Micro Econ Chapter 2

Check computer downloads: 2/28/22 Christine and Paul are deciding how to split their time between writing music and lyrics for their new album. Their PPFs for 72 h of work are shown. Christine and Paul have to write music for 8 songs and lyrics for 12 songs (4 songs already have music). When they are done, they can go to a private island and relax from all their hard work. It is possible that they will use more than 72 h. Once they start writing lyrics and music, assuming their hired help packs for them and their plane is waiting outside their door, in how many hours can they board the plane to their relaxing island getaway? __h Christine will write music for ___songs. Paul will write music for ___songs. Christine will write lyrics for __songs. Paul will write lyrics for __songs.

In order: 96, 0, 8, 12, 0

In a competitive market, all of the choices along the production possibility frontier display ________________ efficiency, while the specific choice on the frontier that society picks is the one with _______________ efficiency. a) productive; allocative b) allocative; productive c) allocative; allocative d) productive; productive

a

Social welfare spending in Sweden occupies too large a portion of the national budget. a) normative economics b) positive economics

a

The richest 11% of Americans should pay more taxes than the rest of the 9999%. a) normative economics b) positive economics

a

Of all the points in the diagram, ________ represents a situation where the opportunity cost of producing one more unit of Good X is highest. a) Point A b) Point B c) Point C d) Point D image: check notebook

a) Point A

A decrease in the supply of coconut will increase the price of German chocolate cake, a good which requires coconut shavings as a key ingredient. a) normative economics b) positive economics

b

Point A in the diagram represents a production situation that is: a) too expensive. b) unattainable. c) efficient. d) inefficient. image: curved graph points: A inner and under graph ; B outside ; C on near the y axis

d) inefficient.

Vincent and Jean are two cooks who work in a village. Each of them can either bake cakes or make pizzas. Every ingredient is readily available to them, and the only scarce resource is the cooks' time. Vincent can bake 1010 cakes or make 55 pizzas in an hour. Jean can bake 1212 cakes or make 88 pizzas in an hour. Please answer the four questions. 1. Which cook has the absolute advantage in baking cakes? 2. Which cook has the absolute advantage in making pizzas? 3. Which cook has the comparative advantage in baking cakes? 4. Which cook has the comparative advantage in making pizzas? options: a) Jean b) Vincent d) Neither

1. A 2. A 3. B 4. A

Assume France and Morocco can both produce grain and dates, and that the only limited resource is the farming labor force, meaning that land, water, and all other resources are plentiful in both countries. Each farmer in France can produce 10 t of grain or 5 t of dates in a season. Each farmer in Morocco can also produce 10 t of grain or 25 t of dates. Please answer the four questions. Options: a. neither b. France c. morocco 1. Which country has the absolute advantage in producing dates? 2. Which country has the absolute advantage in producing grain? 3. Which country has the comparative advantage in producing dates? 4. Which country has the comparative advantage in producing grain?

1. C 2. A 3. C 4. B

Graph: check downloads: 2/28/22 The accompanying graph contains the production possibilities frontier (PPF) for Rubberland. Rubberland only makes two products, rubber band balls and rubber hoses, and on a given day can produce according to the PPF in the graph. Point A on the PPF represents the combination of the two goods Rubberland currently produces. When a new method of rubber processing is discovered, the productivity of all Rubberland's inputs increases. Please shift the PPF to show this change. Assume that Rubberland does not make more rubber band balls than they originally made at point A but still maximize their productive capabilities. Move point A to their new production point. How many more rubber hoses do they now produce per day than before? ___ more horses per day

20

Graph: Downloads: kate and sarah The figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures. Kate has a comparative advantage in a) cake. b) bread. c) neither good. d) both goods. Sarah has a comparative advantage in a) neither good. b) cake. c) both goods. d) bread.

A D

Check downloads: 3rd According to the graph of the production possibilities frontier, what is the opportunity cost of the ninth widget? a) about 9 widgets b) about 4 gizmos c) about 2 gizmos d) about 0 widgets What best explains the shape of the production possibility frontier in the graph? a) The production of widgets and gizmos require the same resources to produce. b) Some resources used to produce one of the goods are not as productive when they are used to produce the other good. c) Producers can move from one point to another on the production possibilities frontier in response toconsumers' demands. d) This economy has the capacity to produce different combinations of widgets and gizmos.

