeepots C teapots and coffeepots nothing D teapots and coffeepots teapots and coffeepots Answer A Country A Country B Good X units of X Good Y units of Y Good X units of X Good Y units of Y In the table above country A is producing units of X and units of Y and country B is producing units of X and units of Y The opportunity cost of producing more of A good X is the same for both countries B good Y is the same for both countries C good X is lower in country A D good Y is lower in country A Answer D In the table above country A is producing units of X and units of Y and country B is producing units of X and units of Y Regarding the production of good X A country A has an absolute advantage B country B has an absolute advantage C country A has a comparative advantage D country B has a comparative advantage Answer D In the table above country B is producing units of X and units of Y For country B the opportunity cost of producing an additional unit of X is A units of Y per unit of X B units of Y per unit of X C units of Y per unit of X D unit of Y per unit of X Answer C Question history Modified th edition In the table above country B is producing units of X and units of Y For country B the opportunity cost of producing an additional unit of Y is A unit of X per unit of Y B unit of X per unit of Y C units of X per unit of Y D units of X per unit of Y Answer B Question history Modified th edition Both Mergatroid and the Geebocks produce only gizmos and widgets It is possible for Mergatroid to have A an absolute and a comparative advantage in both products B an absolute but not a comparative advantage in both products C a comparative but not an absolute advantage in both products D neither a comparative nor an absolute advantage in both products Answer B Topic Absolute Advantage A person who has an absolute advantage in the production of all goods will A also have a comparative advantage in the production of all goods B not be able to gain from specialization and exchange C have a production possibilities frontier with a constant slope D have a comparative advantage in the production of some goods but not in the production of others Answer D Topic Absolute Advantage Question history Modified th edition A country that has an absolute advantage in producing all goods will A have a comparative advantage in some goods but not all B produce all goods at lowest opportunity cost C have a comparative advantage in all goods D not gain from specialization and trade Answer A Homer and Teddy are stranded on a desert island To feed themselves each day they can either catch fish or pick fruit In a day Teddy could pick pieces of fruit or catch fish Homer could pick pieces of fruit or catch fish Which of the following statements is correct A Homer has an absolute advantage in catching fish and Teddy has an absolute advantage in picking fruit B Homer has an absolute advantage in picking fruit and Teddy has an absolute advantage in catching fish C Homer has an absolute advantage in both catching fish and picking fruit D Teddy has an absolute advantage in both catching fish and picking fruit Answer C Topic Absolute Advantage Don's production possibilities Bob's production possibilities Pens Pencils The above table shows the number of pencils or pens that could be produced by Don and Bob in an hour This schedule shows that A Don has an absolute advantage in the production of pencils and Bob has an absolute advantage in the production of pens B Bob has an absolute advantage in the production of pencils and Don has an absolute advantage in the production of pens C Don has a comparative advantage in the production of both pencils and pens D Bob has a comparative advantage in the production of pencils Answer D U S production possibilities France's production possibilities Steel Concrete The above table shows the tons of steel and concrete that can be produced by the United States and France in an hour From the data in the table A France has a comparative advantage in the production of concrete B the United States has a comparative advantage in the production of concrete C France has an absolute advantage in the production of concrete D the United States has a comparative advantage in the production of both goods Answer A Agnes can produce either unit of X or unit of Y in an hour while Brenda can produce either units of X or units of Y in an hour The opportunity cost of producing a unit of X is A unit of Y per unit of X for Agnes and units of Y per unit of X for Brenda B unit of Y per unit of X for Agnes and unit of Y per unit of X for Brenda C hour for Agnes and hour for Brenda D hour for Agnes and hours for Brenda Answer A Question history Modified th edition Agnes can produce either unit of X or unit of Y in an hour while Brenda can produce either units of X or units of Y in an hour The opportunity cost of producing a unit of Y is A unit of X per unit of Y for Agnes and units of X per unit of Y for Brenda B unit of X per unit of Y for Agnes and unit of X per unit of Y for Brenda C hour for Agnes and hour for Brenda D hour for Agnes and hours for Brenda Answer B Question history Modified th edition Agnes can produce either unit of X or unit of Y in an hour while Brenda can produce either units of X or units of Y in an hour There can be gains from exchange A if Agnes specializes in the production of X and Brenda specializes in the production of Y B if Agnes specializes in the production of Y and Brenda specializes in the production of X C only if Agnes becomes faster at producing X D only if Brenda becomes faster at producing X or Y Answer A Topic Achieving the Gains From Trade Agnes can produce either unit of X or unit of Y in an hour while Brenda can produce either units of X or units of Y in an hour A Brenda has an absolute