B BUS 221 CHAPTER 2 (Part 3)

101) Refer to the figure below. Moving from point B to point A, the opportunity cost of 25 more salads is: A) 20 pizzas. B) 10 pizzas. C) 15 pizzas. D) 5 pizzas.

B) 10 pizzas.

123) The figure below shows Avery's weekly production possibilities curve for scarves. For Avery, the opportunity cost of making a red scarf is: 123) _____ A) zero. B) increasing. C) 1 blue scarf. D) decreasing.

C) 1 blue scarf.

133) You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: What's the minimum number of fish you would be willing to accept in exchange for a coconut? A) 4 B) 2 C) 3 D) 5

C) 3

118) Moe divides his time between studying Physics and studying Economics. His production possibilities curve for his final grade in each class is shown below. Moe needs to earn at least an 80 in both economics and physics to keep his scholarship. Given his current PPC, an 80 in both classes is ________. 118) _____ A) inefficient B) attainable C) unattainable D) efficient

C) unattainable

140) One concern regarding the North American Free Trade Agreement (NAFTA) was that it would lead: 140) _____ A) the total value of goods and services produced by the United States to fall. B) highly skilled workers in the United States to lose their jobs. C) unskilled workers in the United States to lose their jobs. D) wages in Mexico to rise.

C) unskilled workers in the United States to lose their jobs.

102) Refer to the figure below. The opportunity cost of making an additional salad: A) decreases as the number of pizzas decreases. B) decreases as the number of salads increases. C) remains constant regardless of how many salads are made. D) increases as the number of salads increases.

D) increases as the number of salads increases.

127) An increase in an economy's productive resources will lead the production possibilities curve to: 127) _____ A) become flatter. B) shift inward. C) stay the same. D) shift outward.

D) shift outward.

107) Refer to the figure below. If this economy is currently producing at point C, then the opportunity cost of providing 100 additional units of medical care would be: 107) _____ A) 400 warheads. B) 200 warheads. C) 100 warheads. D) 800 warheads.

A) 400 warheads.

148) Which of the following jobs is least likely to be outsourced? 148) _____ A) Flipping hamburgers B) Technical assistance over the phone for your computer C) Software design D) Transcription of physicians' records

A) Flipping hamburgers

103) Refer to the figure below. If this restaurant goes from producing 20 to 25 pizzas per hour, then which of the following statements is true? 103) _____ A) It has to give up fewer than 12.5 salads. B) It has to give up more than 12.5 salads. C) It has to give up exactly 12.5 salads. D) It has to give up exactly 25 salads.

A) It has to give up fewer than 12.5 salads.

126) Which of the following is NOT a reason why there are gains to specialization? 126) _____ A) It increases the amount productive resources in the economy. B) It allows individuals to concentrate on the activities in which they have a comparative advantage. C) It further improves skills through experience and practice. D) It eliminates many of the costs of switching from one task to another.

A) It increases the amount productive resources in the economy.

111) You have noticed that your next-door neighbor, Mary, always works in the garden, and her husband, Joe, always walks the dog. You conclude that if Joe and Mary are efficient, then it must be the case that: 111) _____ A) Joe has a comparative advantage in walking the dog. B) Mary has an absolute advantage in gardening. C) Mary's opportunity cost of walking the dog is lower than Joe's. D) Joe experiences increasing opportunity costs when he gardens, but not when he walks the dog.

A) Joe has a comparative advantage in walking the dog

106) Refer to the figure below. Suppose that the government requires that resources be used efficiently. Which of the following would the government definitely not allow? A) Production at point D. B) Production at any point other than C. C) Specialization in medical care production. D) Specialization in warhead production.

A) Production at point D.

137) If country A can produce more of practically everything than can country B, then which of the following statements is true? 137) _____ A) Trade can benefit both countries. B) Country B cannot have a comparative advantage in the production of any good that country A wants to buy. C) Country A has no incentive to trade with country B. D) Country B has no incentive to trade with country A.

A) Trade can benefit both countries.