Both B

Connected to card 20 These figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures. Kate has an absolute advantage in a) both goods. b) cake. c) bread. d) neither good. Sarah has an absolute advantage in a) cake. b) bread. c) neither good. d) both goods.

D D

An economic transaction in which one party trades a good or service for another good or services is called a) barter. b) comparative advantage. c) absolute advantage. d) a production possibility.

a) barter.

Number of Units Produced in 1 Hour: Cars Computers Brazil 10 5 India 1 4 The table above shows the production possibilities for two countries. Brazil has an absolute advantage in producing _____________. a) cars and computers b) none of the two goods c) computers d) cars

a) cars and computers

Suppose that Paulie and Vinny each can produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vinny each can produce in 1 hour, respectively, if they devote all of their time and effort into making the good. Round all answers to two decimal places. Ice Cream (cups) T-shirts (quantity) Paulie 4.00 16.00 Vinny 10.00 13.00 a. What is Paulie's opportunity cost of producing a cup of ice cream? Paulie's opportunity cost:___t‑shirts b. What is Vinny's opportunity cost of producing a t-shirt? Vinny's opportunity cost:___cups of ice cream Paulie has a comparative advantage in____ and Vinny has a comparative advantage in ____ OPTIONS: nothing, t-shirts, ice cream

a. 4 b. .77 c. tshirts; ice cream

Classify the statements as true or false: a. The process of specialization and trade has positive net benefits and is, therefore, beneficial to everyone. b. A nation will not have a comparative advantage in a product if it does not also have an absolute advantage in the production of that good. c. It can be mutually beneficial for two nations to specialize in goods for which they have a comparative advantage and then trade with one another. d. Countries specialize in the production of goods for which they have a comparative advantage. e. Absolute advantage is the source of the potential gains from specialization and trade.

a. F b. F c. T d. T e. F

Identify each statement as true or false. a. When two countries choose to partake in international trade, it is a mutually beneficial activity for both countries. b. Wealthier countries always benefit more from international trade than poorer countries. c. Countries trade for goods in which they do not have a comparative advantage, and therefore, would never trade with nations that have similar resource endowments. d. Through specialization and trade, it is possible for a country to consume a combination of goods that is beyond its original production possibilities frontier.

a. T b. F c. F d. T

As minimum wage increases, the prices of all goods and services also tends to increase. a) normative economics b) positive economics

b

If an economy moves from a point on a production possibility frontier line to a point to the right of that production possibility frontier, what event might have occurred? a) A tornado that has caused tremendous damage. b) There has been a discovery of new technology that expands production possibilities. c) The economy has recovered from a downturn and unemployment is dropping. d) The government has placed new restrictions on energy production.

b) There has been a discovery of new technology that expands production possibilities. Advancement in technology to produce a good would increase production possibilities, meaning more production for said product.

The table presents information about the productivity of digital cameras and personal computers in the United States and Japan. The data are presented in units of output per hour of work. Use this information to answer the question. Digital Camera Personal Computers Japan 6 3 U.S 8 2 Japan has a(n) ___________________ advantage in producing ______________________ . a) comparative, digital cameras and personal computers b) absolute, personal computers c) comparative, digital cameras d) absolute, digital cameras

b) absolute, personal computers

A farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able to get 6 bushels of beans, then her opportunity cost of 11 bushel of beans is a) 0.38 bushels of corn. b) 16.00 bushels of corn. c) 2.67 bushels of corn. d) 2.99 bushels of corn.

c) 2.67 bushels of corn.

