Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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People who provide you with goods and services a. | are acting out
of generosity. | b. | do so because they have no other
choice. | c. | do so because they get something in
return. | d. | are required to do so by government. | | |
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2.
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Ben
bakes bread and Shawna knits sweaters. Ben likes to eat bread and wear sweaters, and the same is true
for Shawna. In which of the following cases is it impossible for both Ben and Shawna to benefit from
trade? a. | Ben cannot knit
sweaters and Shawna cannot bake bread. | b. | Ben is better than Shawna at baking bread and Shawna is better
than Ben at knitting sweaters. | c. | Ben is better than Shawna at baking bread and at knitting
sweaters. | d. | None of the above is correct. | | |
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3.
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Which
of the following statements is not correct? a. | Trade allows for
specialization. | b. | Trade has the potential to benefit all
nations. | c. | Trade allows nations to consume outside of their production
possibilities curves. | d. | Absolute advantage is the driving force of
specialization. | | |
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Table 3-1
| | Labor Hours Needed to Make 1 Pound of: |
Pounds produced in 40 hours: | | | Meat | Potatoes | Meat | Potatoes | Farmer | 8 | 2 | 5 | 20 | Rancher | 4 | 5 | 10 | 8 | | | | | |
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4.
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Refer to Table 3-1. The opportunity cost of 1 pound of potatoes for the farmer
is a. | 8 hours of
labor. | b. | 2 hours of labor. | c. | 4 pounds of
meat. | d. | 1/4 pound of meat. | | |
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These
graphs illustrate the production possibilities available to Fred and Ginger with each person working
40 hours.
Figure 3-3
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5.
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Refer to Figure 3-3. Fred would incur an opportunity cost of 3 ballet slippers
if he a. | increased his
production of tap shoes by 4. | b. | increased his production of tap shoes by
5. | c. | decreased his
production of tap shoes by 4. | d. | increased the time he spends on the two activities from 40
hours to 50 hours. | | |
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6.
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Specialization and trade are closely linked to a. | absolute
advantage. | b. | comparative advantage. | c. | gains to some
traders that exactly offset losses to other traders. | d. | shrinkage of the
economic pie. | | |
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7.
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Total
output in an economy increases when each person specializes because a. | there is less
competition for the same resources. | b. | each person spends more time producing that product in which he
or she has a comparative advantage. | c. | a wider variety of products will be produced within each
country due to specialization. | d. | government necessarily plays a larger role in the economy due
to specialization. | | |
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Table 3-4
Brenda and Eric
run a business that involves setting up and testing computers. The following table
applies.
| | Minutes Needed to | Number of Computers Set Up or Tested in a 40-Hour
Week | | | Set Up | Test | Computers | Computers | | | a Computer | a
Computer | Set
Up | Tested | Brenda | 30 | 40 | 80 | 60 | Eric | 48 | ? | 50 | 40 | | | | | |
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8.
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Refer to Table 3-4. For Brenda, the opportunity cost of testing a computer
is a. | setting up 2/3
of a computer. | b. | setting up 3/4 of a computer. | c. | setting up 1 1/3
computers. | d. | setting up 1 1/2 computers | | |
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9.
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Adam
Smith a. | wrote An
Inquiry into the Nature and Causes of the Wealth of Nations. | b. | opposed free
trade. | c. | wrote The General Theory of
Economics. | d. | All of the above are correct. | | |
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10.
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Assume that Greece has a comparative advantage in fish and Germany has a comparative
advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these
two countries specialize and trade so as to maximize the benefits of specialization and trade,
a. | the two
countries’ combined output of both goods will be higher than it would be in the absence of
trade. | b. | Greece will produce more fish than it would produce in the
absence of trade. | c. | Germany will produce more cars than it would produce in the
absence of trade. | d. | All of the above are correct. | | |
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11.
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Assume for the United States that the opportunity cost of each airplane is 100 cars.
Then which of these pairs of points could be on the United States' production possibilities
frontier? a. | (200 airplanes,
5,000 cars) and (150 airplanes, 4,000 cars) | b. | (200 airplanes,
10,000 cars) and (150 airplanes, 20,000 cars) | c. | (300 airplanes,
15,000 cars) and (200 airplanes, 25,000 cars) | d. | (300 airplanes,
25,000 cars) and (200 airplanes, 40,000 cars) | | |
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Table 3-5
| | Hours needed to make one: | Amount produced
in 2400 hours: | | | Car | Airplane | Cars | Airplanes | Japan | 30 | 150 | 80 | 16 | U.S. | 50 | 200 | 48 | 12 | | | | | |
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12.
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Refer to Table 3-5. If the United States and Japan trade based on the principle
of comparative advantage, Japan will a. | export cars (but not airplanes) to the
U.S. | b. | export airplanes
(but not cars) to the U.S. | c. | export cars and airplanes to the U.S. | d. | import cars and
airplanes from the U.S. | | |
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13.
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Economists generally support a. | trade restrictions. | b. | government
management of trade. | c. | export subsidies. | d. | free
international trade. | | |
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14.
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Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of
oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per
year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade,
Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will
produce and consume 60 bushels of corn and 400 bushels of oats. If each country made the decision to
specialize in producing the good for which it has a comparative advantage, then the combined yearly
output of the two countries would increase by a. | 280 bushels of corn and 450 bushels of
oats. | b. | 340 bushels of corn and 500 bushels of
oats. | c. | 360 bushels of corn and 520 bushels of
oats. | d. | 360 bushels of corn and 640 bushels of
oats. | | |
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15.
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Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of
fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per
year. There are 30 workers in each country. No trade occurs between the two countries. Boatland
produces and consumes 75 units of wheat and 375 units of fish per year while Farmland produces and
consumes 375 units of wheat and 75 units of fish per year. If trade were to occur, Boatland would
trade 90 units of fish to Farmland in exchange for 80 units of wheat. If Boatland now completely
specializes in fish production, how many units of fish could it now consume along with the 80 units
of imported wheat? a. | 490 units | b. | 500
units | c. | 610 units | d. | 660
units | | |
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