Question 1

Which of the following statements is true about comparative advantage?

Accepted Answer

A)  Comparative advantage exists whenever one person,firm,or nation can do something with greater opportunity costs than some other individual,firm,or nation.
B)  Comparative advantage is interesting theoretically,but it is not relevant when evaluating real-world economic conditions.
C)  Third-world countries cannot possibly have a comparative advantage in the production of any good or service because of the relatively low educational attainment of their work force.
D)  Comparative advantage exists whenever one person,firm,or nation can do something with lesser opportunity costs than some other individual,firm,or nation.
E)  Only highly advanced economies can have a comparative advantage in the production of a good or service.

Question 2

Shirley can choose between peanut butter pretzels and caramel coated popcorns for her evening snack.According to economists,her _____ cost of consuming caramel coated popcorns would be the forgone peanut butter pretzels.

Accepted Answer

A)  internal
B)  opportunity
C)  average
D)  transaction
E)  social

Question 3

Private property rights:

Accepted Answer

A)  guarantee that most people will have everything they want.
B)  are necessary for trade to occur.
C)  guarantee that most people will have everything they need.
D)  discourage people from working hard.
E)  discourage people from engaging in free trade.

Question 4

Which of the following actions is most likely to cause a rightward shift in a production possibilities curve [PPC]?

Accepted Answer

A)  Shifting from the production of one product to the production of another product
B)  Shifting all resources to the production of one product
C)  Employing idle resources
D)  Using fewer resources in production
E)  Increasing the technological know-how used in production

Question 5

If the resources within a nation are not being fully or efficiently utilized,it means:

Accepted Answer

A)  that nation is operating at a point inside its production possibilities curve.
B)  that nation is operating at a point outside its production possibilities curve.
C)  that nation is operating at a point along its production possibilities curve.
D)  that nation is probably technologically advanced.
E)  the government of that nation should seize ownership of the resources in order to attain the necessary efficiencies.

Question 6

The tradeoffs facing a society can be illustrated in a graph known as the:

Accepted Answer

A)  production operations curve.
B)  production cost curve.
C)  production cost model.
D)  production cost forecast curve.
E)  production possibilities curve.

Question 7

The marginal cost of producing a commodity increases because of specialization.

Accepted Answer

A) True 
 B)False  True

Question 8

Which of the following best describes a tradeoff?

Accepted Answer

A)  An office executive enrolling into a management course to develop her skills.
B)  An investor buying stocks of a start-up company.
C)  A businessman investing a portion of company profits in research and development.
D)  A college student sacrificing a few hours of study time to work at the town cafeteria.
E)  A worker purchasing a new car with her bonus earnings.

Question 9

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa. 
Table 2.4 
-Refer to Table 2.4.If trade were to occur,what would be the most Ohio would be willing to pay for 1 chili?

Accepted Answer

A)  4 cookies
B)  8 cookies
C)  1/4 Of a cookie
D)  1/8 Of a cookie
E)  6 cookies C

Question 10

Consider the production possibilities curve [PPC] for a country producing only two commodities; wheat and wine.Ceteris paribus,the _____ cost of producing wine increases with each successive increase in wine production.

Accepted Answer

A)  average
B)  marginal
C)  total
D)  external
E)  social

Question 11

Given below is the production possibilities schedule for capital goods and consumer goods. Table 2.3

-Consider Table 2.3.The production possibilities curve [PPC] representing this schedule would be:

Accepted Answer

A)  bowed in.
B)  bowed out.
C)  a negatively sloped straight line.
D)  a positively sloped straight line.
E)  bowed in if consumer goods are plotted on the horizontal axis and bowed out if capital goods are plotted on the horizontal axis.

Question 12

The figure given below represents the PPC in two nations - Germany and Korea,producing only two goods cars and food.
 Figure 2.4

-Refer to Figure 2.4 and identify the correct statement.

Accepted Answer

A)  Germany has comparative advantage in production of cars.
B)  Korea has comparative advantage in production of cars.
C)  Germany has comparative advantage in production of food.
D)  Korea has a lower opportunity cost for making cars.
E)  Germany has a lower opportunity cost for making food.

Question 13

Individuals,firms,and nations should specialize in those activities which have the highest marginal cost.

Accepted Answer

A) True 
 B)False  False

Question 14

Given a production possibilities curve for defense goods and nondefense goods,which of the following is not true?

Accepted Answer

A)  A production point outside the curve may be attained if new resources are discovered.
B)  A production point outside the curve may be attained by acquiring a new technology.
C)  A production point outside the curve may be attained by shifting resources to defense goods.
D)  A production point outside the curve may be attained by acquiring both a new technology and greater resources.
E)  A production point outside the curve cannot be attained with the current level of resources and technology.

Question 15

Given below is the production possibilities schedule for capital goods and consumer goods. Table 2.3

-If the nation depicted in Figure 2.3 is producing at combination E,the opportunity cost of producing the tenth unit of consumer good is:

Accepted Answer

A)  10 units of capital goods.
B)  6 units of capital goods.
C)  1 unit of capital good.
D)  4 units of capital goods.
E)  zero unit of capital good.

