ECO 201 Practice Quiz 3

Which of the following is not correct? a. The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good. b. The gains from specialization and trade are based not on comparative advantage but on absolute advantage. c. The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X. d. The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good.

b. The gains from specialization and trade are based not on comparative advantage but on absolute advantage.

People who provide you with goods and services a. are acting out of generosity. b. do so because they get something in return. c. are required to do so by the government. d. have chosen not to become interdependent.

b. do so because they get something in return.

Goods produced abroad and sold domestically are called a. exports. b. imports. c. opportunity costs. d. exchange rates.

b. imports.

A certain cowboy spends 10 hours per day mending fences and herding cattle. For the cowboy, a graph that shows his various possible mixes of output (fences mended per day and cattle herded per day) is called his a. consumption possibilities frontier. b. production possibilities frontier. c. line of tastes. d. trade-off curve.

b. production possibilities frontier.

When describing the opportunity cost of two producers, economists use the term a. natural advantage. b. trading advantage. c. comparative advantage. d. absolute advantage.

c. comparative advantage.

By definition, imports are a. people who work in foreign countries. b. goods in which a country has an absolute advantage. c. goods produced abroad and sold domestically. d. limits placed on the quantity of goods leaving a country.

c. goods produced abroad and sold domestically.

A person can benefit from specialization and trade by obtaining a good at a price that is a. different than his or her opportunity cost of that good. b. the same as his or her opportunity cost of that good. c. lower than his or her opportunity cost of that good. d. higher than his or her opportunity cost of that good.

c. lower than his or her opportunity cost of that good.

What must be given up to obtain an item is called a. out-of-pocket cost. b. comparative worth. c. opportunity cost. d. absolute value.

c. opportunity cost.

When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all a. rely upon the government to provide us with the basic necessities of life. b. have similar tastes and abilities. c. rely upon one another for the goods and services we consume. d. are concerned about one another's well-being.

c. rely upon one another for the goods and services we consume.

When each person specializes in producing the good in which he or she has a comparative advantage, total production in the economy a. may fall, rise, or stay the same. b. falls. c. rises. d. stays the same.

c. rises.

The opportunity cost of an item is a. always greater than the cost of producing the item. b. always less than the dollar value of the item. c. the number of hours that one must work in order to buy one unit of the item. d. what you give up to get that item.

d. what you give up to get that item.