ECON: final exam multiple choice (part 1)

(Table: Comparative Advantage 1) The opportunity cost of producing 1 unit of herring for Sweden is:

1/10 units if cell phones

(Table: Production Possibilities Schedule 1) If the economy produces 2 units of consumer goods per period, it also can produce at most _______ units of capital goods per period.

24

Assume that Brazil gives up 3 automobiles for each ton of coffee it produces, while Peru gives up 7 automobiles for each ton of coffee it produces. What does Brazil have the comparative advantage for?

Brazil has a comparative advantage in coffee production and should specialize in coffee production.

Damage to the environment occurs because:

In the process of obtaining goods and services we enjoy, pollution occurs.

If external costs exist, the competitive free market:

allocates resources inefficiently

the demand curve for videos has shifted to the right. what could have caused it?

an increase in the income of buyers

the law of demand is illustrated when:

an increase in the purchases of personal computers results from lower prices

the proposition that if bargaining is costless, then the market can achieve an efficient outcome, is the:

coase theorem

An economy is said to have a comparative advantage in the production of one good if it:

has the lowest opportunity cost for producing a particular good

Table: Comparative Advantage 1) Sweden has an absolute advantage in producing:

herring only

The production possibilities curve illustrates that:

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

If the opportunity cost of manufacturing machinery is lower in the United States than in Britain and the opportunity cost of manufacturing sweaters is higher in the United States than in Britain, then the United States will:

import sweaters from Britain and export machinery to Britain.

A Pigouvian tax of $10 will result in a quality of pollution for which the:

marginal social benefit is less than the marginal social cost

if an activity generates external cost, decision makers generating the activity will:

not be faced with its full cost

(Figure: Comparative Advantage 2) Eastland has an absolute advantage in producing:

oranges only

whenever human activity generates a sufficient concentration of a substance in the environment to cause harm to people its called:

pollution

A familiar example of a negative externality is loud music on a college campus. In principle, it should be possible to internalize this externality by permitting students to negotiate about rights to play music during particular time periods. The most likely reason that this does not happen is:

that the transactions costs associated with identifying and establishing communication students would be high.

the marginal external cost of a good or activity equals

the amount by which the marginal social cost curve is higher than the supply curve

if there are external cost

the resources will be over-allocated to the production of the good

There are benefits resulting indirectly from pollution, because:

we obtain goods and services we enjoy even though, in the process, we create pollution.