Homework 2

If a vineyard wants to raise funds to purchase a new bottling machine, it does so in the A. factor market B. output market C. product market D. alcoholic beverages market

factor market

If Blake can pick more cherries in one hour than Cody, then Blake has a comparative advantage in cherry picking. A. true B. false

false

If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is with an advance in technology. A. true B. false

false

Refer to Figure 2-10. In the circular flow diagram, economic agents M represent A. firms B. factor markets C. product markets D. households

households

Adam Smith's ________ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole. A. invisible hand B. Utopian society C. comparative advantage model D. survival of the fittest theory

invisible hand

If the production possibilities frontier is linear, then A. opportunity costs are constant as more of one good is produced B. opportunity costs are increasing as more of one good is produced C. it is easy to efficiently produce output D. opportunity costs are decreasing as more of one good is produced

opportunity costs are constant as more of one food is produced

An outward shift of a nation's production possibilities frontier can occur due to A. a change in the amounts of one good desired B. an increase in the labor force C. a reduction in unemployment D. a natural disaster like a hurricane or bad earthquake

an increase in the labor force

The ________ production points on a production possibilities frontier are the points along and inside the production possibilities frontier. A. productively efficient B. unattainable C. attainable D. allocatively efficient

attainable

A critical function of the government in facilitating the operation of a market economy is A. controlling the market prices of food items B. ensuring an equal distribution of income to all citizens C. setting up and enforcing private property rights D. producing goods and services for low-income households

setting up and enforcing private property rights

The circular flow model demonstrates A. the roles played by households and firms in the market system B. how demand and supply for goods and services are brought into equilibrium C. the role of the government in overseeing the market system D. how shortages and surpluses are eliminated in a market

the roles played by households and firms in the market system

Published in 1776, ________ was written by Adam Smith. A. "The Communist Manifesto" B. "The Declaration of Economics" C. "The General Theory of Employment, Interest, and Money" D. "An Inquiry into the Nature and Causes of the Wealth of Nations"

"An inquiry into the Nature and Causes of the Wealth of Nations"

Which of the following countries does not come close to the free market benchmark? A. France B. the United States C. Cuba D. Japan

Cuba

Refer to Table Below. If the two countries specialize and trade, who should export cell phones? A. they should both be importing cell phones B. there is no basis for trade between the two countries C. Estonia D. Finland

Finland

Refer to Figure Below. Which country has a comparative advantage in the production of coconuts? A. Guatemala B. Costa Rica C. they have equal productive abilities D. neither country

Guatemala

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following? A. increase the variety of products that it can produce with a decrease in resources B. consume a combination of goods that lies outside its own production possibilities frontier C. produce a combination of goods that lies outside its own production possibilities frontier D. never have to engage in trade with other nations

consume a combination of goods that lies outside its own production possibilities frontier

Refer to Figure Below. What is the opportunity cost of one dozen roses? A. 2.5 dozen orchids B. 7.25 dozen orchids C. 16 dozen orchids D. 0.4 dozen orchids

0.4 dozen orchids

For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries? A. Germany has the comparative advantage in watches and chocolate B. Germany has the comparative advantage in watches C. Switzerland has the comparative advantage in chocolate D. Switzerland has the comparative advantage in watches

Switzerland has the comparative advantage in watches

Increasing marginal opportunity cost implies that A. that rising opportunity costs makes it inefficient to produce beyond a certain quantity B. the more resources already devoted to any activity, the benefits from allocating yet more resources to that activity decreases by progressively larger amounts C. the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts. D. the law of scarcity

the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts

A welding machine is an example of a factor of production if it is being used to produce automobiles. A. true B. false

true

If a country produces only two goods, it is possible to have an absolute advantage in the production of both goods. A. true B. false

true