QUIZ 1 Flashcards
A baker can produce only bread, while a butcher can produce only sliced deli meats. If the baker and the butcher like both foods, which of the following is most likely?
a) They cannot gain from trade.
b) They could gain from trade under certain circumstances, but not always.
c) They could gain from trade because each would enjoy a greater variety of food.
d) They could gain from trade only if each were indifferent between bread and sliced deli meats.
c) They could gain from trade because each would enjoy a greater variety of food.
explan.
If there is no trade, which of the following is most likely?
a) A country is better off because it will become self-sufficient.
b) A country’s production possibilities frontier is also its consumption possibilities frontier.
c) A country can still benefit from international specialization.
d) A country has more product variety available.
b) A country’s production possibilities frontier is also its consumption possibilities frontier.
explan.
When will a production possibilities frontier be linear and not bowed out?
a) if no tradeoffs exist
b) if the tradeoff between the two goods is always at a constant rate
c) if unemployment is zero
d) if resources are allocated efficiently
b) if the tradeoff between the two goods is always at a constant rate
explan.
What is the difference between production possibilities frontiers that are bowed out and those that are linear?
a) Bowed out production possibilities frontiers illustrate tradeoffs, whereas linear production possibilities frontiers do not.
b) Bowed out production possibilities frontiers show increasing opportunity cost, whereas linear ones show constant opportunity cost.
c) Bowed out production possibilities frontiers are the result of perfectly adaptable resources whereas linear production possibilities frontiers are not.
d) Bowed out production possibilities frontiers illustrate real world conditions less than linear production possibilities frontiers.
b) Bowed out production possibilities frontiers show increasing opportunity cost, whereas linear ones show constant opportunity cost.
explan.
Which of the following is NOT an implication of our model of trade?
a) Trade allows for specialization.
b) Trade is good for nations.
c) Trade is based on absolute advantage.
d) Trade allows individuals to consume more than otherwise.
c) Trade is based on absolute advantage.
explan.
Suppose a gardener produces both green beans and corn in her garden. If she must give up 20 bushels of corn to get 4 bushels of green beans, what is the opportunity cost of 1 bushel of green beans?
a) 1/5 bushel of corn
b) 5 bushels of corn
c) 16 bushels of corn
d) 24 bushels of corn
b) 5 bushels of corn
explan.
Using all available resources, if a farmer can produce either 65 cantaloupes or 70 watermelons, what is the opportunity cost of 1 cantaloupe to the farmer?
a) 0.82 watermelons
b) 1.08 watermelons
c) 1.50 watermelons
d) 2.00 watermelons
b) 1.08 watermelons
explan.
Shawn can produce beach towels at a lower opportunity cost than Larissa. Who has an absolute or a comparative advantage in the production of beach towels?
a) Shawn has a comparative advantage.
b) Larissa has a comparative advantage.
c) Shawn has an absolute advantage.
d) Larissa has an absolute advantage.
a) Shawn has a comparative advantage.
explan.
What is comparative advantage based on?
a) capital costs
b) labour costs
c) dollar price
d) opportunity costs
d) opportunity costs
explan.
For two people who are planning to trade two different goods, when will there NOT be a comparative advantage for either?
a) if they have exactly the same opportunity cost
b) if they have agreed in advance on who will produce what and how much each will produce
c) if the terms of trade are such that neither can gain from trade
d) if one person has an absolute advantage in both products
a) if they have exactly the same opportunity cost
explan.
South Korea can produce shoes, clothes, TV sets, and computers cheaper than any other country. What would one expect South Korea to export?
a) all of these goods
b) none of these goods
c) some of these and other goods
d) some of these but no other goods
c) some of these and other goods
explan.
Why is the use of theory and observation more difficult in economics than in sciences, such as physics?
a) It is difficult to evaluate an economic experiment.
b) It is difficult to devise an economic experiment.
c) It is difficult to actually perform an experiment in an economic system.
d) It is difficult to find participants for an economics experiment.
c) It is difficult to actually perform an experiment in an economic system.
explan.
Which statement best describes the way economists study the economy?
a) Economists study the past, but do not try to predict the future.
b) Economists use a probabilistic approach based on correlations between economic events.
c) Economists devise theories, collect data, and then analyze the data to test the theories.
d) Economists use controlled experiments much the same way a biologist or physicist does.
c) Economists devise theories, collect data, and then analyze the data to test the theories.
explan.
What is the best reason for people to provide you with goods and services?
a) They are acting out of generosity.
b) They are acting out of fairness.
c) They do so because they get something in return.
d) They are required to do so by the government.
c) They do so because they get something in return.
explan.
Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, what is the opportunity cost of 1 bushel of green beans?
a) 3/5 bushel of corn
b) 8/5 bushels of corn
c) 5/3 bushels of corn
d) 5/2 bushels of corn
c) 5/3 bushels of corn
explan.
