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1. Which of the following is not a reason people choose to depend on others for goods and services?
a.
to improve their lives
b.
to allow them to enjoy a greater variety of goods and services
c.
to consume more of each good without working any more hours
d.
to allow people to produce outside their production possibilities frontiers
2. When can two countries gain from trading two goods?
a.
when the first country can only produce the first good and the second country can only produce the second
good
b.
when the first country can produce both goods, but can only produce the second good at great cost, and the
second country can produce both goods, but can only produce the first good at great cost
c.
when the first country is better at producing both goods and the second country is worse at producing both
goods
d.
Two countries could gain from trading two goods under all of the above conditions.
3. Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is
better at producing both goods. In this case, trade could
a.
benefit both Steve and Tom.
b.
benefit Steve, but not Tom.
c.
benefit Tom, but not Steve.
d.
benefit neither Steve nor Tom.
4. Olivia bakes cakes and Andrew grows corn. Olivia and Andrew both like to eat cake and eat corn. In which of the
following cases is it impossible for both Olivia and Andrew to benefit from trade?
a.
Olivia cannot grow corn and Andrew cannot bake cakes.
b.
Olivia is better than Andrew at baking cakes and Andrew is better than Olivia at growing corn.
c.
Olivia is better than Andrew at baking cakes and at growing corn.
d.
Both Olivia and Andrew can benefit from trade in all of the above cases.
5. Abby bakes brownies and Liam grows flowers. In which of the following cases is it impossible for both Abby and Liam
to benefit from trade?
a.
Abby does not like flowers and Liam does not like brownies.
b.
Abby is better than Liam at baking brownies and Liam is better than Abby at growing flowers.
c.
Liam is better than Abby at baking brownies and at growing flowers.
d.
Both Abby and Liam can benefit from trade in all of the above cases.
6. The production possibilities frontier illustrates
a.
the combinations of output that an economy should produce.
b.
the combinations of output that an economy should consume.
c.
the combinations of output that an economy can produce.
d.
All of the above are correct.
7. An economy’s production possibilities frontier is also its consumption possibilities frontier
a.
under all circumstances.
b.
under no circumstances.
c.
when the economy is self-sufficient.
d.
when the rate of tradeoff between the two goods being produced is constant.
8. A production possibilities frontier is bowed outward when
a.
the more resources the economy uses to produce one good, the fewer resources it has available to produce the
other good.
b.
an economy is self-sufficient instead of interdependent and engaged in trade.
c.
the rate of tradeoff between the two goods being produced is constant.
d.
the rate of tradeoff between the two goods being produced depends on how much of each good is being
produced.
9. A production possibilities frontier is a straight line when
a.
the more resources the economy uses to produce one good, the fewer resources it has available to produce the
other good.
b.
an economy is interdependent and engaged in trade instead of self-sufficient.
c.
the rate of tradeoff between the two goods being produced is constant.
d.
the rate of tradeoff between the two goods being produced depends on how much of each good is being
produced.
10. Consider two individuals — Marquis and Serena — each of whom would like to wear sweaters and eat tasty food. The
gains from trade between Marquis and Serena are most obvious in which of the following cases?
a.
Marquis is very good at knitting sweaters and at cooking tasty food, but Serena’s skills in both of these
activities are very poor.
b.
Marquis and Serena both are very good at cooking tasty food, but neither has the necessary skills to knit a
sweater.
c.
Marquis’s cooking and knitting skills are very poor, and Serena’s cooking and knitting skills are also very
poor.
d.
Marquis’s skills are such that he can produce only sweaters, and Serena’s skills are such that she can produce
only tasty food.
11. Consider two individuals — Howard and Mai — each of whom would like to wear sweaters and eat tasty food. The
gains from trade between Howard and Mai are least obvious in which of the following cases?
a.
Howard is very good at knitting sweaters and at cooking tasty food, but Mai’s skills in both of these activities
are very poor.
b.
Howard is very good at knitting sweaters and at cooking tasty food; Mai is very good at knitting sweaters, but
she knows nothing about cooking tasty food.
c.
Howard’s skills in knitting sweaters are fairly good, but his skills in cooking tasty food are fairly bad; Mai’s
skills in knitting sweaters are fairly bad, but her skills in cooking tasty food are fairly good.
d.
Howard’s skills are such that he can produce only sweaters, and Mai’s skills are such that she can produce
only tasty food.
12. A professor spends 10 hours per day giving lectures and writing papers. For the professor, a graph that shows his
various possible mixes of output (lectures given per day and papers written per day) is called his
a.
line of tastes.
b.
trade-off curve.
c.
production possibilities frontier.
d.
consumption possibilities frontier.
