Problem Set 1 (Chapters 2 & 3) Flashcards
Which of the following is true?
a.Economics is a social science
b.Microeconomics involves the study of choices made by individuals, firms or markets
c.Macroeconomics involves the study of the aggregate market or entire economy
d.All of the above
D
Free trade between the U.S. and Mexico will allow consumers in both countries to consume more goods. This is a
a. false statement
b. normative statement
c. positive statement
d. all of the above
C
Assume the U.S. is considering spending an additional $10 billion on national defense. Also assume the U.S. is considering spending additional money hiring new teachers as $10 billion could purchase 2,500 teachers for the next 50 years at a salary of $80,000 per year. If the U.S. decides to spend an additional $10 billion on national defense, what is the opportunity cost of that decision?
a. $10 billion
b. $80,000
c. the value of new weapons, assuming the $10 billion in national defense spending was spent on new weapons
d. the value of 2,500 teachers for the next 50 years at a salary of $80,000 per year
D
A point inside the production possibilities frontier is
a. feasible but not efficient
b. efficient but not feasible
c. both feasible and efficient
d. neither feasible nor efficient
A
Consider the production possibilities frontier for an economy that produces only cookies and ice cream, and assume production currently occurs at a point somewhere on the economy’s production possibilities frontier. If a discovery of the remarkable health benefits of ice cream changes consumers preferences, we would expect
Question 5 Select one:
a.production to be at a point inside the production possibilities frontier
b.production to move to a different point on the production possibilities frontier
c.the production possibilities frontier to shift outward
d.the production possibilities frontier to shift inward
B
Suppose a nation produces food and clothing. In terms of the nation’s production possibilities frontier, assume clothing on the x-axis, food on the y-axis. An increase in immigration leading to an increase in the labor force would be illustrated by
a.the production possibilities frontier shifting out along both axes
b.the production possibilities frontier shifting in along both axes
c.the production possibilities frontier shifting out only along the y-axis
d.the production possibilities frontier shifting out only along the x-axis
A
Suppose a nation produces food and clothing. In terms of the nation’s production possibilities frontier, assume clothing on the x-axis, food on the y-axis. An increase in technology used in the production of clothing would be illustrated by
a.the production possibilities frontier shifting out along both axes
b.the production possibilities frontier shifting in along both axes
c.the production possibilities frontier shifting out only along the y-axis
d.the production possibilities frontier shifting out only along the x-axis
D
A production possibilities frontier that is a straight line indicates
Question 8 Select one:
a.constant costs of production
b.increasing costs of production
c.diminishing costs of production
d.decreasing costs of production
A
In an hour, Sluggo can wash 4 cars or mow 8 lawns, Bruno can wash 3 cars or mow 1 lawn. Who has the absolute advantage in car washing, who has the absolute advantage in lawn mowing?
a.Sluggo in washing cars, Bruno in mowing lawns
b.Bruno in washing cars, Sluggo in mowing lawns
c.Sluggo in washing cars, Sluggo in in mowing lawns
d.Bruno in washing cars, Bruno in mowing lawns
C
In an hour, Sluggo can wash 4 cars or mow 8 lawns, Bruno can wash 3 cars or mow 1 lawn. Who has the comparative advantage in car washing, who has the comparative advantage in lawn mowing?
a.Sluggo in washing cars, Bruno in mowing lawns
b.Bruno in washing cars, Sluggo in mowing lawns
c.Sluggo in washing cars, Sluggo in in mowing lawns
d.Bruno in washing cars, Bruno in mowing lawns
B
When two countries produce efficiently and then make a mutually beneficial trade based on comparative advantage,
a.each consumes at a point on their own production possibilities frontier
b.one consumes inside their production possibilities frontier, while the other consumes outside theirs
c.they both consume inside their production possibilities frontier
d.they both consume outside their production possibilities frontier
D
Which goods will a nation typically import?
a.those goods in which the nation has an absolute advantage
b.those goods in which the nation has a comparative advantage
c.those goods in which other nations have an absolute advantage
d.those goods in which other nations have a comparative advantage
D
Suppose in an hour’s time, Japan can produce either 4 cars or 8 trucks; South Korea can produce either 3 cars or 2 trucks. Which of the following is true?
a.Japan’s opportunity cost of producing cars is 2 trucks per car
b.Japan’s opportunity cost of producing cars is 1/2 truck per car
c.South Korea’s opportunity cost of producing cars is 1.5 trucks per car
d.South Korea’s opportunity cost of producing cars is 3 trucks per car
A
Suppose in an hour’s time, Japan can produce either 4 cars or 8 trucks; South Korea can produce either 3 cars or 2 trucks. Which of the following is true?
a.Japan has the comparative advantage in cars, South Korea has the comparative advantage in trucks
b.Japan has the comparative advantage in trucks, South Korea has the comparative advantage in cars
c.Japan has the comparative advantage in cars, Japan has the comparative advantage in trucks
d.South Korea has the comparative advantage in cars, South Korea has the comparative advantage in trucks
B
Suppose in an hour’s time, Japan can produce either 4 cars or 8 trucks; South Korea can produce either 3 cars or 2 trucks. Which of the following is true for both countries to gain from trade?
a.Japan should export cars, South Korea should export trucks
b.Japan should export trucks, South Korea should export cars
c.Japan should export both cars and trucks
d.South Korea export both cars and trucks
B
