ECON Unit 1

To protect high-cost domestic producers, a country imposes a tariff on an imported commodity, Y. Which of the following is most likely to occur in the short run? A decrease in domestic production of Y An increase in domestic production of Y An increase in foreign output of Y

2 only

A leftward shift of the supply curve for computers could be caused by which of the following in the short run?

A decrease in the number of computer manufacturers

Which of the following will cause a movement along the demand curve for chicken, a normal good, resulting in an increase in the quantity demanded?

A decrease in the price of chicken

Which of the following would best explain an inward shift of the production possibilities curve?

A decrease in the quality of human capital

Assume an economy produces two goods, capital goods and consumer goods. If the production of capital goods increases in the current period, which of the following will occur for the current and future production possibilities curve (PPC) for consumer goods and capital goods?

A movement along the current PPCPPC and a rightward shift of the future PPC

Which of the following would shift a country's production possibilities curve inward

A reduction in the size of the country's labor force

Which of the following changes will most likely cause a shift of the demand curve from D1 to D2 as shown in the diagram? ( right)

An increase in consumers' income, assuming that video games are a normal good

Which of the following describes the law of supply

An increase in the price of a good will increase the quantity supplied.

Suppose two countries are each capable of individually producing two given commodities. Instead, each specializes by producing the commodity for which it has a comparative advantage and then trades with the other country. Which of the following is most likely to result?

Both countries will become better off.

If two nations specialize according to their individual comparative advantages and engage in trade, then which of the following must be true?

Both nations can consume beyond their individual production possibilities.

Which of the following is an example of a factor of production?

Capital

Country A can produce either 2 tons of cocoa or 4 cars with 10 units of labor. Country B can produce either 5 tons of cocoa or 25 cars with 10 units of labor. Based on this information, which of the following is true?

Country A has a comparative advantage in the production of cocoa, while Country B has a comparative advantage in the production of cars.

Which of the following would cause the production possibilities curve shown above to shift outward?

Developing a more efficient steelmaking process

If two nations specialize according to the law of comparative advantage and then trade with each other, which of the following would be true

Each nation would increase its consumption possibilities.

If there is a decrease in the price of the coffee beans used to make brewed coffee, how will this affect the equilibrium price and quantity of brewed coffee?

Equilibrium price will decrease and equilibrium quantity will increase

If the production technology of a good improves and at the same time the number of consumers willing and able to buy the good in the market increases, which of the following will definitely occur?

Equilibrium quantity will increase.

As nations specialize in production and trade in international markets, they can expect which of the following domestic improvements? Allocation of domestic resources Standard of living Self-sufficiency

I and II only

Which of the following concepts can be illustrated using the production possibilities curve? I. Choice II. Scarcity III. Price level IV. Opportunity cost

I, II, and IV only

For an economy that is operating inside its production possibilities curve, which of the following is true?

It can increase the production of both goods.

Which of the following is always true of an economy operating on its production possibilities frontier?

Its resources are fully employed.

Mary Jane is a lawyer who can earn $150 per hour in her law practice. She is also an excellent carpenter who can build cabinets three times as fast as the best carpenter, whose hourly wage is $20 per hour. Which of the following is a correct economic statement?

Mary Jane has a comparative advantage in law so she should specialize in law and hire a carpenter to make her cabinets.

Which of the following will occur in a competitive market when the price of a good is less than the equilibrium price?

Price will increase to eliminate the shortage and restore equilibrium.

If a certain combination of goods or services lies outside the production possibilities curve of an economy, which of the following is true?

Resources are not available to achieve that combination of goods or services.

All societies face a trade-off for every decision for which of the following reasons?

Resources are scarce.

Which of the following would be most likely to occur if the United States placed high tariffs on imported goods?

The United States economy would become less efficient.

Assume that Country A exports one bushel of wheat in exchange for 2.5 bushels of corn from Country B. If the terms of trade are beneficial to both countries, which of the following must be true?

The cost of producing a bushel of wheat in Country A is less than 2.5 bushels of corn.

Which of the following best explains why many United States economists support free international trade?

The long-run gains to consumers and some producers exceed the losses to other producers.

If the wage rate of workers producing a good decreases, then which of the following will most likely occur?

The supply of the good will increase.

Which of the following is the most fundamental issue that economics addresses?

Use of scarce resources

Which of the following describes scarcity?

Wants exceed resources.

When an economy producing two goods is operating efficiently and at full employment, increasing the production of one good will result in

a decrease in the amount of the other good that can be produced

Any point inside a production possibilities curve is

associated with inefficient use or unemployment of some resources

If producing each additional unit of good X required giving up ever-increasing amounts of good Y, the production possibilities curve between X and Y would be

bowed outward

The main benefit of free trade between two countries is that

each country can consume beyond its constraints of resources and productivity

Scarcity exists because

human wants exceed the productive capacity of the economy

The concept of opportunity cost would no longer be relevant if

the supply of all resources were unlimited

Comparative advantage implies that

two countries should benefit from trade unless both have equal opportunity costs in every good