advantage in the production of X and Y B Agnes has a comparative advantage in the production of Y C Brenda has a comparative advantage in the production of X D Brenda cannot gain from trade Answer A Topic Absolute Advantage Question history Modified th edition Vicky currently produces at point a in the figure above If Vicky moves from point a to point b to point c her opportunity cost of a modem A decreases B increases C is zero D remains the same Answer D Opportunity Cost The figure above shows Freda's PPF Freda currently produces packets of fudge and no cookies If Freda decides to produce packet of cookies her opportunity cost of the packet of cookies is of fudge A packet B packet C packets D packets Answer C Opportunity Cost An economy produces at point a on the PPF shown in the above figure A drought reduces the amount of wheat produced and the economy produces at point b The opportunity cost of a unit of wheat A remains the same B increases C is impossible to calculate without numbers on the axes D decreases Answer B Opportunity Cost In the figure above Joe is producing at point A Joe's opportunity cost of producing one shirt is A of a pair of pants per shirt B of a pair of pants per shirt C pairs of pants per shirt D pairs of pants per shirt Answer D Question history Modified th edition In the figure above Jill is producing at point A Jill's opportunity cost producing one pair of pants is A shirts per pair of pants B shirts per pair of pants C of a shirt per pair of pants D of a shirt per pair of pants Answer A Question history Modified th edition In the figure above both Joe and Jill initially produce at point A If Joe and Jill realize that they each possess a comparative advantage which outcome can we expect A Joe will specialize in shirts and Jill will specialize in pants B Joe will specialize in pants and Jill will specialize in shirts C Joe and Jill each will be able to consume more than shirts and pairs of pants D Both answers B and C are correct Answer D Topic Achieving the Gains From Trade One of the largest categories of exports from the United States is now pop culture movies music TV programming and videos A direct conclusion from this information is that compared to other countries the United States has A lower wages for producers of pop culture B higher wages for producers of pop culture C an absolute advantage in producing pop culture D a comparative advantage in producing pop culture Answer D Topic Achieving the Gains From Trade One of the largest categories of exports from the United States is now pop culture movies music TV programming and videos A direct conclusion from this information is that compared to other countries the United States has A lower wages for producers of pop culture B higher wages for producers of pop culture C a higher opportunity cost of producing pop culture D a lower opportunity cost of producing pop culture Answer D Topic Achieving the Gains From Trade A country that has a comparative advantage in producing capital goods will a country that has a comparative advantage in consumption goods A reap all of the gains from trade when it trades with B grow slower than C reap fewer of the gains from trade when it trades with D specialize in producing capital goods and trade with Answer D Topic Achieving the Gains From Trade George and Michael can gain from exchange A unless one has an absolute advantage in all goods B if each specializes in the production of the good for which he has the higher opportunity cost C if each specializes in the production of the good for which he has the lower opportunity cost D unless they have different opportunity costs Answer C Topic Achieving the Gains From Trade Tom and Di grow tomatoes and turnips Tom has a comparative advantage in growing tomatoes if A Tom can grow more tomatoes than Di can B his opportunity cost of tomatoes is less than Di's opportunity cost of tomatoes C his opportunity cost of tomatoes is less than his opportunity cost of turnips D his marginal benefit from tomatoes is greater than Di's Answer B If Tom and Di specialize in producing the goods in which he and she have a comparative advantage and they exchange goods then A each will produce a combination of goods that is within her his production possibility frontier B they will lose because they are no longer able to produce and consume both goods C each will gain because each can consume a combination of goods that is outside her his production possibility frontier D one of them will gain and the other will lose Answer C Topic Achieving the Gains From Trade When a nation has a comparative advantage in the production of a particular good A the nation tends to avoid specialization B the comparative advantage encourages self-sufficiency C the opportunity cost of producing that good is higher than that of other goods D the nation can gain from trade Answer D Topic Achieving the Gains From Trade To obtain the gains available from comparative advantage individuals or countries must do more than specialize they must also A save B invest C engage in research and development D trade Answer D Topic Achieving the Gains From Trade According to the principle of comparative advantage if a rich country trades with a poor country then A the rich country will benefit and the poor country will lose B the rich country will lose and the poor country will benefit C both countries will benefit D neither of the countries will benefit Answer C Topic Achieving the Gains From Trade The idea of comparative advantage implies that people or countries A should specialize in the production of goods B can gain from trading C can consume at a point outside their production possibilities frontier D all of the above Answer D Topic Achieving the Gains From Trade By specialization