ECON Chapter 2

6. Based on the information provided in the table to the​ right, the opportunity cost to this student of allocating enough additional study time on economics to move her grade up from a 90 to a 100 is a reduction in her biology grade of 10 points.

10

What is the difference between absolute advantage and comparative​ advantage?

Absolute advantage is when someone can produce more of a good using a given quantity of inputs while comparative advantage is when someone can produce a good at a lower opportunity cost.

The opportunity cost of going to college full time away from home includes A. the income you could have earned from a fullminus−time job. B. the funds you would have saved if you had not paid the tuition. C. the time you could have spent with friends back home. D. All of the above are correct.

All of the above are correct.

20. Suppose that Canadian farmers can grow wheat more cheaply than can U.S. farmers. In the interest of​ efficiency, what is the desirable​ outcome?

Allow the Canadian farmers to sell their wheat for a lower price.

Which of the following is not generally considered to be a resource​ (factor of​ production)? A. Upper A small business owner B. Upper A bond issued by the Chrysler Corporation C. Upper A college professor D. Upper A copper mine

B. Upper A bond issued by the Chrysler Corporation

* (W)Opportunity cost

B. is the value of the next best alternative as a result of choosing some given alternative. C. is the value of all alternatives forgone as a result of choosing some given alternative. D.either B or C.

4. Why is it that all of our wants cannot be​ satisfied?

Because limited resources mean all the goods we want cannot be obtained

Kyla is buying clothes. She can choose between a red dress​, a blue sweater and black jeans. She​ doesn't like black jeans​, and after some​ thought, she chooses a red dress. What is the opportunity cost of this​ choice?

Blue sweater

Italy and Singapore are countries that trade with each other. If ItalyItaly has a comparative advantage in cell phones and Singapore has a comparative advantage in hat​, which of the following is a correct statement about the effects of trade between these​ nations? A. Both countries are likely to be better​ off, and world production will increase. B.There will be a net loss of employment in Singapore. C. Both countries will lose jobs through trade and be worse off. D. Italy will lose jobs in the cell phone industry.

Both countries are likely to be better​ off, and world production will increase.

The production possibilities curve represents the maximum feasible production combinations resulting from

C. the mix of current resources that utilizes all available inputs using current technology.

20.The reason that most of the coffee that is consumed in the United States comes from Colombia is that A. Colombia has an absolute advantage in producing coffee relative to the United States. B. Colombia has a comparative advantage in producing coffee relative to the United States. C. government trade disincentives regarding Colombian coffee make such trade possible. D. coffee cannot be grown in the United States.

Colombia has a *comparative advantage* in producing coffee relative to the United States.

Which of the following is TRUE about comparative​ advantage?

Comparative advantage explains trade within nations and among nations.

Which of the following statements is​ true? A. Everyone can benefit when people specialize where they have a comparative advantage and then trade with each other. B. Specialization affects international trade but not interstate trade. C. Specialization affects interstate trade but not international trade. D. Comparative advantage applies to nations but not to people.

Everyone can benefit when people specialize where they have a comparative advantage and then trade with each other.

3. At a zero​ price, which of the following conditions is TRUE for an economic​ good?

Its quantity demanded exceeds its quantity supplied.

Each individual must make choices because

Resources are limited and therefore cannot satisfy​ one's many competing wants.

1. Which of the following is not generally considered to be a resource​ (factor of​ production)?

Share of Microsoft stock

17. StefanieStefanie can make 77 dozen cookiesdozen cookies or 1 peach tartpeach tart in one hour. CurtisCurtis can make 44 dozen cookiesdozen cookies or 1 peach tartpeach tart in one hour. Based on this​ information, which of the following is a true​ statement? A. StefanieStefanie has a comparative advantage in making peach tartspeach tarts. B. CurtisCurtis has an absolute advantage in making cookiescookies. C. StefanieStefanie has a comparative advantage in making cookiescookies. D. CurtisCurtis has a comparative advantage in making cookiescookies.

StefanieStefanie has a comparative advantage in making cookiescookies.

5. If you receive a free ticket to a​ concert, what, if​ anything, is your opportunity cost of attending the​ concert? If miserable weather on the night of the concert requires you to leave much earlier for the concert hall and greatly extends the time it takes to get home​ afterward, the opportunity cost of attending the concert ________

The next best activity that​ can't be done while attending the concert. Increases

The graph shows a production possibilities curve for a student who currently spends 8 hours a week studying. How could the student get a B in both​ classes? A. The student cannot get a B in both classes. B. The student spends more time studying economics than marketing. C. The student could study more than 8 hours a week. D. The student could spend more time studying marketing than economics.

The student could study more than 8 hours a week.

