ENC-211

Efficiency in production is said to exist only if Select one: a. scarcity does not exist. b. it is possible to produce more of one good without producing less of another. c. it is possible to make one person better off without making another worse off. d. it is not possible to produce more of one good without producing less of another. e. it is not possible to make one person better off without making another worse off.

b. it is possible to produce more of one good without producing less of another. Efficiency in production means that we are making as much of each thing as we can right now, given everything else we are making. We could make more of one good, but the only way to do so would be to divert resources from making one of the other goods.

When resources are being used inefficiently, Select one: a. the production possibilities curve shifts inward (to the left). b. the economy is operating inside (below) the production possibilities curve. c. the economy is operating right on the production possibilities curve. d. the economy is operating outside (above) the production possibilities curve. e. the production possibilities curve shifts out (to the right).

b. the economy is operating inside (below) the production possibilities curve.

Suppose a production possibilities curve is constructed for two goods, bread and circuses. The slope of such a production possibilities curve does not indicate Select one: a. the tradeoff possible between bread and circuses. b. that the marginal cost of bread is rising as we move to higher quantities of bread. c. that scarcity exists, in that choices must be made and costs must be borne to produce bread. d. that the marginal cost of circuses is rising as we produce fewer circuses. e. the marginal cost of producing bread, in terms of the circuses given up. Feedback

that the marginal cost of circuses is rising as we produce fewer circuses. - The increasing slope as we move from left to right on the curve indicates increasing cost.

According to the law of comparative advantage, Select one: a. gains from specialization and exchange are not possible. b. nations gain when they import goods which they themselves consume in greatest quantity. c. nations gain when they import those goods which they can produce in the greatest quantity. d. nations gain when they import those goods which they can themselves produce at low opportunity cost compared with other countries. e. nations gain when they import those goods which they produce at higher opportunity cost than other countries.

By obtaining goods from other countries when those countries can provide them at lower cost, a country can not only obtain more goods, but can use its own resources more efficiently. The correct answer is: nations gain when they import those goods which they produce at higher opportunity cost than other countries.

Trade based on comparative advantage assures that a. each item is produced at as low a cost possible in terms of other things given up. b. every trade has a winner and a loser. c. only the strongest survive. d. some people are rich and others are poor. e. each item is produced using the least amount of time needed to produce it.

a. each item is produced at as low a cost possible in terms of other things given up.

According to the law of comparative advantage, Select one: a. nations gain when they specialize in the production of those goods which they can produce at low opportunity cost. b. nations gain when they specialize in the production of goods which they themselves consume. c. gains from specialization and exchange are not possible. d. nations gain when they specialize in the production of those goods which they can produce at high opportunity cost. e. nations gain when they specialize in the production of those goods which they can produce in the greatest quantity.

a. nations gain when they specialize in the production of those goods which they can produce at low opportunity cost.

If the people of Italia all concentrate on producing only food, they could produce 8 tons a year of food. If the people of Italia concentrate on producing only clothing, they can produce 16 tons a year of clothing. On the other hand, the people of Slavia could produce 10 tons of food if they concentrated exclusively on food production, or they instead could produce 30 tons of clothing if they concentrated on clothing production. Which statement is true? a. Trade could benefit Italia, but not Slavia. b. Slavia has a comparative advantage in producing clothing. c. Slavia has a comparative advantage in producing both food and clothing. d. Italia has a comparative advantage in producing neither food nor clothing. e. Trade could benefit Slavia, but only if it harmed Italia

b. Slavia has a comparative advantage in producing clothing.

According to the law of comparative advantage, a. nations gain when they import those goods which they can produce in the greatest quantity. b. gains from specialization and exchange are not possible. c. nations gain when they import goods which they themselves consume in greatest quantity. d. nations gain when they export those goods which they produce at lower opportunity cost than other countries. e. nations gain when they export those goods which they can themselves produce at high opportunity cost compared with other countries.

d. nations gain when they export those goods which they produce at lower opportunity cost than other countries.

The slope of the production possibilities curve tells us: a. the tradeoff possible between two goods. b. the marginal cost of producing one of the goods, in terms of the other good given up. c. the opportunity cost of one of the goods, if the other good is the best thing given up. d. the 'rise over the run', or the vertical change over the horizontal change. e. all of the above.