and trade two individuals can A consume at a point beyond their individual production possibilities frontiers B increase their comparative advantage C increase their absolute advantage D shift their individual production possibilities frontiers outward Answer A Topic Achieving the Gains From Trade Suppose that the United States and Cuba decide to open up trade If each country specializes in the good in which it has a comparative advantage will gain from that trade because A both countries consumption possibilities in both Cuba and the United States will lie outside their PPFs B neither country their consumption possibilities will not change C only the United States consumption possibilities in Cuba will lie outside its PPF and U S consumption possibilities will not change D only Cuba consumption possibilities in Cuba will lie outside its PPF and U S consumption possibilities will not change Answer A Topic Achieving the Gains From Trade In one day Sue can change the oil on cars or change the tires on cars In one day Fred can change the oil on cars or change the tires on cars Sue and Fred can gain from trade if Sue changes the and Fred changes the A tires oil B oil oil C oil tires D tires tires Answer A Topic Achieving the Gains From Trade Missouri can produce tons of pecans per year or tons of pears per year Washington can produce tons of pecans per year or tons of pears per year Which of the following statements about opportunity cost is correct A The opportunity cost of a ton of pecans is tons of pears per ton of pecans for Missouri and ton of pears per ton of pecans for Washington B The opportunity cost of a ton of pears is tons of pecans per ton of pears for Missouri and ton of pecans per ton of pears for Washington C The opportunity cost of a ton of pecans is ton of pears per ton of pecans for Missouri and tons of pears per ton of pecans for Washington D Both answers B and C are correct Answer D Topic Achieving the Gains From Trade Question history Modified th edition Missouri can produce tons of pecans per year or tons of pears per year Washington can produce tons of pecans per year or tons of pears per year Which of the following statements is true A Washington has an absolute advantage in the production of both pecans and pears B Washington has a comparative advantage in the production of both pecans and pears C Washington has a comparative advantage in producing pecans and Missouri has a comparative advantage in producing pears D Both answers A and C are correct Answer A Topic Achieving the Gains From Trade Missouri can produce tons of pecans per year or tons of pears per year Washington can produce tons of pecans per year or tons of pears per year If these two states were to engage in trade which of the following is true A Missouri would specialize in pear production and trade pears to Washington pecans B Missouri would specialize in pecan production and trade pecans to Washington for pears C Washington would produce both pears and pecans and Missouri would produce neither D Half of both Washington's and Missouri's resources would be devoted to pears and the other half to pecans because that is the comparative advantage Answer B Topic Achieving the Gains From Trade Suppose that a typical German factory can produce cameras or computer in an hour and that a typical American factory can produce cameras or computer in an hour The opportunity cost of cameras in terms of computers in Germany is A computers per camera B computers per camera C computer per camera D of a computer per camera Answer C Topic Achieving the Gains From Trade Question history Modified th edition Suppose that a typical German factory can produce cameras or computer in an hour and that a typical American factory can produce cameras or one computer in an hour The opportunity cost of cameras in terms of computers in the United States is A computers per camera B computers per camera C computer per camera D of a computer per camera Answer B Topic Achieving the Gains From Trade Question history Modified th edition Suppose that a typical German factory can produce cameras or computer in an hour and that a typical American factory can produce cameras or one computer in an hour If Germany produces one less computer and switches resources to cameras and the United States produces one more computer and takes resources out of cameras then the net change in camera production in both countries taken together is A B minus cameras C plus cameras D plus cameras Answer C Topic Achieving the Gains From Trade Suppose that a typical German factory can produce cameras or computer in an hour and that a typical American factory can produce cameras or one computer in an hour Germany wishes to purchase computers from the United States in exchange for cameras What is the maximum number of cameras per computer that Germany would be willing to pay the United States A cameras per computer B cameras per computer C camera per computer D cameras per computer Answer B Topic Achieving the Gains From Trade U S production possibilities France's production possibilities Steel Concrete The data in the above table demonstrates that gains from trade can be captured if A the United States produced both goods B the United States produced steel in exchange for concrete produced in France C the United States produced concrete in exchange for steel produced in France D each country became self-sufficient produced both goods for itself and did not engage in trade Answer B Topic Achieving the Gains From Trade Anna and Maria produce shirts and ties The figure above shows Anna's PPF and Maria's PPF Anna and Maria can achieve the gains from trade if Anna produces and Maria produces A ties shirts B shirts and ties only ties C only ties shirts and ties D shirts ties Answer