131) You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: As soon as you see the other island's PPC, you realize there are: 131) _____ A) gains from trade because your island has a comparative advantage in coconuts. B) no gains from trade because there is no difference in your ability to harvest coconuts. C) no gains from trade because your both have the same comparative advantage. D) no gains from trade because the other island has an absolute advantage.

A) gains from trade because your island has a comparative advantage in coconuts.

138) As the differences in opportunity costs between the U.S. and its trading partners increase, the potential gains from specialization and trade ________. 138) _____ A) increase B) stay the same C) decrease D) become unpredictable

A) increase

112) The benefits of specialization can be used to explain why: 112) _____ A) individuals and nations benefit from trade. B) big companies take advantage of smaller ones. C) machines are more productive than human workers. D) workers prefer to work on a variety of tasks during the day.

A) individuals and nations benefit from trade.

142) The benefits to specialization are even greater when two trading partners have: 142) _____ A) large differences in opportunity costs. B) absolute advantages in producing the same goods. C) similar consumption preferences. D) very similar opportunity costs.

A) large differences in opportunity costs.

139) One reason there is political opposition to international trade is that: 139) _____ A) not everyone benefits from trade. B) the potential gains from specialization and trade are small. C) trade does not increase the total value of goods and services produced by a nation. D) the differences in opportunity costs between countries are small.

A) not everyone benefits from trade.

145) Outsourcing is a term increasingly used to refer to the act of: 145) _____ A) replacing relatively expensive American workers with low-wage workers overseas. B) importing raw materials into the United States from other countries. C) hiring illegal immigrants. D) exporting final goods to other countries

A) replacing relatively expensive American workers with low-wage workers overseas.

147) When a U.S. firm engages in outsourcing, it benefits ________ and harms ________. 147) _____ A) the U.S. consumers of the firm's products; the firm's U.S. employees B) the firm; the U.S. consumers of the firm's products C) the U.S. consumers of the firm's products; the firm's foreign employees D) the U.S. consumers of the firm's products; the firm

A) the U.S. consumers of the firm's products; the firm's U.S. employees

136) You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: Both islands specialize exclusively in the product for which they have a comparative advantage. You have agreed to give 350 coconuts to the other island in exchange for 1,300 fish. After the trade the other island has a total of ________ coconuts and ________ fish. 136) _____ A) 850; 1,200 B) 350; 1,200 C) 500; 1,200 D) 350; 1,500

B) 350; 1,200

113) Moe divides his time between studying Physics and studying Economics. His production possibilities curve for his final grade in each class is shown below. Both of Moe's professors require at least a 65 to pass and a 90 to earn an A. Which of the following is true? 113) _____ A) Moe can pass economics, but only if he fails physics. B) Moe can pass both classes. C) Moe can pass physics, but only if he fails economics. D) Moe could earn an A in economics and still pass physics.

B) Moe can pass both classes.

124) The figure below shows Avery's weekly production possibilities curve for scarves. Avery's PPC would shift outward if she: 124) _____ A) knits fewer red scarves and more blue scarves each week. B) devotes more time to knitting each week. C) knits more red scarves and fewer blue scarves each week. D) devotes less time to knitting each week.

B) devotes more time to knitting each week.

104) Refer to the figure below. As the production of pizza increases, the opportunity cost of producing pizza: A) become negative. B) increases. C) decreases. D) doesn't change.

B) increases.

108) Refer to the figure below. The opportunity cost of increasing medical care from 200 to 400 units is ________ the opportunity cost of increasing medical care from 400 to 600 units. A) twice as much as B) less than C) greater than D) exactly the same as

B) less than

117) Moe divides his time between studying Physics and studying Economics. His production possibilities curve for his final grade in each class is shown below. The Principle of Increasing Opportunity Cost is reflected in the fact that the opportunity cost going from 70 to 80 in economics is: 117) _____ A) the same as the opportunity cost of going from 70 to 80 in physics. B) lower than the opportunity cost of going from 80 to 90 in economics. C) lower than the opportunity cost of going from 80 to 90 in physics. D) higher than the opportunity cost of going from 80 to 90 in economics.

