Chapter 1 and 2 Problem Set

You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept:

"How much" is a decision at the margin.

A friend comes up to you and offers you a free ticket to a professional baseball game that night. You decide to attend the game. The game takes five hours and costs you $15 for transportation. If you had not attended the game, you would have worked at your part-time job for $8 an hour. What is the cost to you of attending the game?

$55 8*5=35 35+15=55

The opportunity cost of producing 1 box of herring for Sweden is _____ box(es) of cell phones.

0.1

The opportunity cost of producing 1 box of herring for Finland is _____ box(es) of cell phones.

0.2

The opportunity cost of producing 1 box of peaches for Westland is _____ box(es) of oranges.

0.25

The opportunity cost of producing 1 box of oranges for Eastland is _____ box(es) of peaches

1

The opportunity cost of producing 1 box of peaches for Eastland is _____ box(es) of oranges.

1

The opportunity cost of producing 1 box of cell phones for Sweden is _____ box(es) of herring.

10

The opportunity cost of producing 1 box of oranges for Westland is _____ box(es) of peaches.

4

The opportunity cost of producing 1 box of cell phones for Finland is _____ box(es) of herring.

5

Eastland has a comparative advantage in producing:

Oranges only.

Westland has a comparative advantage in producing:

Peaches only.

Florida schools offered cash bonuses to students who scored high on the state's standardized exams. The cash bonuses are an example of this economic principle:

People usually take advantage of opportunities to make themselves better off.

Which of the following is a normative statement?

The best way to encourage growth in the economy is through government spending.

Which of the following is a positive statement?

The poverty rate is 14%.

The effect of a natural disaster can be shown by _____ the production possibility frontier.

an inward shift of

When the United States and Mexico trade:

both Mexico and the United States will be better off.

The circular-flow diagram illustrates how households _____ goods and services and _____ factors of production.

buy; sell

Finland has a comparative advantage in producing:

cell phones only.

Because of trade, a country may:

consume outside its production possibility frontier.

Resources are being used efficiently when:

every opportunity to make people better off without making others worse off has been seized.

Equity means that:

everyone gets his or her fair share of the goods and services produced.

Sweden has a comparative advantage in producing

herring only.

Sweden has an absolute advantage in producing:

herring only.

The production possibility frontier illustrates that:

if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.

The opportunity cost of production:

is what you give up to produce the good.

A simplified representation that is used to study a real situation is called a(n):

model.

The circular-flow diagram shows how:

money, goods and services, and factors of production flow through the economy.

Finland has an absolute advantage in producing

neither cell phones nor herring.

Economists usually assume that production is subject to increasing opportunity costs because:

not all resources are equally suited to producing every good.

Buying vegetables at a farmers' market benefits the community because:

one person's local spending will increase another local person's income.

As long as people have different _____, everyone has a comparative advantage in something.

opportunity costs

If the production possibility frontier is a straight line:

opportunity costs are constant.

Eastland has an absolute advantage in producing:

oranges only.

Westland has an absolute advantage in producing:

peaches only.

In terms of the production possibility frontier, inefficient use of available resources is shown by:

production at a point inside the production possibility frontier.

Technological improvements will:

shift the production possibility frontier outward.

Gains from trade arise because of:

specialization in production.

If the market for corn is in equilibrium:

the price is set so that the quantity of corn produced is equal to the quantity of corn consumed.

Macroeconomics deals with:

the working of the entire economy or large sectors of it.

Scarcity in economics means that:

we do not have sufficient resources to produce all of the goods and services we want.

The opportunity cost of something is:

what is given up to acquire it.

Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is:

whatever Khalil would have done had he not gone to the opera.