A Topic Gains from Trade In the figure above suppose that Mac and Izzie trade and reach point c Then A Mac produces outside his production possibilities frontier B Izzie produces outside her production possibilities frontier C Mac and Izzie both produce outside their production possibilities frontiers D neither Mac nor Izzie produce outside their production possibilities frontiers Answer D Topic Gains from Trade In the figure above suppose that Mac and Izzie trade and reach point c Then A Mac and Izzie should both produce at point a B Mac should produce at point b and Izzie should produce at point d C Mac should produce at point d and Izzie should produce at point b D Mac and Izzie should both produce at point c Answer B Topic Gains from Trade In the figure above if Mac and Izzie both completely specialized and traded with one another their joint output would be A computers and TV sets per month B computers and TV sets per month C computers and TV sets per month D computers and TV sets per month Answer C Topic Gains from Trade In the figure above suppose that Mac and Izzie specialize and trade to reach point c Mac sends Izzie A computers in exchange for TVs B computers in exchange for TVs C computers in exchange for TVs D computers in exchange for TVs Answer D Topic Gains from Trade In order to achieve the maximum gains from trade people should specialize according to A property rights B PPF C absolute advantage D comparative advantage Answer D Topic Study Guide Question Gains From Trade In one day Brandon can either plow acres or plant acres In one day Christopher can either plow acres or plant acres Which of the following statements about comparative advantage is correct A Brandon has a comparative advantage in both plowing and planting B Brandon has a comparative advantage only in plowing C Brandon has a comparative advantage only in planting D Christopher has a comparative advantage in both plowing and planting Answer C Topic Study Guide Question Comparative Advantage In one day Brandon can either plow acres or plant acres In one day Christopher can either plow acres or plant acres Brandon and Christopher can A gain from exchange if Brandon specializes in planting and Christopher specializes in plowing B gain from exchange if Brandon specializes in plowing and Christopher specializes in planting C exchange but only Brandon will gain from the exchange D exchange but only Christopher will gain from the exchange Answer A Topic Study Guide Question Comparative Advantage Refer to the above figure Mario is self-sufficient and so is Mia Each produces dishes of pasta and pizzas Mario and Mia decide to specialize and trade After they have specialized and traded compared to the initial situation Mia's opportunity cost of pasta has and Mario's opportunity cost of a pizza has A decreased decreased B decreased increased C increased increased D increased decreased Answer C Topic Parallel MyEconLab Questions Achieving the Gains from Trade Economic Coordination The term market refers to A physical structures only B locations where buyers and sellers physically meet C any arrangement that enables buyers and sellers to get information and trade with one another D trading arrangements that have been approved by the government Answer C Topic Markets Markets are best defined as A arrangements where buyers and sellers get together to buy and sell B specific geographic locations where people get together to buy and sell C hypothetical constructs used to analyze how people form their tastes and preferences D places where people can inspect goods and services carefully Answer A Topic Markets Markets A facilitate trade B allow traders to enjoy gains from trade C coordinate price information between buyers and sellers D All of the above answers are correct Answer D Topic Markets Which of the following is TRUE regarding markets I Economists define a market as a geographic location where trade occurs II A market enables buyers and sellers to get information about each other and to buy and sell from each other III Markets coordinate decisions through prices A I only B I and III C II and III D I II and III Answer C Topic Markets Two social institutions that are essential for trade to be organized are A property rights and laws B markets and banks C businesses and banks D markets and property rights Answer D Topic Markets The social arrangements that govern the ownership use and disposal of property are referred to as A the double coincidence of wants B capitalism C private enterprise D property rights Answer D Topic Property Rights In order to societies to reap the gains from trade it is necessary to A define and enforce property rights B foster economic growth C distribute resources equally D achieve productive efficiency Answer A Topic Property Rights In a world lacking property rights it would be to realize the gains from trade and there would be specialization A easier less B easier more C harder less D harder more Answer C Topic Property Rights The rights of an owner to use and exchange property are A capitalist rights B socialist rights C property rights D money rights Answer C Topic Property Rights The social arrangement that gives John Grisham the writer of best-selling novels the ownership of his novels is A a market B property rights C absolute advantage D dynamic comparative advantage Answer B Topic Property Rights If property rights are not clearly defined and enforced then A incentives for specialization based on comparative advantage are weakened B some potential gains from specialization and trade are lost C resources are devoted to protecting possessions rather than to production D All of the above answers are correct Answer D Topic Property Rights A system of property rights A encourages economic growth