Chapter 2 Unlimited - Macro

Which of the following is not a factor of production?

$1,000 in cash

Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing an additional 15 neckties?

15 bow ties

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses?

25 silk leaves

An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776 was written by

Adam Smith.

Which of the following statements about an entrepreneur is false?

An entrepreneur sells his entrepreneurial services in the output market.

Which of the following is an example of spending on factors of production in the circular flow model?

Arlisha purchases a cotton candy machine for her concession stand at the state fair.

Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand?

Diminishing marginal utility

Which of the following statements about a circular flow model is false?

Households are neither buyers nor sellers in the input market.

The simple circular flow model shows that

Households are on the selling side of the resource market and on the buying side of the product market.

For each pound of salami that Hungary produces, it gives up the opportunity to make 10 bottles of beer. Slovakia gives up the opportunity to produce of 1 pound of salami for every 8 bottles of beer it produces. Which of the following is true about the comparative advantage between the two countries?

Hungary has the comparative advantage in beer.

Which of the following statements is true?

Individuals who have never been the best at doing anything can still have a comparative advantage in producing some product.

In 18th century Europe, governments gave guilds legal authority to limit production of goods. How did this authority either obstruct or improve the market mechanism?

It obstructed the market mechanism because the guild's actions prevented the forces of demand and supply from coordinating the self-interested decisions of producers and consumers.

For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France gives up the opportunity to produce of 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the comparative advantage between the two countries?

Italy has the comparative advantage in wine.

All of the following countries come close to the free market benchmark except

North Korea.

The production possibilities frontier model assumes which of the following?

The economy produces only two products.

Which of the following is a fundamental characteristic of the market system?

Property rights

For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?

Switzerland has the comparative advantage in watches.

Which of the following is an example of spending on factors of production in the circular flow model?

The "Suds Bucket" car wash buys new squeegees for all its employees.

The attainable production points on a production possibilities frontier are

The points along and inside the production possibility frontier

An inward shift of a nation's production possibilities frontier can occur due to

a natural disaster like a hurricane or bad earthquake.

An example of a factor of production for Dell is

a worker hired by Dell.

Which of the following is a factor of production?

an oven in a bakery

Comparative advantage means the ability to produce a good or service

at a lower opportunity cost than any other producer.

You have an absolute advantage whenever you

can produce more of something than others with the same resources.

Individuals who have never been the best at doing anything

can still have a comparative advantage in producing some product.

The ________ demonstrates the roles played by households and firms in the market system.

circular flow model

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?

consume a combination of goods that lies outside its own production possibilities frontier

An outward shift of a nation's production possibilities frontier represents

economic growth.

All of the following are critical functions of the government in facilitating the operation of a market economy except

ensuring an equal distribution of income to all citizens.

Tesla Motors manufactures its cars at a plant in Fremont, California. At this plant, Tesla is able to take advantage of the high level of technical training possessed by its American workers, but it also sacrifices the ability to pay lower wages had it chosen to open its plant in a low-wage country such as Mexico, India, or China. In deciding to open the Fremont plant, Tesla

faced a trade-off between higher cost and less technical skill.

If a commercial dairy farm wants to raise funds to purchase feeding troughs, it does so in the

factor market.

The natural resources used in production are made available in the

factor market.

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

As women's wages have risen relative to men's wages, the opportunity cost to women of doing housework has ________ than has the opportunity cost to men.

increased more

As job opportunities for women and the wages those jobs pay have increased, the opportunity cost of doing housework has ________, so many families have chosen to hire specialists in households chores, such as cleaning services and lawn care services, because the cost of these specialists is ________ than the cost of the wife (or husban performing those chores.

increased; lower

In a production possibilities frontier, a point ________ the frontier is productively inefficient.

inside

The resource income earned by those who supply ________ is called wages.

labor

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

linear

The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources.

maximum attainable

The primary purpose of ________ is to encourage the expenditure of funds on research and development to create new products.

patents and copyrights

When you purchase a new pair of jeans you do so in the

product market.

Households ________ final goods and services in the ________ market.

purchase; product

Households

sell resources in the factor market.

If the best lawyer in town is also the best at operating a word processor, then according to the theory of comparative advantage, this person should

specialize in being a lawyer because its opportunity cost is lower.

If the best surgeon in town is also the best at cleaning swimming pools, then according to the theory of comparative advantage, this person should

specialize in being a surgeon because its opportunity cost is lower.

Scarcity

stems from the incompatibility between limited resources and unlimited wants.

The term "property rights" refers to

the ability to exercise control over one's own resources within the confines of the law.

The concept of opportunity cost is that

the economic cost of using a factor of production is the alternative use of that factor that is given up.

Which of the following are separate flows in the circular flow model?

the flow of income earned from the sale of resources and the flow of expenditures on goods and services.

Which of the following is a flow in the circular flow model?

the flow of revenue received by firms and the flow of payments to resource owners

A major factor contributing to the slow growth rate of less-developed economies is

the lack of well-defined and enforceable property rights.

Adam Smith's invisible hand refers to

the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole.

The circular flow model demonstrates

the roles played by households and firms in the market system.

Which of the following is a factor of production?

the security guard at the local bank

The points outside the production possibilities frontier are

unattainable.

Adam Smith's behavioral assumption about humans was that people

usually act in a rational, self-interested way.