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45. The graph below indicates that the economy can produce both:
A. 20 units of eggs and 5 units of rye, although this would not be production efficient.
B. 10 units of eggs and 20 units of rye, although this would not be production efficient.
C. 20 units of eggs and 5 units of rye, and this would be production efficient.
D. 10 units of eggs and 20 units of rye, and this would be production efficient.
46. