Economics 101 - Chapter 2

Refer to the following table to answer the five questions that follow. Given the same quantity of resources, what is Alicia Keys's opportunity cost of producing a New York pizza? A. 5/2 Philly cheesesteaks B. 3 Philly cheesesteaks C. 4/5 New York pizza D. 2/5 Philly cheesesteak E. 1/3 New York pizza

A. 5/2 Philly cheesesteaks

Consider the production possibilities frontier (PPF) shown in the figure below to answer the three questions that follow. Given current resources and technology, the unattainable range is best described as which places on the figures? A. only area O: points outside the PPF. B. area O: outside the PPF and points on the PPF. C. area I: inside the PPF and points on the PPF. D. only area I: points inside the PPF. E. points on the PPF only.

A. only area O: points outside the PPF.

Refer to the accompanying figure to answer the four questions that follow. The inefficient point(s) on the figure is/are: A. point A. B. point C. C. point D. D. points B, C, and E. E. points C and D.

A. point A.

Refer to the following figure to answer the four questions that follow. Based on the graph, what is the most preferred consumption point for a pie-appreciating society? A. point E B. point A C. point D D. point C E. point B

A. point E

Which of the following is a positive statement? A. We should forgo some current consumption in order to invest in the future. B. Increases in the minimum wage cause unemployment. C. We ought to deregulate the mortgage market. D. An economist should test every theory at least twice. E. The government must provide unlimited health care to citizens.

B. Increases in the minimum wage cause unemployment.

Why do economists use models? A. Models allow us to examine more factors than what actually exists in our world. B. Models allow us to study a simplified version of a complex world. C. Models are used to add complexity to a simple world. D. Models allow us to control external factors. E. Models make the world harder to understand.

B. Models allow us to study a simplified version of a complex world.

Which of the following is a normative statement? A. A unicycle has five wheels. B. You should wear a helmet when cycling. C. The sky is blue. D. A bicycle has two wheels. E. Electricity follows the path of least resistance.

B. You should wear a helmet when cycling.

When one producer can create more of a good than another producer using the same quantity of resources, the first producer has: A. a zero-sum game. B. an absolute advantage. C. increasing relative costs. D. gains from trade. E. a comparative advantage.

B. an absolute advantage.

Refer to the following figure to answer the five questions that follow.In the figure, point A is: A. unattainable with current resources. B. an inefficient point. C. the point where society would prefer to consume. D. an efficient point. E. the equilibrium.

B. an inefficient point.

Ceteris paribus, if a society is producing at a point on the production possibilities frontier (PPF), it can only increase the production of one good by: A. increasing the price of the second good. B. decreasing the production of the second good. C. also increasing the production of the second good. D. reducing the resources available for production. E. decreasing the price of the second good.

B. decreasing the production of the second good.

Refer to the following figure to answer the five questions that follow. Which point in the corresponding figure shows that productive resources are NOT fully employed? A. point C B. point A C. point E D. point D E. point B

B. point A

Refer to the following figures to answer the two questions that follow.Which allocation point in the short-run production possibilities frontier (PPF) will lead to NO growth in the long-run PPF? A. point B B. point A C. point D D. point C E. point E

B. point A

Refer to the accompanying figure to answer the four questions that follow. Which point(s) on the figure show inefficient use of resources? A. point D. B. point A. C. points B, C, and E. D. point B. E. point C.

B. point A.

Consider the following scenario to answer the five questions that follow. Two friends, Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake one loaf of bread and one hour to make one pie. Joey takes four hours to bake one loaf of bread and four hours to make one pie. What is Joey's opportunity cost of baking a loaf of bread? A. 2 pies B. 4 pies C. 1 pie D. 1 loaf of bread E. 1/2 loaf of bread

C. 1 pie

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. Refer to these figures to answer the six questions that follow. What is Jim's opportunity cost of making a stromboli? A. 2 pizzas B. 2 stromboli C. 1/2 pizza D. 2/3 pizza E. 25 pizzas

C. 1/2 pizza

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the five questions that follow. What is DiNozzo's opportunity cost for solving a crime? A. 1/10 of a boat B. 30 solved crimes C. 1/20 of a boat D. 20 solved crimes E. 5 solved crimes