13. Suppose there are only two people in the world. Each person’s production possibilities frontier also represents his or
her consumption possibilities when
a.
neither person faces trade-offs.
b.
the frontiers are straight lines.
c.
the frontiers are bowed out.
d.
they choose not to trade with one another.
14. The most obvious benefit of specialization and trade is that they allow us to
a.
work more hours per week than we otherwise would be able to work.
b.
consume more goods than we otherwise would be able to consume.
c.
spend more money on goods that are beneficial to society, and less money on goods that are harmful to
society.
d.
consume more goods by forcing people in other countries to consume fewer goods.
15. As a student, Anne spends 40 hours per week writing term papers and completing homework assignments. On one
axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is
measured the number of homework assignments completed per week. Anne’s production possibilities frontier is a straight
line if
a.
she faces no trade-off between writing term papers and completing homework assignments.
b.
she can switch between writing term papers and completing homework assignments at a constant rate.
c.
the rate at which she can switch between homework assignments and term papers depends on the number of
homework assignments she is completing and on the number of term papers she is writing.
d.
she is required by her professors to spend half of her time on term papers and the other half of her time on
homework assignments.
16. For a self-sufficient producer, the production possibilities frontier
a.
is the same as the consumption possibilities frontier.
b.
is greater than the consumption possibilities frontier.
c.
is less than the consumption possibilities frontier.
d.
is always a straight line.
Labor Hours Needed
to Make
Bottle of Wine
Loaf of Bread
Jane
2
1.5
John
3
1
17. Refer to Table 3-1. Assume that John and Jane each work 24 hours. What happens to total production if instead of
each person spending 12 hours producing each good, Jane spends 21 hours producing wine and 3 hours producing bread
and John spends 3 hours producing wine and 21 hours producing bread?
a.
The total production of bread and wine each rise.
b.
The total production of bread rises and the total production of wine falls.
c.
The total production of bread falls and the total production of wine rises.
d.
The total production of bread and wine each fall.
Table 3-2
Assume that England and Holland can switch between producing milk and oats at a constant rate.
Number of Units
Produced in an Hour
Milk
Oats
England
10
4
Holland
8
6
18. Refer to Table 3-2. We could use the information in the table to draw a production possibilities frontier for England
and a second production possibilities frontier for Holland. If we were to do this, measuring milk along the horizontal axis,
then
a.
the slope of England’s production possibilities frontier would be -10/4 and the slope of Holland’s production
possibilities frontier would be -4/3.
b.
the slope of England’s production possibilities frontier would be -4/10 and the slope of Holland’s production
possibilities frontier would be -3/4.
c.
the slope of England’s production possibilities frontier would be 10/4 and the slope of Holland’s production
possibilities frontier would be 4/3.
d.
the slope of England’s production possibilities frontier would be 4/10 and the slope of Holland’s production
possibilities frontier would be 3/4.
Table 3-3
Production Opportunities
Hours Needed to Make 1 Unit of
Number of Units Produced in 40 Hours
Cheese
Wine
Cheese
Wine
England
1
4
40
10
France
5
2
8
20
19. Refer to Table 3-3. Assume that England and France each has 40 labor hours available. If each country divides its
time equally between the production of cheese and wine, then total production is
a.
8 units of cheese and 10 units of wine
b.
24 units of cheese and 15 units of wine
c.
40 units of cheese and 20 units of wine
d.
48 units of cheese and 30 units of wine
20. Refer to Table 3-3. Which of the following combinations of cheese and wine could France produce in 40 hours?
a.
2 units of cheese and 20 units of wine
b.
4 units of cheese and 15 units of wine
c.
6 units of cheese and 5 units of wine
d.
8 units of cheese and 20 units of wine
21. Refer to Table 3-3. Which of the following combinations of cheese and wine could England not produce in 40 hours?
a.
12 units of cheese and 7 units of wine
b.
16 units of cheese and 6 units of wine
c.
20 units of cheese and 5 units of wine
d.
26 units of cheese and 4 units of wine
22. Refer to Table 3-3. We could use the information in the table to draw a production possibilities frontier for England
and a second production possibilities frontier for France. If we were to do this, measuring cheese along the horizontal
axis, then
a.
the slope of England’s production possibilities frontier would be -4 and the slope of France’s production
possibilities frontier would be -0.4.
b.
the slope of England’s production possibilities frontier would be -0.25 and the slope of France’s production
possibilities frontier would be -2.5.
c.
the slope of England’s production possibilities frontier would be 0.25 and the slope of France’s production
possibilities frontier would be 2.5.
d.
the slope of England’s production possibilities frontier would be 4 and the slope of France’s production
possibilities frontier would be 0.4.
