Econ-E201 Module 2 quiz

According to the graphs, for Ben, the opportunity cost of 1 pound of ice cream is a. 4 pounds of cones b. 1/2 pound of cones c. 2 pounds of cones d. 1/4 pound of cones

a. 4 pounds of cones

Two countries, Nicaragua and Argentina can both produce bananas and wheat. Their production possibility frontiers are shown below. Based on this we can say that Nicaragua has a comparative advantage in producing__________. Both countries can gain from trade if Nicaragua produces___________ and Argentina produces __________ and trade. a. Bananas; bananas; wheat b. Wheat, bananas; bananas c. Bananas; wheat; bananas d. Wheat; wheat; bananas

a. Bananas; bananas; wheat

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that a. Mike has an absolute advantage in chairs b. Mike has a comparative advantage in tables c. Sandy has an absolute advantage in chairs d. Sandy has a comparative advantage in chairs

a. Mike has an absolute advantage in chairs

Refer to Figure 2.2. Which of the following is true for Cliff and Paul? a. Paul has an absolute advantage in both wheat and corn b. Paul has an absolute advantage in wheat and Cliff has an absolute advantage in corn c. Cliff has an absolute advantage in wheat and Paul has an absolute advantage in corn d. Cliff has an absolute advantage in both wheat and corn

a. Paul has an absolute advantage in both wheat and corn

Which of the following is NOT true concerning comparative advantage? a. The comparative advantage is determined by which person can produce a good using fewer inputs b. The principle of comparative advantage applies to countries as well as people c. Economists use the principle of comparative advantage to advocate free trade d. Gains from trade are based on the principle of comparative advantage

a. The comparative advantage is determined by which person can produce a good using fewer inputs

The concept of slope can be used to answer questions about how much one variable responds to changes in another variable. a. True b. False

a. True

Refer to Figure 2.3. Ben has a comparative advantage in a. cones and Jerry has a comparative advantage in ice cream b. ice cream and Jerry has a comparative advantage in cones c. neither good and Jerry has a comparative advantage in both goods d. both goods and Jerry has a comparative advantage in neither good

a. cones and Jerry has a comparative advantage in ice cream

For two people who are planning to trade, it is impossible to a. have a comparative advantage in both goods b. have an absolute advantage in both goods c. specialize in the production of one good d. trade so that both people will be better off

a. have a comparative advantage in both goods

Normative statements are a. prescriptive, whereas positive statements are descriptive b. Falsedescriptive, whereas positive statements are prescriptive c. backward-looking, whereas positive statements are forward-looking d. forward-looking, whereas positive statements are backward-looking

a. prescriptive, whereas positive statements are descriptive

According to the graph, the opportunity cost of 1 bushel of wheat for Cliff is a. 1/3 bushel of corn b. 2/3 bushel of corn c. 1 bushel of corn d. 3/2 bushels of corn

b. 2/3 bushel of corn

Refer to Figure 2.3. For Jerry, the opportunity cost of 1 pound of ice cream is a. 1 pound of cones b. 3/2 pounds of cones c. 1/3 pounds of cones d. 2 pounds of cones

b. 3/2 pounds of cones

The slope of a line is equal to the change in the x-variable divided by the change in the y-variable. a. True b. False

b. False

One way to characterize the difference between positive statements and normative statements is as follows: a. Positive statements tend to reflect optimism about the economy and its future, whereas normative statements tend to reflect pessimism about the economy and its future b. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be c. Positive statements involve advice on policy matters, whereas normative statements are supported by scientific theory and observation d. Economists outside of government tend to make normative statements, whereas government-employed economists tend to make positive statements

b. Positive statements offer descriptions of the way things are, whereas normative statements offer opinions on how things ought to be

Good economic models a. often leave out important variables, causing serious errors b. omit many details to allow us to see what is truly important c. are designed to give a complete picture of a given relationship d. cause economics to be misunderstood by the general public

b. omit many details to allow us to see what is truly important

When a production possibilities frontier is linear it shows a. a truer picture of real life than a bowed out production possibilities frontier b. that resources are perfectly shiftable from the production of one good to another c. an example of increasing opportunity cost d. All of the above are correct

b. that resources are perfectly shiftable from the production of one good to another

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that a. the nation is producing beyond its capacity, and inflation will occur b. the nation is not using all available resources or has inefficiencies c. the nation is producing an efficient combination of goods d. there will be a large opportunity cost if the nation tries to increase production

b. the nation is not using all available resources or has inefficiencies.

Economists make assumptions a. to diminish the chance of wrong answers b. to make the world easier to understand c. because all scientists make assumptions d. to make certain that all necessary variables are included

b. to make the world easier to understand

The kitchen manager at an Italian restaurant is deciding what assignments he should give to his two cooks, John and David. John can make 25 pizzas or 40 servings of pasta per hour and David can make 20 pizzas or 30 servings of pasta. Which of the following should be the manager's choice? a. Fire David because he is not as productive as John. John will do both jobs b. John will make pizza because he has comparative advantage in making pizza c. David will make pizza because he has comparative advantage in making pizza d. John and David both will spend half their time making pizza and half their time making pasta

c. David will make pizza because he has comparative advantage in making pizza

Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement? a. One economist believes the North American Free Trade Agreement (NAFTA) has led to a loss of American jobs; another economist disputes this claim b. One economist believes that when income taxes are cut, people will increase their spending; another economist believes that when income taxes are cut, people will increase their saving c. One economist advises against increases in sales taxes because she thinks such increases are unfair to low-income people; another economist disputes the idea that increases in sales taxes are unfair to low-income people d. One economist believes that, prior to the Civil War, slavery contributed to economic growth in the South; another economist believes that slavery held back the South's economic growth

c. One economist advises against increases in sales taxes because she thinks such increases are unfair to low-income people; another economist disputes the idea that increases in sales taxes are unfair to low-income people

Refer to the production possibilities frontier in the figure above. Which production point indicates that resources are NOT fully utilized? a. Point a b. Point b c. Point c d. Point e

c. Point C

Which of the following is an example of a positive, as opposed to normative, statement? a. Inflation is more harmful to the economy than unemployment is b. If welfare payments increase, the world will be a better place c. Prices rise when the government prints too much money d. When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency

c. Prices rise when the government prints too much money

Which of the following is NOT correct? a. Trade allows for specialization b. Trade is good for nations c. Trade is based on absolute advantage d. Trade allows individuals to consume outside of their individual production possibilities curve

c. Trade is based on absolute advantage

Refer to Figure 2.1. In the figure above, moving from production at point d to production at point a requires a. technological change b. a decrease in unemployment c. decreasing the output of consumer goods in order to boost the output of capital goods d. both capital accumulation and a decrease in unemployment

c. decreasing the output of consumer goods in order to boost the output of capital goods

Refer to Figure 2.1. Which production point is unattainable? a. Point a b. Point b c. Point c d. Point e

d. Point e

The principle of comparative advantage does not provide answers to certain questions. One of those questions is a. Is it possible for specialization and trade to benefit more than one party to a trade? b. Is it possible for specialization and trade to increase total output of traded goods? c. Do opportunity costs play a role in people's decisions to specialize in certain activities? d. What determines the price at which trade takes place?

d. What determines the price at which trade takes place?

Production efficiency is achieved when a. all goods and services desired by consumers can be produced in the economy b. producing inside the production possibilities frontier c. the ability is gained to produce goods and services that are desired beyond the PPF boundary d. producing one more unit of one good cannot occur without producing less of some other good

d. producing one more unit of one good cannot occur without producing less of some other good