C. 1/20 of a boat

If Elaine can produce more output from a set amount of resources than Jerry can, you know that ________ has a(n) ________ advantage. A. Jerry; comparative B. Elaine; normative C. Elaine; absolute D. Jerry; absolute E. Elaine; comparative

C. Elaine; absolute

Refer to the following figure for the five questions that follow. According to the figure, a new technology that makes it easier to peel, core, and prepare apples will cause the: A. entire PPF to shift inward. B. PPF to rotate outward to a larger maximum quantity of blueberry pies with no change in maximum apple pies. C. PPF to rotate outward to a larger maximum quantity of apple pies with no change in maximum blueberry pies. D. entire production possibilities frontier (PPF) to shift outward. E. PPF to stay exactly the same because there is no change in resources.

C. PPF to rotate outward to a larger maximum quantity of apple pies with no change in maximum blueberry pies.

Suppose you find a production possibilities frontier (PPF) that is shaped like a straight line. What can you determine about the production of the two goods? A. One producer must have an absolute advantage in production. B. Production of the two goods is subject to increasing relative cost. C. Production of the two goods is subject to constant opportunity cost anywhere along the PPF. D. Production of the two goods is subject to decreasing relative cost. E. More resources will not cause the PPF to shift.

C. Production of the two goods is subject to constant opportunity cost anywhere along the PPF.

Which of the following would NOT lead to an outward shift of a future production possibilities frontier (PPF)? A. the discovery of new resources B. population growth C. a decline in life expectancy D. an increase in technology E. increased investment today

C. a decline in life expectancy

Opportunity cost is evident on the production possibilities frontier (PPF) graph: A. at any one single point on the graph. B. as you move from one unattainable point to an efficient point on the frontier. C. as you move from one point on the frontier to another point on the frontier. D. as you move from the origin to any inefficient point. E. as you move from an inefficient point to the origin.

C. as you move from one point on the frontier to another point on the frontier.

Specialization and trade allow individuals to: A. produce more goods with less technology. B. produce fewer goods with less technology. C. consume outside their own production possibilities frontiers (PPFs). D. eliminate scarcity. E. shift their PPF outward.

C. consume outside their own production possibilities frontiers (PPFs).

One reason that economists make assumptions when designing models is to: A. increase internal factors. B. make models more complex. C. exclude variables that do not add predictive power to the model. D. ensure that all possible factors are included. E. make models more like the real world.

C. exclude variables that do not add predictive power to the model.

The area inside (within) the production possibilities frontier (PPF) contains ________ points. A. positive B. efficient C. inefficient D. normative E. high opportunity cost

C. inefficient

A positive statement: A. is a declaration of opinion. B. cannot be evaluated using the scientific method. C. is a claim that can be tested. D. is a statement about what ought to be. E. is a claim that cannot be tested.

C. is a claim that can be tested.

A society that is producing its maximum combination of goods and using all available resources for production: A. has minimized its opportunity cost. B. has eliminated scarcity. C. is operating on its production possibilities frontier (PPF). D. has maximized its opportunity cost. E. is operating outside its production possibilities frontier (PPF).

C. is operating on its production possibilities frontier (PPF).

The production possibilities frontier (PPF) shows: A. the difference between normative and positive analysis. B. how price and quantity are related for a single good. C. the trade-off between the efficient production of two different goods. D. the difference between micro analysis and macro analysis. E. how a firm should price a new product.

C. the trade-off between the efficient production of two different goods.

You have an absolute advantage in producing something whenever: A. you enjoy producing that good. B. you have specific training in the production of that good. C. you can produce more of it than someone else can using the same quantity of resources. D. your opportunity cost is lower than that of other producers. E. your opportunity cost is constant.

C. you can produce more of it than someone else can using the same quantity of resources.

Consider the following scenario to answer the five questions that follow. Two friends, Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake one loaf of bread and one hour to make one pie. Joey takes four hours to bake one loaf of bread and four hours to make one pie. What is Joey's opportunity cost of baking a pie? A. 4 pies B. 1/2 loaf of bread C. 1 pie D. 1 loaf of bread E. 2 pies

D. 1 loaf of bread

Refer to the following figure for the five questions that follow.The opportunity cost of increasing production of blueberry pies from 7 to 11 pies is: A. 2 blueberry pies. B. 4 apple pies. C. 14 apple pies. D. 2 apple pies. E. 7 blueberry pies.

