147. Refer to Table 2-3. The opportunity cost of 1 pound of potatoes for the rancher is
a.
5 hours of labor.
b.
4 hours of labor.
c.
5/4 pounds of meat.
d.
4/5 pound of meat.
148. Refer to Table 2-3. The rancher has a comparative advantage in
a.
neither good, and the farmer has a comparative advantage in both goods.
b.
both goods, and the farmer has a comparative advantage in neither good.
c.
potatoes, and the farmer has a comparative advantage in meat.
d.
meat, and the farmer has a comparative advantage in potatoes.
149. Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in
a.
meat and the rancher were to specialize in potatoes.
b.
potatoes and the rancher were to specialize in meat.
c.
neither good and the rancher were to specialize in both goods.
d.
none of the above; they cannot both benefit by specialization and trade.
150. Use the table below to choose the correct answer. The table outlines the production possibilities of
Robinson Crusoe and Joe Friday.
Friday
Crusoe
Good Y
Good X
Good Y
Good X
1
3
2
3
2
2
4
2
3
1
6
1
If Crusoe and Friday want to maximize their consumption possibilities,
a.
Crusoe should specialize in producing good X and Friday in producing good Y, but no
trade should be allowed.
b.
Crusoe should specialize in producing good X and Friday in producing good Y; trade
should occur to maximize joint consumption.
c.
Crusoe should specialize in producing good Y and Friday in producing good X; trade
should occur to maximize joint consumption.
d.
Not enough information is provided to conclusively answer this question.
151. Use the table below to choose the correct answer. The table outlines the production possibilities of
Robinson Crusoe and Joe Friday.
Friday
Crusoe
Good Y
Good X
Good Y
Good X
2
3
1
3
4
2
2
2
6
1
3
1
If Crusoe and Friday want to maximize their consumption possibilities,
a.
Crusoe should specialize in producing good X and Friday in producing good Y, but no
trade should be allowed.
b.
Crusoe should specialize in producing good X and Friday in producing good Y; trade
should occur to maximize joint consumption.
c.
Crusoe should specialize in producing good Y and Friday in producing good X; trade
should occur to maximize joint consumption.
d.
both individuals should strive for self-sufficiency, which always maximizes output.
152. Suppose you can type a paper in two hours or mow the lawn in four hours, while it takes your friend
Gabriela eight hours to type a paper or two hours to mow the lawn. Which of the following is true?
a.
You have a comparative advantage in typing.
b.
You have a comparative advantage in mowing the lawn.
c.
You and Gabriela could save time if you mowed her lawn while she typed your paper.
d.
You and Gabriela cannot gain from specialization and trade.
153. If Xavier can produce sandwiches at a lower opportunity cost than Kimani, then
a.
Xavier has a comparative advantage in the production of sandwiches.
b.
Kimani has a comparative advantage in the production of sandwiches.
c.
Xavier should not produce sandwiches.
d.
Xavier is capable of producing more sandwiches than Kimani in a given amount of time.
154. If Terrell can produce more bagels in one day than Zori can produce in one day, then
a.
Terrell has a comparative advantage in the production of bagels.
b.
Zori has a comparative advantage in the production of bagels.
c.
Terrell has an absolute advantage in the production of bagels.
d.
Terrell should produce bagels and Zori should spend her time on a different activity.
155. Darryl can build picnic tables twice as fast as Trevon. Darryl can assemble swing sets three times as
fast as Trevon. The law of comparative advantage suggests that
a.
Darryl can gain only at Trevon’s expense.
b.
Trevon can gain only at Darryl’s expense.
c.
both can gain if Darryl specializes in assembling swing sets and Trevon in building picnic
tables.
d.
both can gain if Darryl specializes in building picnic tables and Trevon in assembling
swing sets.
156. If Mia can either wash 10 cars or wax 2 cars during a day, and Daniel can either wash 17 cars or wax 2
cars during a day, then according to the law of comparative advantage,
a.
Daniel’s opportunity cost of waxing a car is less than Mia’s.
b.
their total output can be expanded if Mia specializes in waxing and Daniel in washing.
c.
their total output can be expanded if Mia specializes in washing and Daniel in waxing.
d.
it would be impossible for Daniel and Mia to increase their total output through
specialization and mutual exchange.
157. What are the three basic questions faced by every economy?
a.
What, how, and for whom will goods be produced?
b.
When, where, and how much will be produced?
c.
Why, where, and when will goods be produced?
d.
How, how much, and why will goods be produced?
158. Which of the following is not a basic question that each economy must answer?
a.
Which resources are scarce?
b.
For whom shall the goods be produced?
c.
How shall goods be produced?
d.
What goods shall be produced?
159. Three basic decisions must be made by all economies. What are they?
a.
How much will be produced; when will it be produced; who will produce it?
b.
What goods will be produced; how will goods be produced; for whom will goods be
produced?
c.
What will be consumed; how will goods be consumed; for whom will goods be
consumed?
d.
How will the opportunity cost principle be applied; if the law of comparative advantage
will be utilized, how will it be utilized; will the production possibilities constraint apply?
160. Even countries that depend primarily on market forces to resolve the basic economic questions will
usually rely on the collective decision-making process to
a.
determine the prices of goods and resources.
b.
allocate goods that are essential to life.
c.
determine the distribution of income among citizens.
d.
define and enforce private-property rights and designate the acceptable forms of
competitive economic behavior.
