Midterm test questions

A PPF that is linear exhibits the same opportunity cost for producing greater quantities of either good over the entire curve True/False

True

A(n) _________________ means a country can produce more of a good than another country using the same amount of resources a. Absolute advantage b. comparative advantage c. complete advantage d. comparable advantage

a. absolute advantage

1. The Scandinavian countries of Europe a. allow a large role for government services. b. do not protect property rights. c. have economies coordinate solely by markets. have no barriers to the market

a. allow a large role for government services

David Ricardo developed the concept of: a. comparative advantage b. absolute advantage c. production efficiency d. allocative efficiency

a. comparative advantage

1. Investment in human capital refers to a. education, on-the-job training, and professional training activities. b. increasing the number of people working at companies. c. increasing the financial capital in the economy. d. increasing the machinery and equipment that firms use.

a. education, on-the-job training, and professional training activities

the Norway spruce trees that are grown in Christmas tree farms are considered: a. land b. capital c. labor d. entrepreneurial ability

a. land

1. Short-run economic growth is illustrated on a PPF diagram by movement from inside the PPF toward the PPF. A situation where this would be an appropriate depiction is in an economy: a. recovering from a recession. b. with increasing unemployment. c. going into a recession. that is stagnant

a. recovering from a recession.

1. Suppose that Costa Rica is able to produce 50,000 pounds of coffee or 10,000 medical devices per day; Vietnam is able to produce 40,000 pounds of coffee or 5,000 medical devices per day. Which statement is TRUE? a. Costa Rica has a comparative advantage in the production of both coffee and medical devices. b. Costa Rica has a comparative advantage in the production of medical devices, while Vietnam has a comparative advantage in coffee production. c. Costa Rica has a comparative advantage in coffee production, while Vietnam has a comparative advantage in the production of medical devices. d. Costa Rica has an absolute advantage in medical device production, while Vietnam has an absolute advantage in coffee production.

b. Costa Rica has a comparative advantage in the production of medical devices, while Vietnam has a comparative advantage in coffee production.

1. Production efficiency is defined as producing the mix of goods and services most desired by society. a. True b. False

b. False

1. The production possibilities frontier (PPF) shows: a. how many products a society consumes. b. how much an economy can produce when using all of its inputs efficiently. c. how many factories are currently active in an economy. d. how many inputs are consumed in producing the output desired by consumers.

b. how much an economy can produce when using all of its inputs efficiently

1. One of the major limits to trade is a. comparative advantage. b. transaction costs. c. opportunity costs. d. absolute advantage.

b. transaction costs

1. Industries at a comparative disadvantage may find it necessary to decrease their workforce. a. False b. True

b. true

1. Assume that the population of Lauronia decreased and so did its total production, since fewer people can produce fewer things. What would this look like on a graph of the production possibilities frontier? a. A point to the outside of the curve b. A new curve that is to the right of the original curve c. A new curve that is to the left of the original curve d. A point to the inside of the curve

c. A new curve that is to the left of the original curve

1. When two countries specialize and trade based on their comparative advantage a. both countries would move to a different point on the existing PPF. b. the country with the greater comparative advantage moves beyond its PPF while the other falls below it. c. both countries are able to consume at a point beyond the original PPF. d. both countries remain at their original point on the PPF because trade primarily affects consumption.

c. both countries are able to consume at a point beyond the original PPF.

Many of the decorative items made in China are hand-painted. China has a large labor supply, and workers earn relatively low wages. Which of these basic economic questions does this illustrate? a. what goods are to be produced? b. who will receive the goods produced? c. how are these goods to be produced? d. when should the goods be produced?

c. how are these goods to be produced?

during World War 2, the production of synthetic rubber increased dramatically in response to high natural rubber prices and the unstable supply of natural rubber. The new substitute allowed industries that used rubber, such as the tire industry, to achieve what type of efficiency. a. both production and allocative efficiency b. distributive efficiency c. production efficiency d. allocative efficiency

c. productive efficiency

1. When an economy is producing the mix of goods and services MOST desired by society, that economy is considered to have a. productive efficiency. b. allocative equitability. c. productive equitability. d. allocative efficiency.

d. allocative efficiency

Bolivia has about 50% of the world's reserves of lithium. It is also a major producer of zinc. Suppose that Bolivia produced only those two goods and that its linear production possibilities frontier had the following end points: 20,000 tons of lithium and zero zinc or 10,000 tons of zinc and no lithium. A combination of 12,000 tons of lithium and 5,000 tons of zinc would be: a. efficient but not attainable b. unattainable c. attainable and efficient d. attainable but not efficient

d. attainable but not efficient

a medical imaging facility recently purchased a new open MRI machine to cater to patients who find the older closed machines claustrophobic. This new machine is an example of: a. land b. labor c. entrepreneurial ability d. capital

d. capital

1. In which market system does the government play the smallest role in regulating businesses? a. communist b. socialist c. planned d capitalist

d. capitalist

1. The opportunity cost of producing more of a good increases because of: a. increasing returns to scale. b. increasing returns to inputs. c. diminishing opportunity costs. d. diminishing returns to inputs

d. diminishing returns to inputs

1. Bolivia has about 50% of the world's reserves of lithium. It is also a major producer of zinc. Suppose that Bolivia produced only those two goods and that its linear production possibilities frontier had the following end points: 20,000 tons of lithium and zero zinc or 10,000 tons of zinc and no lithium. A combination of 12,000 tons of lithium and 5,000 tons of zinc would be: a. Attainable but not efficient b. Efficient but not attainable c. Attainable and efficient Unattainable

d. unattainable