It takes Juan 1 hour to wash a car and 2 hours to wax it. Maria, on the other hand, takes 1 hour to wash a car and half an hour to wax it. If they divide the work, _______ would specialize in washing since his/her opportunity cost is _________ for that activity. a) Maria; lowest b) Juan; highest c) Juan; lowest d) Maria; highest

c) Juan; lowest

Why is the shape of the production possibilities frontier (PPF) often curved instead of straight? a) Because the production possibilities frontier is based on the productive capabilites, and of a nation overall, rather than the productive capacity of an individual. b) To take a potential sunk cost into account, the PPF is curved to distribute the burden of the sunk cost based on allocative effieciency. c) Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for. d) The productive efficiency of an economy decreases as it moves from left to right along the PPF.

c) Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for.

An outward parallel shift of the production possibility frontier signals: a) a shrinkage of the economy due to rising opportunity costs. b) an ability to produce more of one but not both goods represented by the PPF. c) an expansion of the productive capacity of the economy. d) the employment of previously unused resources into production.

c) an expansion of the productive capacity of the economy. Production of a good will increase because there are more resources like technology or money.

Number of Units Produced in 1 Hour: Cars Computers Brazil 10 5 India 1 4 The table above shows the production possibilities for two countries. Brazil has a comparative advantage in producing _____________, and India has a comparative advantage in producing ________. a) cars; cars b) computers; cars c) cars; computers d) computers; computers

c) cars; computers

Suppose two economists are debating a tax reform bill. Both economists agree that the bill would increase the after-tax income of the top 5% of income earners; however, they disagree on whether the bill would improve the tax system. Which is the most plausible reason for why these economists disagree? a) differences in methodology b) a lack of evidence about the long-run impact of the proposed bill c) differences in values d) different choices about the right simplifications to use in economic analysis

c) differences in values

Select the correct definition of the term "comparative advantage." a) the ability to produce more of a good or service than another over a specified time period b)the ability to produce a good or service at a higher opportunity cost than another c) the ability to produce a good or service at a lower opportunity cost than another d) the ability to produce less of a good or service than another over a specified time period e) a nation offering more favorable trade policy with its allies than with other countries When trading with more developed countries, less developed countries do not have a a) comparative advantage in the production of any goods or services. b) less developed countries have a comparative advantage in the production of all goods or services. c) less developed countries have a comparative advantage in the production of some goods or services.

c) the ability to produce a good or service at a lower opportunity cost than another c) less developed countries have a comparative advantage in the production of some goods or services.

Connected to q.20 and 21 Kate and Sarah own a bakery together. The two figures illustrate the production possibilities available to them if they work at their bakery for 8 h a day. Answer the question using these figures. If Kate and Sarah both specialize in the good in which they have a comparative advantage, the a) total production of bread will be 4 loaves, and the total production of cake will be 9 units. b) total production of bread will be 16 loaves, and the total production of cake will be 17 units. c) total production of bread will be 12 loaves, and the total production of cake will be 8 units. d) total production of bread will be 8 loaves, and the total production of cake will be 8.5 units.

c) total production of bread will be 12 loaves, and the total production of cake will be 8 units.

When an economic model is used, it tends to: a) start with many details and then become simpler over time. b) use a case study approach by focusing on one specific real-life example. c) start with very few details in order to simplify the model. d) include many caveats to ensure that the model is realistic.

c)start with very few details in order to simplify the model. Too many details can cause confusion when understanding the model.

Can a production possibility frontier ever shrink inwards? a) Yes, if it has underutilized resources. b) No, economic growth is always a positive value. c) No, but an economy can produce at a point inside of its PPF. d) Yes, if new regulations restrict a country's capacity to produce goods.

d) Yes, if new regulations restrict a country's capacity to produce goods. A law can stop or limit the production of a good.

Suppose you are trying to understand the effect that an increase in the price of grapes will have on the market for wine. An effective model to determine this effect is one that evaluates the change in the price of grapes on the market quantity of wine assuming: a) buyers' incomes also change. b) buyers' preferences and incomes also change. c) some wines use different grapes. d) no other change takes place.

d) no other change takes place.

Suppose you have a very efficient study system. Then, as you increase the hours that you study for an economics exam, the opportunity cost of studying for the exam: a) stays the same. b) decreases. c) may increase or decrease. d) increases.

d)increases. It increases because you are increasing the amount of hours you are studying.