Economics CH 2
David sells his car, which he considers worthless, to Cameron for $200. Which of the following statements is true? A) David and Cameron must have different preferences for the car. B) This trade did not create value because Cameron is buying a car that David considers worthless. C) Cameron is the only one made better off by the trade. D) David is made better off by the trade, but Cameron is made worse off.
A) David and Cameron must have different preferences for the car.
21. Fewer than 2% of Americans are farmers today while 150 years ago most people were farmers. Those individuals who are still farmers today most likely have: A) a comparative advantage in farming. B) a relative advantage in farming. C) no skills for manufacturing or service-related jobs. D) no other available options. E) A and C.
A) a comparative advantage in farming.
Which of the following trades would make both countries better off? A) Armenia makes hats and trades them for coats at a price of 1 coat = 3 hats. B) Armenia makes coats and trades them for hats at a price of 1 coat = 3 hats. C) Armenia makes hats and trades them for coats at a price of 1 coat = 4 hats. D) Armenia makes coats and trades them for hats at a price of 1 coat = 4 hats. E) Armenia makes coats and trades them for hat at a price of 1 coat = 2.5 hats.
B) Armenia makes coats and trades them for hats at a price of 1 coat = 3 hats.
If Armenia can make 500 hats or 200 coats or some combination, and Estonia can make 400 hats or 100 coats or some combination, then A) Armenia has the comparative advantage in hats and Estonia in coats. B) Estonia has the comparative advantage in hats and Armenia in coats. C) Armenia has the comparative advantage in both hats and coats. D) Neither has the comparative advantage in either product since the differences aren't large.
B) Estonia has the comparative advantage in hats and Armenia in coats.
Conan O'Brien has been a talk show host since 1993, but he began his career in comedy as a writer. Given that he is such an accomplished comedy writer, it might be surprising to learn that his current talk show staff includes over a dozen writers. How can you explain this? A) Because he is now a talk show host his skills as a writer must have deteriorated. B) The opportunity cost of his time as a writer is higher now. C) He has a comparative advantage as a writer. D) His preferences changed and now he enjoys more being a writer than a talk show host.
B) The opportunity cost of his time as a writer is higher now.
To benefit from trade, a person should: A) specialize in an activity for which she has an absolute advantage. B) specialize in an activity for which she has a comparative advantage. C) do everything she possibly can. D) do nothing at all.
B) specialize in an activity for which she has a comparative advantage.
Which of the following statements is incorrect? A) Trade makes people better off when preferences differ. B) Trade increases productivity through specialization and the division of knowledge. C) Non-fraudulent voluntary trade produces both winners and losers. D) Trade increases productivity through comparative advantage.
C) Non-fraudulent voluntary trade produces both winners and losers.
The cost to a cinema owner of letting someone see a movie for free is A) always equal to the regular ticket price of $8.50. B) usually more than the regular ticket price of $8.50. C) likely to be higher on a Saturday night than on a Monday night. D) always nothing if he/she owns the cinema.
C) likely to be higher on a Saturday night than on a Monday night.
A person has a comparative advantage in activity X when that person's: A) opportunity cost of performing that activity is very high. B) ability to perform that activity exceeds that of all other people. C) government negotiates a favorable trade agreement. D) opportunity cost is lower than other trading partners.
D) opportunity cost is lower than other trading partners.
the FDA would be making a type 2 error if it a. approved a drug that turned out to be dangerous b. banned a drug that turned out to be safe c. approved a drug based on political pressure rather than on scientific research d. made the right decision for the rong reason e. none of the above
b. banned a drug that turned out to be safe
the opportunity cost of winning a free ticket to the super bowl worth $950 and attending the game is a. zero, since the ticket was free b. priceless, if the person really loves football c. at least $950, the lost market vaue of selling th ticket and the time to go d. zero, if the person would rather go to the game than do anything else
c. at least $950, the lost market vaue of selling th ticket and the time to go
An article in the newspaper suggest that an Indian tribe should use coal rather than gas power because the tribe owns 114 billion tons of coal reserves. This statement A) is true because if they own the coal, they don't have to pay for it. B) is false because coal is more polluting. C) is false because it ignores opportunity costs. D) none of the above.
c. false because it ignores opportunity costs
if you buy a motorcycle for $1000 and then discover that you hate riding it and will never ride it again, the best thing to do is a. keep the motorcycle because you paid so much for it b. keep the motorcycle unless you can find someone who will pay you at least $1000 c. sell the motorcycle for the best offer you can get d. sell the motorcycle for the best offer you can get as long as it cover smost of what you paid for it
c. sell the motorcycle for the best offer you can get
You see this deal at the supermarket: one frozen pizza for $3.00, two for $5.00. Your marginal cost for the second pizza is A) $5.00 B) $3.00 C) $2.50 D) $2.00 E) zero.
d. $2.00
wy do grocery stores offer by one get one hlf ff specials? I. it is a way to offer an incentive to consumers to buy the extra item II. they are thinking at the margin, and they stand to make additional profit even if they sell the second unit at a lower price than the first III. goernment regulationsrequir them to hold such promotions from time to time a. I only b II only c. III only d. I and II
d. I and II
How can I raise the price of coming to class? A) Charge an admission fee. B) Schedule class at inconvenient times. C) Give extra homework to anyone who shows up. D) All of the above. E) None of the above.
d. all of the above
scarcity is a situation in which a. something is being wasted b. something is on the verge of running out c. some people are por and others are rich d. we are unable to satisfy all our wants e. all of the above
d. we are unable to satisfy all of our waants
if you say that expanding the food stamp program is the right thing to do, and i reply that expanding the program will lead to less spent in other areas, we are unlikely to have a meeting of minds because a. you are emphasizing marginal benefits and i am emphasizing marginal costs b. much of the food stamp program is already sunk cost c. the benefits and costs of food stamps are likely to be difficult to calculate d. you are making a normative argument and i am making a positive argument e. you are being reasonable and i am be aggravating
d. you are making a normative argument and i am making a positive argument
you buy an all day ski pass for $50, planning on tking 10 runs and getting $100 worth of enjoyment. after four runs, you find youre not enjoying yourself and want to go home according to economic model, you should a. take at least one more run to get your moneys worth b. take a fifth run only if the benefit from it is at least $10 c. take more runs unless youve gotten at least $50 worth of enjoyment already d. keep skiing until youve taken 10 runs e. go home
e. go home
after graduating high school, steve had three choices 1 attend clemson 2 work in a printed circuit board factory, or 3 attend a rival college his opportunity cost of going to clemson includes a. the income he could have earned at th printed circuit board factory b. the direct cost of attending clemson c. the benefits he could have recieved from attending the rival college d. all of the above e. just a and b
e. just a and b