23. Refer to Table 3-3. We could use the information in the table to draw a production possibilities frontier for England
and a second production possibilities frontier for France. If we were to do this, measuring wine along the horizontal axis,
then
a.
the slope of England’s production possibilities frontier would be -4 and the slope of France’s production
possibilities frontier would be -0.4.
b.
the slope of England’s production possibilities frontier would be -0.25 and the slope of France’s production
possibilities frontier would be -2.5.
c.
the slope of England’s production possibilities frontier would be 0.25 and the slope of France’s production
possibilities frontier would be 2.5.
d.
the slope of England’s production possibilities frontier would be 4 and the slope of France’s production
possibilities frontier would be 0.4.
Table 3-4
Assume that Andrea and Paul can switch between producing wheat and producing beef at a constant rate.
Minutes Needed to Make 1
Bushel of Wheat
Pound of Beef
Andrea
30
15
Paul
15
5
24. Refer to Table 3-4. Assume that Andrea and Paul each has 480 minutes available. If each person divides his time
equally between the production of wheat and beef, then total production is
a.
24 bushels of wheat and 64 pounds of beef.
b.
21 bushels of wheat and 33 pounds of beef.
c.
16 bushels of wheat and 48 pounds of beef.
d.
5 bushels of wheat and 24 pounds of beef.
25. Refer to Table 3-4. Which of the following combinations of wheat and beef could Andrea produce in one 8-hour day?
a.
16 bushels of wheat and 32 pounds of beef
b.
9 bushels of wheat and 25 pounds of beef
c.
7 bushels of wheat and 15 pounds of beef
d.
10 bushels of wheat and 13 pounds of beef
26. Refer to Table 3-4. Which of the following combinations of wheat and beef could Paul not produce in one 8-hour
day?
a.
13 bushels of wheat and 60 pounds of beef
b.
20 bushels of wheat and 30 pounds of beef
c.
20 bushels of wheat and 20 pounds of beef
d.
25 bushels of wheat and 15 pounds of beef
Table 3-5
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.
Labor Hours
Needed to Make 1
Cooler
Radio
Aruba
2
5
Iceland
1
4
27. Refer to Table 3-5. Which of the following represents Aruba's production possibilities frontier when 100 labor hours
are available?
a.
b.
c.
d.
28. Refer to Table 3-5. Which of the following represents Iceland's production possibilities frontier when 100 labor hours
are available?
a.
b.
c.
d.
29. Refer to Table 3-5. Assume that Aruba and Iceland each has 80 labor hours available. If each country divides its time
equally between the production of coolers and radios, then total production is
a.
28 coolers and 50 radios.
b.
30 coolers and 9 radios.
c.
60 coolers and 18 radios.
d.
120 coolers and 36 radios.
30. Refer to Table 3-5. Which of the following combinations of coolers and radios could Aruba produce in one 40-hour
week?
a.
3 coolers and 7 radios
b.
5 coolers and 6 radios
c.
11 coolers and 4 radios
d.
13 coolers and 3 radios
Table 3-6
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant
rate.
Machine Minutes
Needed to Make 1
Toothbrush
Hairbrush
Zimbabwe
3
10
Portugal
5
6
31. Refer to Table 3-6. Which of the following represents Zimbabwe’s and Portugal’s production possibilities frontiers
when each country has 60 minutes of machine time available?
a.
Zimbabwe Portugal
b.
Zimbabwe Portugal
c.
Zimbabwe Portugal
d.
Zimbabwe Portugal
32. Refer to Table 3-6. Assume that Zimbabwe and Portugal each has 180 machine minutes available. If each country
divides its time equally between the production of toothbrushes and hairbrushes, then total production is
a.
24 toothbrushes and 12 hairbrushes.
b.
48 toothbrushes and 24 hairbrushes.
c.
96 toothbrushes and 48 hairbrushes.
d.
720 toothbrushes and 1440 hairbrushes.
33. Refer to Table 3-6. Which of the following combinations of toothbrushes and hairbrushes could Portugal produce in
30 minutes?
a.
1 toothbrush and 4 hairbrushes
b.
4 toothbrushes and 2 hairbrushes
c.
5 toothbrushes and 6 hairbrushes
d.