Why do economists avoid making the distinction between wants and needs​?

The term need is subjective making it difficult to distinguish between something someone wants and something they need.

* (W) 12. Which of the following is assumed when constructing a production possibilities​ curve?

a fixed amount of resources

8. A graphical representation which shows the trademinus−off that occurs when more of one output is obtained at the sacrifice of another is called

a production possibilities curve.

A production possibilities curve represents

all possible combinations of output that could be produced assuming fixed productive resources and their efficient use

The division of labor increases the output of society by

allowing resources to specialize in the tasks for which they have a comparative advantage.

Danny goes to a military academy to become a soldier. This is an example of

an investment in human capital.

18. Specialization of labor and trade yield greater economic efficiency when applied to interstate​ trade,

and when applied to international trade.

16. If the production of capital goods is shown along the horizontal axis of a production possibilities​ curve, and the production of consumer goods is shown along the vertical axis of a production possibilities​ curve, and the economy desires to have a rapid rate of economic​ growth, then the economy should produce at a point

at a point near the horizontal axis concentrating on the production of capital goods.

The ability to produce a good at a lower opportunity cost than others is known as

comparative advantage.

2. Many state governments claim a shortage of funds because there are​ "unmet needs." This claim is

false because of scarcity

16. Using productive resources to make capital goods requires that we

forgo some level of current consumption.

Human beings

have unlimited wants.

Education increases the stock of which factor of​ production?

human capital

* (W)According to the law of increasing additional​ cost, the opportunity cost of producing

is likely to decrease as society tries to produce more cottoncotton.

15. If a country is currently producing inside its production possibilities​ curve,

it can increase the production of both goods by putting unemployed resources to work.

Factors of production include

land, labor, physical​ capital, human capital and entrepreneurship.

16. ​Generally, if a nation produces more consumer goods than capital goods

less of all goods may be produced in the future.

18. Canada goes to considerable lengths to protect its television program and magazine producers from U.S. competitors. The United States often seeks protection from food imports from Canada. From an economywide​ viewpoint, these efforts are

misguided because the enhanced output from specialization based upon comparative advantage is restricted.

Opportunity cost is best defined as the _________ ​alternative(s) that must be sacrificed to obtain something or to satisfy a want.

next best....

* (W)3. Scarcity implies that

no​ person's wants can be satisfied.

10. A production possibilities curve that is bowed outward​ (from the​ origin) represents the concept that

production of additional units of one good requires that increasing quantities of the other good be given up.

14. A country produces pearspears and ricerice. ​1.) Using the​ 3-point curved line drawing tool​, draw a representative PPC for this country. Label it PPC1. ​2.) Suppose that a breakthrough in technology makes all agriculture more productive. Using the​ 3-point curved line drawing tool​, draw a new PPC showing the effect of this change. Label it PPC2. Carefully follow the instructions​ above, and only draw the required objects.

see screen shot

13. Using the diagram to the​ right, click on the point labeled ​'S​' and drag the ​'savings​' slider to the right ​(denotes the production of more capital goods​). Use this to help answer the question below. If a country devotes more resources toward the production of capital goods and less toward consumer goods then A. that country will not experience any growth. B. that country will experience greater economic growth. C. that country will experience unemployment. D. scarcity will increase.

that country will experience greater economic growth.

The existence of scarcity requires

that people must make choices and face​ trade-offs in using their resources.

15. Economic growth appears on a production possibilities curve as the curve shifting out away from the origin. B. the points outside the production possibilities curve. C. the curve shifting in toward the origin. D. a change in the slope of the curve.

the curve shifting out away from the origin.

11. The law of increasing relative costs is due to

the fact that resources are not perfectly adaptable for alternative uses.

12. Some resources are better suited to produce certain goods than other resources. This fact leads to

the law of increasing cost.

Whenever a society forgoes current consumption in order to invest in capital​ goods,

the more the society can consume in the future.

19. John and Mary work at a bakery. John can decorate either 10​ ice-cream cakes or 4 wedding​ cakes; Mary can decorate either 8​ ice-cream cakes or 2 wedding cakes. According to this​ scenario,

the opportunity cost of decorating a wedding cake for Mary is 4​ ice-cream cakes.

7. Opportunity cost is

the value of the next highest ranked alternative that must be sacrificed to obtain a want.

When an individual proclaims the need for a new​ car, the person typically means

they want something they currently do not have.

4. Economists are concerned with an​ individual's

wants because the existence of wants leads to scarcity.

17. The division of labor refers to

workers being assigned specific tasks.

* (W)7.Which of the following sets of terms describes the problem of scarcity in​ economics?

​Production, consumption, and wants