B) lower than the opportunity cost of going from 80 to 90 in economics.

119) Refer to the figure below. For the nation whose PPC is shown, it must be true that: 119) _____ A) the nation's productive resources are better-suited to making milk than to making movies. B) some of the nation's productive resources are better-suited to making milk, and some are better-suited to making movies. C) the nation's productive resources are better-suited to making movies than to making milk. D) the nation has a comparative advantage in making milk.

B) some of the nation's productive resources are better-suited to making milk, and some are better-suited to making movies.

130) Regarding specialization, it is generally true that: 130) _____ A) more specialization is always worse. B) specialization imposes costs as well as benefits. C) less specialization is always better. D) more specialization is always better.

B) specialization imposes costs as well as benefits.

110) The Principle of Increasing Opportunity Costs states that: 110) _____ A) productive people do the hardest tasks first. B) when increasing production, resources with the lowest opportunity costs should be used first. C) opportunity costs increase when too little is produced. D) when increasing production, resources with the lowest opportunity costs should be used last.

B) when increasing production, resources with the lowest opportunity costs should be used first.

128) Suppose that Nepal invests less in new factories and equipment than does the United States. This will likely cause: 128) _____ A) Nepal's production possibilities curve to shift outward faster than the U.S.'s. B) Nepal's production possibilities curve to shift inward faster than the U.S.'s. C) The U.S.'s production possibilities curve to shift outward faster than Nepal's. D) The U.S.'s production possibilities curve to shift inward faster than Nepal's.

C) The U.S.'s production possibilities curve to shift outward faster than Nepal's.

134) You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: If you offer to give the other island 1 coconut for every 4 fish they give you, then they will: 134) _____ A) refuse your offer because they have a comparative advantage in fish. B) accept your offer because your opportunity cost of a coconuts is less than 4 fish. C) accept your offer because their opportunity cost of a coconut is greater than 4 fish. D) refuse your offer because they can produce as many coconuts as you can.

C) accept your offer because their opportunity cost of a coconut is greater than 4 fish.

115) Moe divides his time between studying Physics and studying Economics. His production possibilities curve for his final grade in each class is shown below. According to Moe's PPC, moving from a 70 to an 80 in economics: 115) _____ A) has a higher opportunity cost than moving from an 80 to a 90. B) is inefficient. C) has a lower opportunity cost than moving from an 80 to a 90. D) is unattainable.

C) has a lower opportunity cost

125) Economic growth can result from a(n): 125) _____ A) increase in number of the minimum wage jobs. B) decrease in the number of workers available. C) increase in the amount of productive resources. D) increase in the amount of consumer goods produced.

C) increase in the amount of productive resources.

116) Moe divides his time between studying Physics and studying Economics. His production possibilities curve for his final grade in each class is shown below. If Moe moves from Point A to point C, his grade in Physics will go down by ________ his grade in economics. 116) _____ A) less than the decrease in B) more than the increase in C) less than the increase in D) more than the decrease in

C) less than the increase in

143) According to the textbook, the evidence indicates that NAFTA has: 143) _____ A) stopped illegal immigration from Mexico. B) reduced the employment of unskilled workers in the United States significantly. C) not significantly reduced the employment of unskilled workers in the United States. D) reduced the wages of skilled workers in the United States.

C) not significantly reduced the employment of unskilled workers in the United States.

132) You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: If the other island's delegate offers to give you 2 fish for every 1 coconut you give them, you will: 132) _____ A) accept their offer because you do not have an absolute advantage in fish. B) refuse their offer because the opportunity cost to you of a coconut is less than 2 fish. C) refuse their offer because the opportunity cost to you of a coconut is more than 2 fish. D) accept their offer because you do not have the comparative advantage in fish.

C) refuse their offer because the opportunity cost to you of a coconut is more than 2 fish.