161. When collective decision making is utilized to resolve economic questions regarding the allocation of
resources,
a.
decentralized decision making is inevitable.
b.
central planning and political bargaining will replace market forces.
c.
individual preferences are of no importance.
d.
economic equality will result.
162. When collective decision making is utilized to resolve economic questions regarding the allocation of
resources,
a.
the role of markets will be replaced by political decision making.
b.
centralized decision making in all areas is inevitable.
c.
the preferences of individuals are of no importance.
d.
economic efficiency will be assured.
163. A form of economic organization that relies primarily on private ownership of productive assets,
freedom of exchange, and market prices to allocate goods and resources is often called
a.
national socialism.
b.
the welfare state.
c.
a corporate economy.
d.
capitalism.
164. A system of economic organization in which the ownership and control of productive capital assets
rests with the state and in which resources are allocated through central planning and political decision
making is called
a.
socialism.
b.
a market economy.
c.
a corporate economy.
d.
capitalism.
Figure 2-1
165. In Figure 2-1, point A is
a.
unattainable.
b.
inefficient.
c.
efficient.
d.
preferable to point B.
Figure 2-2
166. Which of the following would most likely cause the production possibilities curve for breadfruit and
fish to shift outward from AA to BB in Figure 2-2?
a.
a decrease in the labor force of the country
b.
a sudden change in consumer preferences for more fish and less breadfruit
c.
a major technological advance
d.
a decrease in the capital stock
KEY: Bloom’s: Analysis MSC: Graphics Questions
Figure 2-3
167. Points A and B in Figure 2-3 indicate consumption and investment for two economies. Other things
constant, which of the economies is likely to grow more rapidly in the future?
a.
economy A
b.
economy B
c.
They can be expected to grow at the same rate.
d.
This is uncertain since growth is not influenced by the factors indicated in this example.
Figure 2-4
168. Which of the following is true of Figure 2-4?
a.
If the economy operates at point A, it is impossible to produce more of both food and
clothing.
b.
If the economy operates at point B, it is impossible to increase the output of clothing
without giving up food production.
c.
If the economy operates at point A, resources are being used efficiently.
d.
If the economy operates at point B, resources are being used inefficiently.
MSC: Graphics Questions
Figure 2-5
169. In Figure 2-5, which of the following is true?
a.
Point A is inefficient.
b.
Point B is efficient.
c.
Point C is unattainable.
d.
All of the above are true.
Figure 2-6
170. Which of the following will most likely shift the production possibilities curve for breadfruit and fish
outward from AA to BB in Figure 2-6?
a.
an improvement in the form of economic organization
b.
lower investment and a reduction in the country’s capital stock
c.
an increase in the price of breadfruit
d.
a decrease in the average number of hours worked
Figure 2-7
171. If an economy operates at point A on the production possibilities curve shown in Figure 2-7,
a.
to produce more food, it would have to reduce its production of clothing.
b.
to produce more clothing, it would have to reduce the production of food.
c.
it is operating efficiently.
d.
all of the above would be correct.
Figure 2-8
172. Points A, B, and C in Figure 2-8 indicate consumption and investment for three economies. Other
things constant, which of the economies is likely to grow more rapidly in the future?
a.
economy A
b.
economy B
c.
economy C
d.
They would all be expected to grow at the same rate.
Figure 2-9
173. Refer to Figure 2-9. If the economy moves from point A to point D, the opportunity cost is
a.
10 toasters.
b.
20 toasters.
c.
30 toasters.
d.
30 toothbrushes.
174. Refer to Figure 2-9. The opportunity cost of obtaining 15 additional toasters by moving from point D
to point C is
a.
10 toothbrushes.
b.
20 toothbrushes.
c.
30 toothbrushes.
d.
none of the above; the economy cannot move from point D to point C.
175. Refer to Figure 2-9. The opportunity cost of obtaining 10 additional toasters by moving from point B
to point A is
a.
10 toothbrushes.
b.
20 toothbrushes.
c.
30 toothbrushes.
d.
zero, since the economy has the additional resources to produce 10 additional toasters.
176. Refer to Figure 2-9. Suppose the economy is producing at point B. Which of the following statements
would best explain this situation?
a.
The economy lacks the resources to produce at a more desirable point.
b.
The economy’s available technology prevents it from producing at a more desirable point.
c.
There is widespread unemployment in the economy.
d.
Any of the above statements would be a legitimate explanation for this situation.
Figure 2-10
177. Refer to Figure 2-10. What is the opportunity cost of the movement from point A to point C?
a.
50 baseballs
b.
100 baseballs
c.
100 bananas
d.
300 bananas
178. Refer to Figure 2-10. A movement from point C to point D could be caused by
a.
unemployment.
b.
a decrease in society’s preference for bananas.
c.
fewer resources available for production of bananas.
d.
All of the above are correct.
179. Refer to Figure 2-10. If this economy put all available resources into the production of bananas, it
could produce
a.
200 bananas and also 150 baseballs.
b.
300 bananas and also 100 baseballs.
c.
400 bananas and no baseballs.
d.
It is impossible to know unless we know the quantity of resources available.
180. Refer to Figure 2-10. If the economy moves from point C to point B, then which of the following
statements is correct?
a.
The economy benefited from a technological advance in the production of baseballs.
b.
The opportunity cost of each additional baseball is 2 bananas.
c.
The opportunity cost of each additional banana is 2 baseballs.
d.
The move involves no opportunity cost; it simply reflects the desires of the economy’s
citizens.