Econ exam 1

A typical bowed-out production possibility frontier between two goods, guns and butter, shows that the opportunity cost of butter in terms of guns increases as more butter is produced. This implies that the opportunity cost of guns in terms of butter decreases as more guns are produced. False True

False

As long as people have different _____, everyone has a comparative advantage in something. direct costs benefits utility opportunity costs

opportunity costs

Technological improvements will: leave the production possibility frontier unchanged. shift the production possibility frontier outward. necessarily lead to increased unemployment. shift the production possibility frontier inward.

shift the production possibility frontier outward

A production possibility frontier that is a straight line sloping down from left to right suggests that: a- more of both goods could be produced moving along the frontier. b- there are no opportunity costs. c- the two products must have the same price. d- the opportunity costs of the products are constant.

the opportunity costs of the products are constant

If an economy produces the desired mix of goods from its available resources, then this mix of goods is: allocatively efficient. productively efficient. both productively and allocatively efficient. neither productively nor allocatively efficient.

allocativley efficient

If an economy has to sacrifice increasing amounts of good X for each additional unit of good Y produced, then its production possibility frontier is: bowed in. a vertical line. bowed out. a straight line.

bowed out

Economists generally believe that a country should specialize in the production of a good or service if the: production possibility frontier is closer to the origin than that of any other country. country can produce the product while forgoing fewer alternative products than any other country. country can produce the product using more resources than any other country. production possibility frontier is further from the origin than that of any other country.

country can produce the product while forgoing fewer alternative products than any other country.

If countries engage in international trade: they can consume inside their production possibility frontiers. they can consume outside their production possibility frontiers. they give up the ability to specialize in production. worldwide levels of production are lower.

they can consume outside their production possibility frontier

If an economy is producing at a point on its production possibilities frontier, it is: not necessarily efficient in production or allocation. efficient in allocation but not necessarily in production. efficient in production but not necessarily in allocation. efficient in production and allocation.

efficient in production, but not necessarily in allocation

The simplest circular-flow model shows the interaction between households and firms. In this model: households and firms interact in the market for goods and services, but firms are the only participants in the factor markets. attention is focused on real flows of goods, services, and factors of production, but money flows between households and firms are ignored for simplicity. only barter transactions take place. firms supply goods and services to households, which in turn supply factors of production to firms.

firms supply goods and services to households, which in turn supply factors of production to firms.

Coworkers Yvonne and Rodney are washing dishes and sweeping the floors of the store. They know that to finish both tasks as quickly as possible, each of them should focus on just one task, but they don't know who should do what. Yvonne and Rodney should determine which one: can wash the dishes faster. has the absolute advantage in both sweeping and dishwashing. has the comparative advantage in dishwashing. has the production possibility frontier that is farthest from the origin in dishwashing.

has the comparative advantage in dishwashing

The production possibility frontier is bowed out because: resources are scarce. resources are inefficiently used. resources are not equally suited for the production of both goods. economic growth leads to inefficiency.

resources are not equally suited for the production of both goods

To achieve gains from trade, each nation should specialize in the production of a good or service if: its production possibility frontier is farther from the origin than that of any other country. its production possibility frontier is closer to the origin than that of any other country. the country can make that good or service using fewer resources than any other country. the country can make that good or service while forgoing the production of fewer alternative products than any other country.

the country can make that good or service while forgoing the production of fewer alternative products than any other country

Free trade between countries: should be based on absolute advantage. always involves wealthy countries exploiting less developed nations. will allow for greater levels of consumption than without trade. will shift the domestic production possibility frontier to the right.

will allow for greater levels of consumption than without trade