economics homework 2

The expression "there's no such thing as a free lunch" reflects the concept of:

opportunity cost.

The expression "time is money" pertains to the concept of:

opportunity cost.

An increase in the nation's capital stock in the current period will:

shift the economy's PPF outward in the next period.

Amanda has a choice of working full-time during the summer or attending summer school full-time. Summer tuition and books are $2,500, while her personal upkeep costs amount to $700. The earnings from the full-time work that she forgoes amounts to $8,000. Her rent is $1,000 for the summer, irrespective of her choice. Therefore, Amanda's opportunity cost of going to summer school is:

$10,500

Which of the following economic systems uses only centralized economic planning to answer the basic economic questions?

A command economy

Identify a key feature of a pure capitalist economy.

Decision making is typically decentralized.

If Jacob produces one t-shirt in 4 hours and Diana produces one t-shirt in 3 hours, then it can be firmly concluded that:

Diana has an absolute advantage in making t-shirts.

A traditional handloom cotton-textile company in the East decides to shift to using a power loom as it is unable to find skilled labor resources. Which of the following economic questions does this decision answer?

How to produce?

Which of these holds true for the production possibilities frontier for a given society?

It is a model that is useful for illustrating scarcity, opportunity cost, and economic growth.

Which of these is true of an economic system?

It is a set of social institutions and mechanisms organized to answer the three economic questions.

Which of the following is true of the opportunity cost of an activity?

It is equal to the value of the best alternative not chosen.

Which of the following is true of a sunk cost?

It should not be considered when making economic decisions.

Marley takes 10 minutes to iron a shirt and 10 minutes to water 15 flower plants in his garden. Kristen takes 10 minutes to iron a shirt and 15 minutes to water 15 flower plants. Which of the following statements is correct?

Kristen has a comparative advantage in ironing.

Fiona has a comparative advantage over Maya in guitar tuning but not in painting a flower vase. In this case, they can gain from trade if:

Maya has a lower opportunity cost of painting a flower vase.

Bella cleans the house in 1 hour and cooks dinner in 1 hour. Evan cleans the house in 2 hours and cooks dinner in 2 hours. Which of the following statements is true?

Neither Bella nor Evan would gain from specialization.

If Peter can change a punctured car tire in 20 minutes and paint a fence in 10 minutes, and Lucy can change a punctured car tire in 15 minutes or paint a fence in 15 minutes, which of the following statements is true?

Peter has a comparative advantage in painting a fence.

Stephan can bake 10 cakes or 20 pizzas in one hour while Robin can bake 15 pizzas or 15 cakes in one hour. Which of the following statements is correct?

Robin has a comparative advantage over Stephan in the production of cakes.

Identify a key feature of a mixed capitalist economy.

Some of the resources are publicly owned while others are held by private individuals.

According to Smith, although each individual pursues his or her self-interest, the "invisible hand" promotes the general welfare. Which of the following phrases define the "invisible hand"?

The allocative role played by different institutions in a market

Cherita, a reputed fashion designer for children, chooses to exercise at a higher-priced gym, situated 2 miles from home, over a less costly gym, located 15 miles from home. Which of the following can be concluded from her behavior?

The higher monetary cost of the more expensive gym is offset by the higher opportunity cost of the lower-priced gym.

The government of a country declares several tax sops and resource subsidies to the manufacturers of arms and ammunition. It also grants new licenses to manufacturers willing to enter this industry. Which of the following economic questions does this attitude of the government help to answer?

What to produce?

An inefficient output condition is represented by:

a point inside the production possibilities frontier.

A comparison of the economic growth experienced by Taiwan and China, once they adopted different economic systems, reveals that:

capitalist economies have experienced better growth than command economies.

The opportunity cost of choosing a particular item or activity:

changes over time and depends on circumstances.

The basic questions regarding what to produce, how to produce and for whom to produce are resolved by a set of mechanisms and institutions commonly referred to as the:

economic system.

According to the law of comparative advantage, gains from specialization and trade can occur in a two-commodity exchange model when an individual having an absolute advantage in producing both the goods:

has a comparative cost advantage in the production of only one of the two goods.

According to the law of comparative advantage, an individual should choose to produce a good if:

her opportunity cost of producing the good is the lowest.

The statement "opportunity cost is subjective" implies that the opportunity cost of a particular activity:

is different for each individual.

You have a choice of playing tennis or cooking on a particular day. If you enjoy pursuing both these activities, your opportunity cost of cooking:

is higher on sunny days than it is on rainy days.

Consider a production possibilities frontier that shows different quantities of corn and sugar produced in an economy. If the corn production in the economy increases, _____.

larger and larger amounts of sugar production must be given up

An output combination that cannot be achieved with the resources available to the producer and a given technology is represented by:

point outside the production possibilities frontier.

A particular axis of the production possibilities frontier diagram measures:

the amount of a good produced during a year.

A linear production possibilities frontier represents:

the constant opportunity cost of producing one good in terms of the forgone good.

Each point on the production possibilities frontier represents:

the greatest achievable output levels with the given resources.

According to the law of comparative advantage, ______.

the individual with the lower opportunity cost of producing a particular good should specialize in the production of that good

The concept of efficiency when used in the context of a production possibilities frontier refers to:

the maximum output achievable from the given resources.

Under pure capitalism, _____.

the price system is used to guide resources to their highest-valued uses

The opportunity cost of a chosen item or activity equals

the value of the best alternative not chosen.

The production possibilities frontier of an economy is likely to shift to the right when:

there is an increase in the size of the labor force.

If Larry has an absolute advantage in gardening and car washing when compared when Gloria, then:

we can conclude nothing about comparative advantage.