6 toothbrushes and 5 hairbrushes
34. Refer to Table 3-6. Which of the following combinations of toothbrushes and hairbrushes could Zimbabwe not
produce in 120 minutes?
a.
5 toothbrushes and 11 hairbrushes
b.
10 toothbrushes and 9 hairbrushes
c.
20 toothbrushes and 6 hairbrushes
d.
30 toothbrushes and 3 hairbrushes
Table 3-7
Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate.
Labor Hours Needed to Make 1 Pound of
Pounds Produced in 24 Hours
Meat
Potatoes
Meat
Potatoes
Farmer
6
4
4
6
Rancher
3
8
8
3
35. Refer to Table 3-7. Assume that the farmer and the rancher each has 24 labor hours available. If each person divides
his time equally between the production of meat and potatoes, then total production is
a.
6 pounds of meat and 4.5 pounds of potatoes.
b.
5.5 pounds of meat and 8 pounds of potatoes.
c.
12 pounds of meat and 9 pounds of potatoes.
d.
5 pounds of meat and 5.5 pounds of potatoes.
36. Refer to Table 3-7. Which of the following combinations of meat and potatoes could the farmer produce in 24 hours?
a.
1 pound of meat and 8 pounds of potatoes.
b.
2 pounds of meat and 2 pounds of potatoes.
c.
1 pounds of meat and 5 pounds of potatoes.
d.
3 pounds of meat and 2 pounds of potatoes.
37. Refer to Table 3-7. Which of the following combinations of meat and potatoes could the rancher not produce in 24
hours?
a.
5 pounds of meat and 1 pounds of potatoes.
b.
2 pounds of meat and 2 pounds of potatoes.
c.
1 pounds of meat and 3 pounds of potatoes.
d.
4 pounds of meat and 1 pound of potatoes.
Table 3-8
Assume that England and Spain can switch between producing cheese and producing bread at a constant rate.
Labor Hours Needed to Make 1 Unit of
Number of Units Produced in 24 Hours
Cheese
Bread
Cheese
Bread
England
2
3
12
8
Spain
3
6
8
4
38. Refer to Table 3-8. Assume that England and Spain each has 24 labor hours available. If each country divides its time
equally between the production of cheese and bread, then total production is
a.
10 units of cheese and 6 units of bread.
b.
25 units of cheese and 7.5 units of bread.
c.
20 units of cheese and 12 units of bread.
d.
12 units of cheese and 8 units of bread.
39. Refer to Table 3-8. Which of the following combinations of cheese and bread could Spain produce in 24 hours?
a.
4 units of cheese and 3 units of bread.
b.
6 units of cheese and 1 units of bread.
c.
7 units of cheese and 1.5 units of bread.
d.
3 units of cheese and 3 units of bread.
40. Refer to Table 3-8. Which of the following combinations of cheese and bread could England not produce in 24
hours?
a.
5 units of cheese and 3 units of bread.
b.
6 units of cheese and 4 units of bread.
c.
8 units of cheese and 3 units of bread.
d.
7 units of cheese and 2 units of bread.
41. Refer to Table 3-8. We could use the information in the table to draw a production possibilities frontier for England
and a second production possibilities frontier for Spain. If we were to do this, measuring cheese along the horizontal axis,
then
a.
the slope of England’s production possibilities frontier would be -0.67 and the slope of Spain’s production
possibilities frontier would be -0.5.
b.
the slope of England’s production possibilities frontier would be -1.5 and the slope of Spain’s production
possibilities frontier would be -2.
c.
the slope of England’s production possibilities frontier would be -.75 and the slope of Spain’s production
possibilities frontier would be -1.
d.
the slope of England’s production possibilities frontier would be -2 and the slope of Spain’s production
possibilities frontier would be -.5.
42. Refer to Table 3-8. We could use the information in the table to draw a production possibilities frontier for England
and a second production possibilities frontier for Spain. If we were to do this, measuring bread along the horizontal axis,
then
a.
the slope of England’s production possibilities frontier would be -0.67 and the slope of Spain’s production
possibilities frontier would be -0.5.
b.
the slope of England’s production possibilities frontier would be -1.5 and the slope of Spain’s production
possibilities frontier would be -2.
c.
the slope of England’s production possibilities frontier would be -.75 and the slope of Spain’s production
possibilities frontier would be -1.
d.
the slope of England’s production possibilities frontier would be -2 and the slope of Spain’s production
possibilities frontier would be -.5.
Table 3-9
Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate.