121) Refer to the figure below. This economy would be operating at point B if: A) the opportunity cost of making movies were higher than the opportunity cost of making milk. B) it was operating efficiently. C) resources that are better-suited to making movies were being used to make milk, while resources that are better-suited to making milk were being used to make movies. D) the opportunity cost of making milk were higher than the opportunity cost of making movies.

C) resources that are better-suited to making movies were being used to make milk, while resources that are better-suited to making milk were being used to make movies.

122) Refer to the figure below. If this economy were currently operating at point D, then in order to make more movies: 122) _____ A) no productive resources would need to switch from making milk to movies because each resource should continue to be used according to its comparative advantage. B) the first productive resources to switch to making movies should be those with the lowest opportunity cost of making milk. C) the first productive resources to switch to making movies should be those with the highest opportunity cost of making milk. D) no productive resources would need to switch from making milk to movies because point D is already efficient.

C) the first productive resources to switch to making movies should be those with the highest opportunity cost of making milk.

135) You are the Minister of Trade for a small island country with the following annual PPC: You are negotiating a trade agreement with a neighboring island with the following annual PPC: Both islands specialize exclusively in the product for which they have a comparative advantage. You have agreed to give 350 coconuts to the other island in exchange for 1,300 fish. After the trade, your island has a total of ________ coconuts and ________ fish. 135) _____ A) 500; 1,300 B) 150; 2,800 C) 500; 1,500 D) 150; 1,300

D) 150; 1,300

144) According to the textbook, NAFTA was expected to help which country exploit its comparative advantage in the production of goods made by unskilled labor? 144) _____ A) The U.S.A. B) Canada C) Cuba D) Mexico

D) Mexico

114) Moe divides his time between studying Physics and studying Economics. His production possibilities curve for his final grade in each class is shown below. Which of the following is true? 114) _____ A) Moe has a comparative advantage in economics. B) Moe has a comparative advantage in physics. C) Moe has an absolute advantage in economics. D) Moe's opportunity cost of studying for each subject is increasing.

D) Moe's opportunity cost of studying for each subject is increasing.

105) Refer to the figure below. Which of the following is true? 105) _____ A) Point D is efficient because it requires using the fewest resources. B) Point F is the most efficient because medical care is the highest there. C) Point A is efficient because it is farthest from the origin. D) Points B, C, E and F are efficient.

D) Points B, C, E and F are efficient.

129) If a nation restricts imports, it will: 129) _____ A) increase the total value of goods and services produced in that nation. B) harm each individual citizen in that nation. C) benefit each individual citizen in that nation. D) decrease the total value of goods and services produced in that nation.

D) decrease the total value of goods and services produced in that nation.

120) Refer to the figure below. At point D, the opportunity cost of making milk is: 120) _____ A) high because the economy is not operating efficiently. B) low because the economy is specializing in making milk. C) high because productive resources that are better-suited to making movies are not being used to make milk. D) high because productive resources that are better-suited to making movies are being used to make milk.

D) high because productive resources that are better-suited to making movies are being used to make milk.

146) The fundamental reason firms outsource is that: 146) _____ A) U.S. workers cannot perform the tasks performed by workers in other countries. B) outsourcing increases employment overseas. C) low-wage workers in other countries are more productive than are U.S. workers. D) hiring low-wage workers overseas reduces firms' costs.

D) hiring low-wage workers overseas reduces firms' costs.

109) Production possibilities curves for large economies are generally bow-shaped because: 109) _____ A) specialization gives some producers a comparative advantage. B) as more resources are used to produce a good, those resources become less expensive. C) opportunity costs tend to decrease with increases in production. D) opportunity costs tend to increase with increases in production.

D) opportunity costs tend to increase with increases in production.

141) When a nation reduces the barriers to international trade: 141) _____ A) each individual citizen becomes worse off. B) the total value of all goods and services produced by the nation falls. C) each individual citizen becomes better off. D) the total value of all goods and serviced produced by the nation rises.

D) the total value of all goods and serviced produced by the nation rises.