Economics Exam 1

Classify each statement as true or false by dragging it into the corresponding category. FALSE

1. Wealthier countries always benefit more from international trade than poorer countries. 2. 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.

Classify each statement as true or false by dragging it into the corresponding category. TRUE

1. When two countries choose to partake in international trade, it is a mutually beneficial activity for both countries. 2. Through specialization and trade, it is possible for a country to consume a combination of goods that is beyond its original PPF.

When trading with more developed countries

less developed countries have a comparative advantage in the production of some goods or services

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 1 bushel of beans is. 1. 0.38 bushels of corn 2. 16.00 bushels of corn 3. 2.67 bushels of corn 4. 2.99 bushels of corn

3. 2.67 bushels of corn

Which decision is least likely to be well explained by Marginal analysis? 1. Deciding how fast to go on the freeway 2. Deciding whether to take a lunch break or knock on another door as a door-to-door salesperson 3. Deciding between watching another episode of your favorite TV series and going to bed 4. Deciding whether to do more sit-ups at the gym 5. Deciding which college to attend

5. Deciding which college to attend

These figure illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer these questions according to the figures.

A. Kate has a comparative advantage in : cake B. Sarah has a comparative advantage in: bread

These figure illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer these questions according to the figures.

A. Kate has an absolute advantage in: neither good B. Sarah has an absolute advantage in: both goods

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.

A. What is Paulie's opportunity cost od producing a cup of ice cream? 4 t-shirts B. What is Vinny's opportunity cost of producing a t-shirt? 0.533 cups of ice cream C. Paulie has a comparative advantage in _________ and Vinny as a comparative advantage in________. t-shirts;ice cream

Which statement describes the equity-efficiency trade-off?

Actions intended to make economic outcomes fairer may cause efficiency to decrease.

Which demonstrates a scenario with no opportunity cost? 1. Its friday night and you stay up late talking and hanging out with your friends. 2. The chemistry club is giving out free pizza for lunch to all who come to their table to get it. 3. Naomi, age 8, is at a bookstore and chooses to buy a book about a young wizard instead of buying a math book that she would probably never open. 4. Chex Moi and Chez Nous, to premiere French restaurants with three Michelin stars, noth offer you a full time sous chef job at the same salary. You are ecstatic because you know it is a win-win scenario and choose to work for Chez Nous.

All of these scenarios have opportunity cost.

While in class, you realize that there are more people in the classroom than there are seats. Across the hall, you notice a large, empty lecture hall and wonder why the university is not operating at

Efficiency

Your economics professor is attempting to recruit more students to major in economics. She presents data showing that economics majors develop skills valuable in private industry, government, and research. She also argues that they earn a relatively higher income than other majors. Your professor is presenting you with ____________ to major in economics.

Incentives

You and other college students are deciding whether to major in music or engineering. You learn that there is a shortage of engineers, making it easy for engineering graduates to find employment, while there is a glut of musicians for whom finding a job is difficult. As a result, you and many other college students decide to major in engineering. Which economic principle does this illustrate?

Markets tend to move towards equilibrium as individuals respond to incentives.

You decide to forgo partying for two hours to study for an upcoming economics exam. In your first semester Principles of economics class, you learn that the enjoyment you would have received from partying is an

Opportunity Cost

There are limited resources to satisfy all of society's wants.

Scarcity

You are assigned a final group project for your economics course. One member of your group is really good at finding resources for the project, one is really good at proofreading and editing, and you are really good at making a presentation. Based on this, you know that via ___________ you can complete the project more efficiently than if you all did each part together.

Specialization

Select the correct definition of the tern "comparative advantage."

The ability to produce a good or service at a lower opportunity cost than another.

The five-dollar Burger Joint gift card that your friend gave you for your birthday expires today. You can either use the gift card to buy yourself dinner at Burger Joint, or you can stay home and eat a delicious home-cooked meal. What is the opportunity cost of eating the home-cooked meal?

The value of the ingredients that go into the home-cooked meal, and the value of a five dollar dinner at Burger Joint.

Comparing the benefits and costs of engaging in an activity.

Trade-off

Why is the shape of the production possibilities frontier (PPF) often curved instead of straight?

Typically, come 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.