Hours Needed to Make 1
Amount Produced in 60 Hours
Mixer
Toaster
Mixer
Toaster
Maya
6
3
10
20
Miguel
10
5
6
12
43. Refer to Table 3-9. Assume that Maya and Miguel each has 60 hours available. If each person divides his/her time
equally between the production of mixers and toasters, then total production is
a.
8 mixers and 16 toasters.
b.
3.5 mixers and 6 toasters.
c.
15 mixers and 9 toasters.
d.
20 mixers and 12 toasters.
44. Refer to Table 3-9. Which of the following combinations of mixers and toasters could Maya produce in 60 hours?
a.
5 mixers and 12 toasters.
b.
6 mixers and 4 toasters.
c.
7 mixers and 7 toasters.
d.
8 mixers and 5 toasters.
45. Refer to Table 3-9. Which of the following combinations of mixers and toasters could Miguel not produce in 80
hours?
a.
5 mixers and 6 toasters.
b.
6 mixers and 5 toasters.
c.
7 mixers and 2 toasters.
d.
4 mixers and 8 toasters.
46. Refer to Table 3-9. We could use the information in the table to draw a production possibilities frontier for Maya and
a second production possibilities frontier for Miguel. If we were to do this, measuring mixers along the horizontal axis,
then
a.
the slope of Maya’s production possibilities frontier would be -2 and the slope of Miguel’s production
possibilities frontier would be -2.
b.
the slope of Maya’s production possibilities frontier would be -0.5 and the slope of Miguel’s production
possibilities frontier would be -0.5.
c.
the slope of Maya’s production possibilities frontier would be -1.67 and the slope of Miguel’s production
possibilities frontier would be -1.67.
d.
the slope of Maya’s production possibilities frontier would be -0.6 and the slope of Miguel’s production
possibilities frontier would be -0.6.
47. Refer to Table 3-9. We could use the information in the table to draw a production possibilities frontier for Maya and
a second production possibilities frontier for Miguel. If we were to do this, measuring toasters along the horizontal axis,
then
a.
the slope of Maya’s production possibilities frontier would be -2 and the slope of Miguel’s production
possibilities frontier would be -2.
b.
the slope of Maya’s production possibilities frontier would be -0.5 and the slope of Miguel’s production
possibilities frontier would be -0.5.
c.
the slope of Maya’s production possibilities frontier would be -1.67 and the slope of Miguel’s production
possibilities frontier would be -1.67.
d.
the slope of Maya’s production possibilities frontier would be -0.6 and the slope of Miguel’s production
possibilities frontier would be -0.6.
Table 3-10
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.
Hours Needed to Make 1
Quantity Produced in 2400 Hours
Car
Airplane
Car
Airplane
Japan
30
150
80
16
Korea
50
150
48
16
48. Refer to Table 3-10. Assume that Japan and Korea each has 2400 hours available. If each country divides its time
equally between the production of cars and airplanes, then total production is
a.
40 cars and 8 airplanes.
b.
64 cars and 16 airplanes.
c.
80 cars and 16 airplanes.
d.
128 cars and 32 airplanes.
49. Refer to Table 3-10. We could use the information in the table to draw a production possibilities frontier for Japan
and a second production possibilities frontier for Korea. If we were to do this, measuring cars along the horizontal axis,
then
a.
the slope of Japan’s production possibilities frontier would be -5 and the slope of Korea’s production
possibilities frontier would be -3.
b.
the slope of Japan’s production possibilities frontier would be -0.2 and the slope of Korea’s production
possibilities frontier would be -0.33.
c.
the slope of Japan’s production possibilities frontier would be 0.2 and the slope of Korea’s production
possibilities frontier would be 0.33.
d.
the slope of Japan’s production possibilities frontier would be 5 and the slope of Korea’s production
possibilities frontier would be 3.
50. Refer to Table 3-10. We could use the information in the table to draw a production possibilities frontier for Japan
and a second production possibilities frontier for Korea. If we were to do this, measuring airplanes along the horizontal
axis, then
a.
the slope of Japan’s production possibilities frontier would be -5 and the slope of Korea’s production
possibilities frontier would be -3.
b.
the slope of Japan’s production possibilities frontier would be -0.2 and the slope of Korea’s production
possibilities frontier would be -0.33.
c.
the slope of Japan’s production possibilities frontier would be 0.2 and the slope of Korea’s production
possibilities frontier would be 0.33.
d.
the slope of Japan’s production possibilities frontier would be 5 and the slope of Korea’s production
possibilities frontier would be 3.
Table 3-11
Assume that Max and Min can switch between producing mittens and producing hats at a constant rate.