E. all of the above

Calvin and Hobbes are stranded in an alternative universe. They can produce and consume two goods, "X" and "Y". Calvin's production possibilities are such that he can produce 2X or 2Y per day. Hobbes can produce 6X or 3Y per day. Which of the following will maximize the consumption alternatives available for Calvin and Hobbes? Select one: a. Both individuals will have to be self-sufficient, since Calvin can offer nothing to Hobbes at a lower cost than Hobbes can obtain it himself. b. Calvin should specialize in X and Hobbes in Y, and trade can occur. c. Hobbes should specialize in X and Calvin in Y, and trade can occur. d. Calvin should specialize in Y and Hobbes in X, but no trade should be allowed. e. Both individuals should strive for self-sufficiency, since this will maximize output.

Hobbes should specialize in X and Calvin in Y, and trade can occur.

If each person sells goods for which she has the greatest comparative advantage in production, and buys those goods in which she has the least comparative advantage (or a comparative disadvantage), then a. buyers of goods will gain at the expense of sellers. b. total output available to each person can be expanded by trade and specialization. c. sellers of goods will gain at the expense of buyers. d. total output might be expanded, but only if some individuals are net "losers." e. total output will increase if and only if persons with a comparative advantage in the production of a good also have an absolute advantage in its production. Feedback

b. total output available to each person can be expanded by trade and specialization.

Which of the following is likely to eventually shift the production possibilities curve outward (to the right)? a. Increases in income tax rates, which discourage people from working harder. b. Natural disasters that destroy resources and make production more difficult. c. A tax policy that encourages capital investment in new equipment and technology while reducing current consumption. d. Reduction in research into new technology. e. A tax policy that discourages capital investment in new equipment and technology while increasing current consumption.

c. A tax policy that encourages capital investment in new equipment and technology while reducing current consumption.

Below is a table showing the annual production possibilities open to Mexico and Germany if both countries work to maximum capacity to produce either lemons or fish. Germany- 25 million lbs.- lemons 15 million lbs.- fish Mexico- 15 million lbs.- lemons 10 million lbs.- fish The table above sugggests that Select one: a. Mexico should sell lemons to Germany. b. There is no way for Germany and Mexico to gain benefits by trading with each other. c. Germany should sell lemons to Mexico. d. Mexico should sell both lemons and fish to Germany. e. Germany should sell both lemons and fish to Mexico.

c. Germany should sell lemons to Mexico.

International trade based on comparative advantage a. will raise the level of production but reduce the standard of living in the trading countries. b. will reduce the level of production and standard of living in the trading countries. c. will increase the level of production and standard of living in the trading countries, by allowing more efficient use of resources. d. will reduce the level of production and standard of living in some countries, but raise them in others, as the "winner" countries force the people of "loser" countries into trades they don't want. e. will reduce the level of production but raise the standard of living in the trading countries. Feedback

c. will increase the level of production and standard of living in the trading countries, by allowing more efficient use of resources. By obtaining goods from other countries when those countries can provide them at lower cost, a country can not only obtain more goods, but can use its own resources more efficiently.

Which of the following best describes the implications of the law of comparative advantage? a. Total output might be expanded by specialization and trade, but some individuals will end up worse off than if the specialization and trade had not occurred; some people will be "losers". b. Sellers of goods gain at the expense of buyers most of the time. c. Sellers of goods always gain at the expense of buyers. d. All of the above. e. None of the above.

e. None of the above The law of comparative advantage says that if we want efficiency and we want to produce the most, we should have each resource producing the good that it can produce at lowest cost. It implies that, since more will be produced, everyone will benefit to some degree.

Which of the following might increase the production possibilities for workers in a bakery? Select one: a. A hurricane strikes the bakery. b. Firing some workers. c. Requiring each worker to fill out lengthy paperwork every time they put something into the ovens. d. Changing the jobs each worker is assigned, so that each is making the good that he or she can make at lowest cost. e. The bakery buys new computerized mixers that shorten the time to make dough for cookies. Feedback

e. The bakery buys new computerized mixers that shorten the time to make dough for cookies.

If Jones drives from Phoenix to New Orleans, it takes three days longer than flying would. Thus, if Jones drives on the vacation, Jones will have to take three more days off than Jones would if Jones flies. Jones is self-employed. Jones figures to earn $200 per day (after taxes) on each of those days. Jones enjoys driving, and considers the value of being able to see the scenery along the way to be about $100 (total). Jones will drive if the airline fare Select one: a. is more than $200 above the expense of driving. b. is more than $600 above the expense of driving. c. is more than $100 above the expense of driving. d. is more than $150 above the expense of driving. e. is more than $500 above the expense of driving.

e. is more than $500 above the expense of driving.