Chapter 2
If the economy is currently producing at point C, what is the opportunity cost of moving to point B?
20 thousand spoons
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?
Switzerland has the comparative advantage in watches.
The table above shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. If the two countries specialize and trade, who should export lumber?
Estonia
If a vineyard wants to raise funds to purchase a new bottling machine, it does so in the ______ market.
Factor market
An increase in population shifts the production possibilities frontier inwards over time. T/F
False
If Blake can pick more cherries in one hour than Cody, then Blake has a comparative advantage in cherry picking. T/F
False
When a celebrity has the desire to have his image protected following his death, this is best described as an example of the protection of....
Intellectual Property
Suppose there is some unemployment in the economy and society decides that it wants more of one good. Which of the following statements is true?
It will have to give up production and consumption of some other good.
Which two arrows in the diagram depict the following transaction: Lizzie Haxem hires "The Paint Pros," a professional painting company, to paint her home.
K and G
The table above shows the output per week of two people, James and Lucy. They can either devote their time to making wagons or making tricycles. Which of the following statements is true?
Lucy has a comparative advantage in making wagons and James in making tricycles.
The table above shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. Estonia has a comparative advantage in the production of...
Lumber
The table above shows the output per week of two people, Minnie and Mickey. They can either devote their time to making hats or making umbrellas. Which of the following statements is true?
Mickey has a comparative advantage in making hats and Minnie in making umbrellas.
If the two countries have the same amount of resources and the same technological knowledge, which country has an absolute advantage in the production of both pineapples and coconuts?
Neither country
The slope of a production possibilities frontier measures the ________ of producing one more unit of a good.
Opportunity Cost
________ is (are) technically efficient.
Point B
The table above shows the number of labor hours required to produce a wristwatch and a pound of rice in Japan and Thailand. Japan has a comparative advantage in the production of
Rice
All of the following are considered intellectual property except...
Shares of stock
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries?
Switzerland has the comparative advantage in watches.
If the two countries specialize and trade, who should export wristwatches?
Thailand
Which of the following is an example of spending on factors of production in the circular flow model?
The "Lucky Ducky" casino buys a new craps table for the casino floor.
A decrease in the unemployment rate may be represented as a movement from a point inside the production possibilities frontier to a point on the frontier. T/F
True
If a country is producing efficiently and is on the production possibilities frontier, producing more of one good would result in a movement along the frontier. (T/F)
True
If a country produces only two goods, it is possible to have an absolute advantage in the production of both goods. T/F
True
The payment received by suppliers of entrepreneurial skills is called profit. T/F
True
The figure to the right shows various points on three different production possibilities frontiers for a nation. Consider the following events: a. a reduction in the patent protection period to no more than 2 years b. a war that destroys a substantial portion of a nation's capital stock c. the lack of secure and enforceable property rights system Which of the events listed above could cause a movement from W to V?
a and c only
Which of the following would shift a nation's production possibilities frontier inward?
a law requiring workers to retire at age 50
The figure to the right shows various points on three different production possibilities frontiers for a nation. Consider the following events: a. a decrease in the unemployment rate b. general technological advancement c. an increase in consumer wealth Which of the events listed above could cause a movement from V to X ?
a only
An outward shift of a nation's production possibilities frontier can occur due to...
an increase in the labor force.
A guild is...
an organization of producers that limits the amount of a good produced.
The production possibilities frontier model assumes all of the following except...
any level of the two products that the economy produces is currently possible.
Households purchase...
final goods and services in the product market.
Firms sell...
goods in the product market
Assume Dina's Diner only produces sliders and hot wings. A combination of 20 sliders and 60 hot wings would appear...
inside Dina's production possibilities frontier.
Assume that in response to changing consumer demands, Apple cuts back on the production of self−driving automobiles and increases its production of traditional automobiles. This strategy is best represented by the..
movement from J to H in Graph B.
An inward shift of the production possibilities frontier represents...
negative economic growth.
Suppose your expenses for this term are as follows: tuition: $9,000, room and board: $1,500, books and other educational supplies: $1,000. Further, during the term, you can only work part−time and earn $3,000 instead of your full−time salary of $8,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?
$15000
If the economy is currently producing at point D, what is the opportunity cost of moving to point B?
0 Forks
What is Finland's opportunity cost of producing one board foot of lumber?
0.25 Cell phones
What is Wilma's opportunity cost of making a statue?
1/3 of a bench
The table above shows the output per week of two people, Minnie and Mickey. They can either devote their time to making hats or making umbrellas. What is Mickey's opportunity cost of making an umbrella?
10 Hats
Horatio can produce either a combination of 15 bird houses and 25 wind chimes or a combination of 30 bird houses and 15 wind chimes. If he now produces 30 bird houses and 15 wind chimes, what is the opportunity cost of producing an additional 10 wind chimes?
15 Bird houses
Consider the following movements: a. from point V to point W b. from point W to point Y c. from point Y to point Z Which of the movements listed above represents advancements in technology with respect to only plastic production?
C. only
Once the copyright on a book expires...
no publisher can claim copyright of that author's words, but the book can be reissued by any publisher.
What is Jack's opportunity cost of cultivating a garden?
one and a half lawns mowed
Increasing marginal opportunity cost implies that...
the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.
The unattainable points in a production possibilities diagram are...
the points outside the production possibilities frontier.
The table above shows the output per week of two people, Minnie and Mickey. They can either devote their time to making hats or making umbrellas. What is Mickey's opportunity cost of making a hat?
