EC 201 Chapter 1+2 Quiz

When deciding whether or not to undertake an activity, economists compare

the additional cost of the activity against the additional benefit received.

The cost of skipping your chemistry class on any given day is

the lost information that may affect your grade.

Table: Production in the U.S. and Germany Labor units required to produce: 1 Clock 1 Sofa (US) 2 5 Germany: 3 9 According to the table above, the opportunity cost of producing 1 sofa in the United States is _________, and the opportunity cost of producing 1 sofa in Germany is _______.

2.5 clocks, 3 clocks

Which of the following choices best issustrates Adam Smith's concept of the "invisible hand"?

A farmer in Vietnam grows rice to sell for income; that rice is exported to the United States by an export company; a grocer in Marquette sells the rice at a profit to the owner of the Rice Paddy, a local restaurant.

Who wrote, "It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy"?

Adam Smith

Angela and Ed are married. Angela can do $40 worth of household chores per hour, and Ed can do $15 worth of household chores per hour. In the labor market, Ed can earn $30/hour and Angela can earn $40/hour. The theory of comparative advantage suggests that:

Angela should specialize in household production and Ed should specialize in market work.

If a country has an absolute advantage in both items when compared to another country, there can never be any benefit for them to trade.

False

Why is specialization so advantageous to international trade? I. Through specialization, countries can achieve economies of scale. II. Through specialization, countries can use specialized machinery and techniques. III. International trade exists only between countries that have complete specialization in the goods they are best at producing.

I and II only

The opportunity cost of a choice is:

The value of the opportunities lost

You must decide whether to attend class tomorrow morning or take your friend to the airport. Your decision highlights the following "big idea" in economics?

Tradeoffs are everywhere

Economic theory supports the existence of specialized majors in college.

True

According to the theory of comparative advantage, a country should specialize in producing a good that involves:

a lower opportunity cost than that of other countries.

Which of the following answer choices contain factors that you think would create a suitable environment for achieving economic growth?

a. well functioning markets, removal of price controls, and good health systems b. well functioning markets, private property rights, and firm creativity c. development of physical and human capital per worker, and technological advancement. d. All of the above are correct (correct answer)

The ability of one producer to produce one good or service using fewer inputs than another producer is:

absolute advantage

The theory of comparative advantage is:

always relevant for identifying whether gains from trade can be obtained.

What are the institutions that help foster the appropriate incentives for economic growth?

dependable legal system, property rights, and competitive and open markets

What causes countries to become wealthier over time?

economic growth

In several cities around the country, schools are paying cash rewards to students who do well in Math and English tests. This practice highlights the "big idea" that

incentives matter--the rewards and penalties that motivate behavior.

The opportunity cost of attending college is

lost wages from not working full time.

Tampering with the laws of supply and demand

produces consequences