D. 2 apple pies.

Refer to the following figure for the five questions that follow.The opportunity cost of increasing production of apple pies from 14 to 16 pies is: A. 14 apple pies. B. 2 blueberry pies. C. 16 blueberry pies. D. 7 blueberry pies. E. 4 blueberry pies.

D. 7 blueberry pies.

Consider the following scenario to answer the two questions that follow. On a particular Saturday, Mark Zuckerberg and Bill Gates can either plant trees or spread mulch in their gardens. Their maximum output per day is listed in the following table, along with blanks where you can calculate the opportunity cost. At what terms of trade (relative price ratio) could Zuckerberg and Gates specialize and trade with one another so that both have more trees planted and mulch spread than they could accomplish on their own? A. 12 trees planted per 12 cubic yards of mulch spread B. 5 trees planted per 12 cubic yards of mulch spread C. 10 trees planted per 12 cubic yards of mulch spread D. 7 trees planted per 12 cubic yards of mulch spread E. 9 trees planted per 12 cubic yards of mulch spread

D. 7 trees planted per 12 cubic yards of mulch spread

Use these production possibilities frontier (PPF) curves, which compare the ancient production of agricultural products to art and literature, to answer the four questions that follow. Suppose a great plague wipes out half of the society's population. Which of the following graphs best depicts how this would affect the PPF? A. Graph C B. Graph E C. Graph A D. Graph D E. Graph B

D. Graph D

How will a reduction in the national unemployment rate affect a nation's production possibilities frontier (PPF)? A. It will cause the PPF to shift inward. B. It will cause the PPF to shift outward. C. It will move society to a point farther inside the PPF. D. It will move society outward to a point closer to or on the PPF. E. It will push society to a point outside its PPF.

D. It will move society outward to a point closer to or on the PPF.

Suppose Jason is a brilliant attorney who can draft especially persuasive legal briefs. He also happens to possess some excellent administrative skills such as typing, filing, assembling binders and notes, and making reservations. Which best describes whether Jason should hire an administrative assistant to help him? A. Jason should not hire an administrative assistant because he has an absolute advantage in performing administrative functions. B. Jason should hire an administrative assistant because the assistant would likely have an absolute advantage in writing legal briefs. C. Jason should not hire an administrative assistant because he likely has a comparative advantage in performing administrative functions. D. Jason should hire an administrative assistant because the assistant would likely have a comparative advantage in performing administrative functions. E. Jason should hire an administrative assistant because the assistant would likely have a comparative advantage in writing legal briefs.

D. Jason should hire an administrative assistant because the assistant would likely have a comparative advantage in performing administrative functions.

Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the six questions that follow. Does either Michael or Angelo have a comparative advantage? A. No, neither has a comparative advantage. B. Yes, Angelo has a comparative advantage in both sculptures and paintings. C. Yes, Michael has a comparative advantage in sculptures, and Angelo has a comparative advantage in paintings. D. Yes, Michael has a comparative advantage in paintings, and Angelo has a comparative advantage in sculptures. E. Yes, Michael has a comparative advantage in both sculptures and paintings.

D. Yes, Michael has a comparative advantage in paintings, and Angelo has a comparative advantage in sculptures.

The ability of one producer to produce a good at a lower opportunity cost than another producer is called: A. a zero-sum game. B. the law of increasing relative cost. C. a normative statement. D. comparative advantage. E. absolute advantage.

D. comparative advantage.

A model without any simplifying assumptions: A. does not look like the real-world problem it is meant to address. B. excludes important predictive variables. C. provides simplified solutions to complex problems. D. is highly complex and likely unworkable. E. is very helpful for solving tough, real-world problems.