1/10 of an umbrella
The figure above shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. What is the opportunity cost of producing 1 snow cone in Greenland?
5/6 of a popsicle
The figure above shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. What is the opportunity cost of producing 1 snow cone in Greenland?
5/6 of a popsicle
Wagons Tricycles James 16 32 Lucy 18 24 What is James's opportunity cost of making a wagon?
2 tricycles
The figure to the right shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. What is the opportunity cost of ONE dozen orchids?
2.5 dozen roses
The table above shows the output per week of two people, James and Lucy. They can either devote their time to making wagons or making tricycles. What is Lucy's opportunity cost of making a tricycle?
3/4 of a wagon
In the circular flow diagram, who are economic agents A and who are economic agents B?
A = households; B = firms
All of the following are examples of spending on goods and services in the circular flow model except...
Chaitanya buys a new spa pedicure chair for her expanding nail salon business.
Which of the following is an example of spending on goods and services in the circular flow model?
Chester buys a first−class ticket from Atlanta to London for his long−awaited vacation.
If opportunity costs are ________, the production possibilities frontier would be graphed as a negatively sloped straight line.
Constant
Which of the following countries does not come close to the free market benchmark?
Cuba
For a person to have a comparative advantage in producing a product, he must be able to produce that product at a higher opportunity cost than his competitors. T/F
False
If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is with an advance in technology. T/F
False
In the circular flow model, households demand resources such as labor services in the product market. T/F
False
In the circular flow model, households supply resources such as labor services in the product market. T/F
False
In economics, the term "free market" refers to a market where no sales tax is imposed on products sold.
False
The idea underlying Adam Smith's "invisible hand" is that people tend to behave in ways that go unnoticed in society. T/F
False
The table above shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. Does either Estonia or Finland have an absolute advantage and if so, in what product?
Finland has an absolute advantage in both products.
The table above shows the output per day of two gardeners, George and Jack. They can either devote their time to mowing lawns or cultivating gardens. Which of the following statements is true?
George has an absolute advantage in both tasks.
Carlos Vanya grows tomatoes and strawberries on his land. A portion of his land is more suitable for growing tomatoes and the other portion is better suited for strawberry cultivation. Which of the graphs in the figure above represent his production possibilities frontier?
Graph C
The figure above shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. Which country has a comparative advantage in the production of popsicles?
Greenland
The figure above shows the production possibilities frontiers for Costa Rica and Guatemala. Each country produces two goods, pineapples and coconuts. Which country has a comparative advantage in the production of coconuts?
Guatemala
The figure above shows the production possibilities frontiers for Greenland and Iceland. Each country produces two goods, snow cones and popsicles. Which country has a comparative advantage in the production of snow cones?
Iceland
If the 12 nations that are a part of the TPP do not agree to these stricter pharmaceutical patent laws as a way to increase intellectual property rights and ignore any international agreements which do protect these intellectual property rights, which of the following would most likely occur?
Pharmaceutical companies would decrease investment in the development of more experimental drugs.
The figure to the right shows various points on three different production possibilities frontiers for a nation. Consider the following events: a. an increase in the patent protection period to 75 years b. a hurricane that destroys a substantial portion of a nation's capital stock c. the implementation of a secure and enforceable property rights system Which of the events listed above could cause a movement from W to Z?
a and c only
The figure to the right shows various points on three different production possibilities frontiers for a nation. Consider the following events: a. an increase in the unemployment rate b. general technological advancement c. an increase in consumer wealth Which of the events listed above could cause a movement from Z to V ?
a only
The ________ production points on a production possibilities frontier are the points along and inside the production possibilities frontier.
attainable
The figure to the right shows various points on three different production possibilities frontiers for a nation. Consider the following movements: a. from point V to point W b. from point W to point Y c. from point Y to point Z Which of the movements listed above represents advancements in technology with respect to both plastic production and food production?
b only
A production possibilities frontier with a ________ shape indicates increasing opportunity costs as more and more of one good is produced.
bowed outward
The figure to the right shows various points on three different production possibilities frontiers for a nation. Consider the following events: a. an increase in the unemployment rate b. a decrease in a nation's money supply c. a war that kills a significant portion of a nation's population Which of the events listed above could cause a movement from Z to X ?
c only
Assume Nadia's Neckties only produces ascots and bowties. Nadia faces ________ opportunity costs in the production of ascots and bowties.
constant
Which of the following statements about an entrepreneur is true?
develops the vision for the firm and funds the producing unit
The opportunity cost of taking an online history class is
equal to the highest value of an alternative use of the time and money spent on the class.
Izzy Amador is a highly talented tattoo artist. She has chosen to specialize in tattoo art because of all of the following except ...
her opportunity cost of pursuing another career is very low.
If the production possibilities frontier is linear, then ...
opportunity costs are constant as more of one good is produced.
In a production possibilities frontier model, a point inside the frontier is...
productively inefficient.
Households...
purchase final goods and services in the product market.
A critical function of the government in facilitating the operation of a market economy is...
setting up and enforcing private property rights.
Economic growth is represented on a production possibilities frontier model by the production possibilities frontier....
shifting outward.
If the best lawyer in town is also the best at operating a word processor, then according to economic reasoning, this person should...
specialize in being a lawyer because its opportunity cost is lower.
In the circular flow model, households...
spend earnings from resource sales on goods and services in the product market.
Comparative advantage means..
the ability to produce a good or service at a lower opportunity cost than any other producer.
Which of the following is not a flow in the circular flow model?
the flow of profit and the flow of revenue