Econ 2.2 & 2.3

When figuring out the opportunity cost of Product A and of Product B the formula is... A) B/A B) A/B C) B x A D) A x B

A) B/A

______ the ability to make something using fewer resources than other producers require.

Absolute Advantage

Which of the following is NOT result in an outward (rightward) shift of the production possibilities curve? A) An improvement in the quality of a nation's human capital B) A decrease in unemployment C) An increase in the quality of a society's resources D) A technological breakthrough that improves productivity E) A decrease in the working age

B) A decrease in unemployment

______ a system of exchange in which products are traded directly for other products.

Bartering

How are comparative advantage and absolute advantage similar?

Both show the opportunity cost

Which of the following is the best example of a division of labor? A) Todd lives in a cabin in the woods where he does most things for himself B) Julia works as a doctor, while her husband Ted is an automobile mechanic C) Benito washes dishes after lunch, while his wife dries and puts them away D) Brenda reads the front page of the newspaper, while her husband studies the comics

C) Benito washes the dishes after lunch, while his wife dries and puts them away

Production possibilities frontiers are used to illustrate each of the following except: A) Scarcity B) Efficiency C) Voluntary exchange D) Opportunity costs/trade-offs

C) Voluntary exchange

If there are two producers and two products, which of the following cannot happen? A. A producer has an absolute advantage in one product B. A producer has an absolute advantage in both products C. A producer has a comparative advantage in one product D. A producer has a comparative advantage in both products

D) A producer has a comparative advantage in both products

______ organizes the production process so that each work specializes in a separate task.

Division of Labor

Which of the following is true if a production curve for two goods is straight rather than bowed outward? A) Resources are not scarce B) Resources are not equally suited for the production of both goods C) Economic growth is occurring in the economy D) Resources are being inefficiently used in the economy E) Resources are equally suited for the production of either good

E) Resources are equally suited for the production of either good

______ an expansion of the economy's production possibilities, or ability to produce.

Economic Growth

______ producing the maximum possible output from the additional resources, meaning the economy cannot produce more of one good without producing less of the other good.

Efficiency

A point of underutilization is shown by shifting the PPC to the right. True or False

False

According to the law of comparative advantage, only people with an absolute advantage can benefit from specialization. True or False

False

It is possible for one country to have a comparative advantage in the production of all products? True or False

False

Points on the PPF are less efficient than points outside the curve. True or False

False

If Sally can pick 3 lbs/hr of berries and Jill can pick 4 lbs/hr of berries, who has the absolute advantage?

Jill

______ each additional increment of one good requires the economy to give up successively larger increments of the other good.

Law of Opportunity Cost

______ anything that everyone is willing to accept in exchange for goods and services.

Money

______ shows the possible combinations of two types of goods that can be produced when available resources are employed efficiently.

PPF

______ the laws, customs, manners, conventions, and other institutional underpinnings that encourage people to pursue productive activity.

Rules of the Game

______ occurs when individual workers focus on single tasks, enabling each worker to become more efficient and productive.

Specialization

As we move along the curve we trade-off more and more for less and less added output? True or False

True

The law of comparative advantage applies not only to individuals, but also firms, regions of countries, and entire nations? True or False

True

A society that is producing on its production possibilities curve...

fully utilizing all of its production resources

Comparative advantage means countries should produce goods in which they have....

lowest opportunity cost

The discovery of more resources will cause the PPF to ...

shift right

According to the theory of comparative advantage, countries gain from trade because

specialization allows world output to increase collectively

When a nation has a lower opportunity cost of production than another producer for an item...

they have comparative advantage