Question 16

If society begins by producing 3 units of X and 4 units of Y and then alters production so that it is now producing 4 units of X and 4 units of Y,and we know that the quantity and quality of resources were unchanged and that technology did not change,then:

Accepted Answer

A)  3 units of X and 4 units of Y are a combination best represented by a point inside the production possibilities curve [PPC].
B)  society has moved along the PPC.
C)  resources were being fully utilized at 3 units of X and 4 units of Y.
D)  resources were being efficiently utilized at 3 units of X and 4 units of Y.
E)  3 units of X and 4 units of Y are a combination best represented by a point outside the PPC.

Question 17

A decrease in the quantity of available resources would be represented by:

Accepted Answer

A)  a steeper PPC.
B)  a point inside the PPC.
C)  an inward shift of the PPC.
D)  an upward movement along the PPC.
E)  a downward movement along the PPC.

Question 18

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa. 
Table 2.4

-Refer to Table 2.4.If trade were to occur,what would be the least amount Ohio would be willing to accept for 1 cookie?

Accepted Answer

A)  8 chilies
B)  1/4 Of a chili
C)  1/8 Of a chili
D)  4 chilies
E)  12 chilies

Question 19

Bob and Bill can make 16 toys each if they devote 8 working hours in a day.Further,Bob can repair 4 cars and Bill can repair 2 cars,if they devote 8 working hours in a day.What is the opportunity cost of repairing one car to Bob?

Accepted Answer

A)  10 toys
B)  8 toys
C)  16 toys
D)  12 toys
E)  4 toys

Question 20

Following is the production possibilities schedule for an economy producing two goods Good A and GoodB. 
Table 2.1

-Refer to Table 2.1.Identify the correct statement.

Accepted Answer

A)  This economy can produce 100 units of A and 20 units of B.
B)  The opportunity cost of producing more of A decreases as A increases.
C)  The opportunity cost of producing more of B decreases as B increases.
D)  This economy can produce 70 units of A and 40 units of B.
E)  If this economy fully and efficiently employs all its resources,it can produce 100 units of A and 80 units of B.

Exam 2: Choice, opportunity Costs, and Specialization

Which of the following statements is true about comparative advantage?

Correct AnswerverifiedShow Answer

Shirley can choose between peanut butter pretzels and caramel coated popcorns for her evening snack.According to economists,her _____ cost of consuming caramel coated popcorns would be the forgone peanut butter pretzels.

Correct AnswerverifiedShow Answer

Private property rights:

Correct AnswerverifiedShow Answer

Which of the following actions is most likely to cause a rightward shift in a production possibilities curve [PPC]?

Correct AnswerverifiedShow Answer

If the resources within a nation are not being fully or efficiently utilized,it means:

Correct AnswerverifiedShow Answer

The tradeoffs facing a society can be illustrated in a graph known as the:

Correct AnswerverifiedShow Answer

The marginal cost of producing a commodity increases because of specialization.

Correct AnswerverifiedTrue

Which of the following best describes a tradeoff?

Correct AnswerverifiedShow Answer

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa. Table 2.4 -Refer to Table 2.4.If trade were to occur,what would be the most Ohio would be willing to pay for 1 chili?

Correct AnswerverifiedC

Consider the production possibilities curve [PPC] for a country producing only two commodities; wheat and wine.Ceteris paribus,the _____ cost of producing wine increases with each successive increase in wine production.

Correct AnswerverifiedShow Answer

Given below is the production possibilities schedule for capital goods and consumer goods. Table 2.3 -Consider Table 2.3.The production possibilities curve [PPC] representing this schedule would be:

Correct AnswerverifiedShow Answer

The figure given below represents the PPC in two nations - Germany and Korea,producing only two goods cars and food. Figure 2.4 -Refer to Figure 2.4 and identify the correct statement.

Correct AnswerverifiedShow Answer

Individuals,firms,and nations should specialize in those activities which have the highest marginal cost.

Correct AnswerverifiedFalse

Given a production possibilities curve for defense goods and nondefense goods,which of the following is not true?

Correct AnswerverifiedShow Answer

Given below is the production possibilities schedule for capital goods and consumer goods. Table 2.3 -If the nation depicted in Figure 2.3 is producing at combination E,the opportunity cost of producing the tenth unit of consumer good is:

Correct AnswerverifiedShow Answer

If society begins by producing 3 units of X and 4 units of Y and then alters production so that it is now producing 4 units of X and 4 units of Y,and we know that the quantity and quality of resources were unchanged and that technology did not change,then:

Correct AnswerverifiedShow Answer

A decrease in the quantity of available resources would be represented by:

Correct AnswerverifiedShow Answer

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa. Table 2.4 -Refer to Table 2.4.If trade were to occur,what would be the least amount Ohio would be willing to accept for 1 cookie?

Correct AnswerverifiedShow Answer

Bob and Bill can make 16 toys each if they devote 8 working hours in a day.Further,Bob can repair 4 cars and Bill can repair 2 cars,if they devote 8 working hours in a day.What is the opportunity cost of repairing one car to Bob?

Correct AnswerverifiedShow Answer

Following is the production possibilities schedule for an economy producing two goods Good A and GoodB. Table 2.1 -Refer to Table 2.1.Identify the correct statement.

Correct AnswerverifiedShow Answer

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False

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