D. is highly complex and likely unworkable.

Refer to the following figures to answer the two questions that follow. Which allocation point in the short-run production possibilities frontier (PPF) will lead to the most significant growth in the long-run PPF? A. point B B. point A C. point C D. point E E. point D

D. point E

Refer to the following figure to answer the five questions that follow.In the figure, point E is: A. evidence that trade does not enrich society. B. the equilibrium. C. an efficient point. D. unattainable with current resources. E. an inefficient point.

D. unattainable with current resources.

The figures below depict the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between building wooden boats and solving crimes. Refer to these figures to answer the five questions that follow. What is Gibbs's opportunity cost of making a wooden boat? A. 1/20 of a boat B. 30 solved crimes C. 20 solved crimes D. 1/10 of a boat E. 10 solved crimes

E. 10 solved crimes

Consider the following scenario to answer the five questions that follow. Two friends, Rachel and Joey, enjoy baking bread and making apple pies. Rachel takes two hours to bake one loaf of bread and one hour to make one pie. Joey takes four hours to bake one loaf of bread and four hours to make one pie. What is Rachel's opportunity cost of baking a loaf of bread? A. 1/2 loaf of bread B. 1 pie C. 1 loaf of bread D. 4 pies E. 2 pies

E. 2 pies

Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. Use this table to answer the six questions that follow. What is Michael's opportunity cost of a painting? A. 3 paintings B. 2 paintings C. 1/2 sculpture D. 1/2 painting E. 2 sculptures

E. 2 sculptures

Refer to the following figure for the five questions that follow. The opportunity cost of increasing the production of apple pies from 12 to 14 pies is: A. 14 apple pies. B. 2 apple pies. C. 7 blueberry pies. D. 2 blueberry pies. E. 4 blueberry pies.

E. 4 blueberry pies.

Refer to the following table to answer the five questions that follow. Given an eight-hour workday, which statement best describes the absolute advantage evident in the table? A. Alicia Keys has an absolute advantage in making pizzas, and Jay-Z has an absolute advantage in making cheesesteaks. B. Neither party has an absolute advantage. C. Jay-Z has an absolute advantage in the production of both foods. D. Jay-Z has an absolute advantage in making pizzas, and Alicia Keys has an absolute advantage in making E. Alicia Keys has an absolute advantage in the production of both foods.

E. Alicia Keys has an absolute advantage in the production of both foods.

Use these production possibilities frontier (PPF) curves, which compare the ancient production of agricultural products to art and literature, to answer the four questions that follow. Suppose a new generation of baby boomers is entering the workforce. Which graph best depicts how this would affect the PPF? A. Graph C B. Graph D C. Graph E D. Graph B E. Graph A

E. Graph A

Use these production possibilities frontier (PPF) curves, which compare the ancient production of agricultural products to art and literature, to answer the four questions that follow. Suppose the printing press is invented. Which graph best depicts how this would affect the PPF? A. Graph A B. Graph E C. Graph C D. Graph D E. Graph B

E. Graph B

Refer to the following figure to answer the five questions that follow. Which statement best describes the opportunity cost evident in the production possibilities frontier (PPF) for the corresponding figure? A. The law of increasing relative cost applies because the PPF is a straight line. B. The opportunity cost is constant because the PPF is bowed outward. C. The opportunity cost decreases because the line has a negative slope. D. The law of increasing relative cost applies because the PPF is bowed outward. E. The opportunity cost is constant because the PPF is a straight line.

E. The opportunity cost is constant because the PPF is a straight line.

Money eliminated the need for the double coincidence of wants through its role as: A. an accounting unit. B. a hard currency. C. fiat, or declared, money. D. something to store value. E. a medium of exchange.

E. a medium of exchange.

On a production possibilities frontier (PPF) that shows the trade-off between consumer goods and capital goods given a fixed amount of labor, unemployment is illustrated by: A. movement from a point on the frontier to another point on the frontier. B. a point outside the frontier. C. a point on the frontier. D. movement from a point within the frontier to a point on the frontier. E. a point within the frontier.

E. a point within the frontier.

The ________ illustrates the various combinations of output that a society can produce if all of its resources are being used efficiently. A. law of demand B. principle of comparative advantage C. concept of absolute advantage D. law of positive statements E. production possibilities frontier (PPF)

E. production possibilities frontier (PPF)