Chapter 2 Mirco

An economy that has the lowest opportunity cost for producing a particular good is said to have: - an absolute advantage. - a comparative advantage. - a production possibility frontier. - an increasing opportunity cost

- a comparative advantage.

A simplified representation that is used to study a real situation is called: - a model. - a production possibility frontier. - an assumption. - a trade-off

- a model.

Trade takes the form of ________ when people directly exchange goods that they have for goods they want. - exploitation - benevolence - barter - the zero-sum game

- barter

The process observed when an economy's production possibility frontier is shifted outward is: - comparative advantage. - economic growth. - full employment. - specialization.

- economic growth.

All points on the production possibility frontier are: - efficient production points. - inefficient production points. - infeasible production points. - economic growth

- efficient production points.

The models used in economics: - are usually limited to variables that are directly related. - are essentially not reliable because they are not testable in the real world. - are of necessity unrealistic and not related to the real world. - emphasize basic relationships by abstracting from complexities in the everyday world.

- emphasize basic relationships by abstracting from complexities in the everyday world.

Economists are generally in support of: - government restrictions on trade. - free international trade. - tariffs to restrict trade. - subsidizing exports.

- free international trade

All points outside the production possibility frontier are: - efficient production points. - inefficient production points. - infeasible production points. - economic growth.

- infeasible production points.

The opportunity cost of production: - is the price of a good. - is what you give up to produce the good. - decreases as production increases. - is what you gain by producing the good.

- is what you give up to produce the good.

Trade can be beneficial to an economy because: - it results in a more efficient use of the combined resources of some of the trading countries, even though it reduces efficiency in others. - more goods and services can be obtained at lower opportunity cost. - it prevents specialization in those activities in which countries have a comparative advantage. - it prevents unemployment.

- more goods and services can be obtained at lower opportunity cost

The concept of comparative advantage is based upon: - absolute labor productivity. - relative labor costs. - dollar prices of labor. - relative opportunity costs.

- relative opportunity costs.

A production possibility frontier illustrates the ________ facing an economy that ________ only two goods. - prices; sells - trade-offs; produces - trade-offs; consumes - shortages; produces

- trade-offs; produces