Assignment 2

If the opportunity cost of manufacturing automobiles is higher in the United States than in Britain and the opportunity cost of manufacturing airplanes is lower in the United States than in Britain, then the United States will: A. export airplanes to Britain and import automobiles from Britain. B. import airplanes from Britain and export automobiles to Britain. C. export both airplanes and automobiles to Britain. D. import both airplanes and automobiles from Britain.

A. export airplanes to Britain and import automobiles from Britain.

Scenario: Countries A and B Two countries, A and B, produce two goods, wheat (W) and steel (S). Each has a linear production possibility frontier in both goods. If country A spends all of its available resources to produce wheat, it can produce 500 tons of wheat and no steel. If it uses all of its resources to produce steel, it can produce 250 tons of steel and no wheat. If country B spends all of its available resources producing wheat, it can produce 400 tons of wheat, and if it spends all of its resources on the production of steel, it can produce 400 tons of steel. Look at the scenario Countries A and B. Given this information, country _____ has a comparative advantage in the production of wheat, and country _____ has a comparative advantage in the production of steel. A. B; A B. A; B C. B; B D. A; A

B. A; B

Which of the following is a normative statement? A. The federal government spends half of its budget on national defense. B. Everyone in the United States deserves to be covered by national health insurance. C. The rate of unemployment is 9%. D. A high rate of economic growth creates jobs.

B. Everyone in the United States deserves to be covered by national health insurance.

Which of the following is an example of a positive statement? A. A high rate of economic growth should be a more important goal for the country than a low rate of unemployment. B. The federal government pays for 46% of U.S. health care costs. C. The poverty rate should be 4%. D. Everyone in the country should be covered by national health insurance.

B. The federal government pays for 46% of U.S. health care costs.

Assume that Colombia gives up three motorcycles for each ton of coffee it produces, while Bolivia gives up seven motorcycles for each ton of coffee it produces. Colombia has a comparative advantage in _____ production and should specialize in _____. A. coffee; motorcycles B. coffee; coffee C. motorcycle; coffee D. motorcycle; motorcycles

B. coffee; coffee

A statement that the minimum wage should be increased is a: A. scientific conclusion based on marginal analysis. B. normative statement. C. ceteris paribus assumption. D. positive statement.

B. normative statement.

Alison has a linear production possibility frontier in bracelets and necklaces. In one hour, she can produce 5 bracelets or 10 necklaces. What is the opportunity cost to make 1 necklace? A. 5 bracelets B. 2 necklaces C. 0.5 bracelet D. 10 necklaces

C. 0.5 bracelet

Which of the following is a normative statement? A. Increased defense spending will lead to higher budget deficits. B. Higher expenditures on health care will reduce infant mortality rates. C. To improve our economic security, we should reduce our dependence on oil imports. D. International trade leads to expanded consumption opportunities.

C. To improve our economic security, we should reduce our dependence on oil imports.

An economy is said to have a comparative advantage in the production of a good if it can produce that good: A. outside its production possibility frontier. B. with more resources than another economy. C. at a lower opportunity cost than another economy. D. with a higher opportunity cost than another economy.

C. at a lower opportunity cost than another economy.

Positive economics: A. describes opinions and perspectives on how the world should work. B. is based on opinion polls. C. describes how the world does work. D. is the same as normative economics.

C. describes how the world does work.

To achieve the gains from trade, each nation should specialize in the production of a good or service if: A. the country can make the product using fewer resources than any other country. B. its production possibility frontier is farther from the origin than that of any other country. C. the country can make the product while forgoing fewer alternative products than any other country. D. its production possibility frontier is closer to the origin than that of any other country.

C. the country can make the product while forgoing fewer alternative products than any other country.

Scenario: Countries A and B Two countries, A and B, produce two goods, wheat (W) and steel (S). Each has a linear production possibility frontier in both goods. If country A spends all of its available resources to produce wheat, it can produce 500 tons of wheat and no steel. If it uses all of its resources to produce steel, it can produce 250 tons of steel and no wheat. If country B spends all of its available resources producing wheat, it can produce 400 tons of wheat, and if it spends all of its resources on the production of steel, it can produce 400 tons of steel. Look at the scenario Countries A and B. If country B produces 300 tons of steel, how many tons of wheat can it produce? A. 200 B. 300 C. 400 D. 100

D. 100

Of the following statements, which reflect(s) a normative view? I. The United States should increase the minimum wage to $10 per hour. II. There is a federal minimum wage in the United States. III. The federal minimum wage in the United States is less than $10 per hour. A. I and II B. I, II, and III C. None is normative. D. I

D. I

"All other relevant factors remain unchanged" is another way of saying: A. allow several variables to change to understand how those variables affect one variable held constant. B. no variables change. C. allow all variables to change and attempt to understand how the variables interact with each other. D. all other things equal.

D. all other things equal.