Econ test 1

Which question would be considered a normative question?

Should obstacle races be regulated to ensure the safety of its participants

If a producer does NOT face increasing opportunity cost, then the production possibilities frontier is:

a straight downward-sloping curve.

Which pair does NOT relate?

land—revenue

Entrepreneurs:

combine and manage inputs of land, labor, and capital.

Most trade is based on specialization, according to:

comparative advantage

If a farmer can grow 100 tubs of grapefruit or 250 tubs of oranges per acre of land, what is the opportunity cost of growing one orange?

0.4 of a grapefruit

Suppose that in Japan one worker can produce either four cars or five tons of grain per year. What is the opportunity cost of producing one car in Japan?

1.25 tons of grain

At an amusement park, Sue achieves an enjoyment value of 10 on her first roller coaster ride and an enjoyment value of 6 on her second ride. Her marginal benefit from her second ride is:

6

Which shaped curve reflects the reality that most goods are better suited for specific sorts of production?

A concave production possibilities frontier

(Figure) What would be a reason why an economy is operating at point D?

A reduction in business investment causes unemployment to increase.

_____ advantage exists when one country can produce more of a good than another country.

Absolute

Which of these would be least likely to increase economic growth?

An increase in tariffs to protect domestic industries from foreign competition.

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?

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

Which headline would be LEAST likely to be studied in macroeconomics?

GM Expands Car Sales in China

_____ combine land, labor, and capital to produce goods and services and assume the risks associated with running businesses.

Entrepreneurs

Which statement about entrepreneurs is NOT correct?

Entrepreneurs do not take on any business risks

(Figure: Pork and Corn PPF) Economists can unequivocally tell which point of production is ideal.

False

(Figure: Pork and Corn PPF) It is possible to produce 15 units of corn and 4 units of pork at the same time.

False

The choice to attend a free college lecture involves no opportunity cost.

False

Capital:

is any manufactured product that is used to produce other products.

Which statement defines absolute advantage?

One country that can produce more of a good than another country if both work with identical resources.

Which of the following is not possible for two countries who trade computers and automobiles with one another?

One of the countries has a comparative advantage in the production of both products

Using the productivity rates for Spain and Portugal, which statement is TRUE?

Spain has a comparative advantage in olives.

Which situation deals more with equity than efficiency?

The Red Sox signs a star player for $35 million a year, which is over 10 times the average salary of the rest of the team

What does the term "laissez-faire" mean in economics?

The role of government should be as minimal as possible.

The production possibilities frontier is bowed outward as a result of increasing costs.

True

Which of these questions would NOT be considered one of the basic economic questions?

When will the new high-speed train in California be completed?

Which of these would NOT be considered a factor of production?

a bank loan used to start a new business

For a country to have a comparative advantage in a good, it must have:

a lower opportunity cost of producing that good

If one country has a(n) _____ advantage in the production of one item, it can always produce more of the same item than another nation, given the same resources.

absolute

When an economy is producing the mix of goods and services MOST desired by society, that economy is considered to have:

allocative efficiency.

When the mix of goods and services produced is just what society desires, then __________ exists.

allocative efficiency.

The main reason why a production possibilities frontier would have a concave shape is:

because as a country specializes in one product, it must give up more of the other.

Why is entrepreneurial ability considered a factor of production?

because entrepreneurs assume the risk of producing output, an important part of the production process

If an economy faces increasing opportunity costs with respect to the production of two goods, then the production possibilities frontier between the two goods will be:

bowed outward.

The limits on international trade include all of these EXCEPT:

decreasing opportunity costs and increasing returns.

Capital includes all of these EXCEPT:

dollar bills in a bank vault.

Land:

earns rent.

"The economic wealth of this country was built primarily by some individuals profiting from a transaction, whereas others were harmed by that transaction." This statement indicates that its author:

fails to understand that all voluntary trades benefit both parties involved.

As it relates to the production possibilities frontier, an increase in technology for one good while holding all else constant will cause a complete outward shift of the production possibilities frontier.

false

There is no opportunity cost involved when the government decides to cut federal taxes.

false

(Figure) The area between which two points on the production possibilities frontier could represent an improvement in productive efficiency?

from A to B

(Figure) The area between which two points on the PPF could represent an improvement in allocative efficiency?

from B to C

Which of these is one of China's top five exports to the United States?

furniture

Which of the following is NOT an example of an improvement to human capital?

increasing the number of machines available to workers

In economics, the payment to capital is called:

interest.

In economics, the term "capital" refers to:

manufactured buildings and equipment used to produce other goods and services.

China produces many products at the lowest cost possible, even though Chinese consumers do not desire many of these products (e.g., football helmets). China is achieving:

neither production efficiency nor allocative efficiency

Increasing opportunity costs occur along the production possibilities frontier because:

not all resources are equally well suited to produce all goods.

When an economy uses the most efficient means of farming to grow as much corn as possible, this economy has achieved:

production efficiency but not necessarily allocative efficiency

The practical constraints on trade include all of these EXCEPT:

production possibilities frontiers for nations are linear.

The MOST common way in which economists model a problem is by:

simplifying the model down to its basic relevant elements.

Which of these is among the top five U.S. exports to China?

soybeans

A point on a nation's production possibilities frontier indicates:

that resources are fully utilized in producing the given combination of goods and services.

In which market is government most likely to intervene to prevent a market failure?

the market for college education

Tim woke up this morning with a stomachache and decided to skip class in order to get more rest. What is the opportunity cost of Tim's decision to sleep in?

the value of attending the class he decided to miss

Economists refer to the payment to labor as:

wages

All of these are considered human capital, EXCEPT:

working in a factory.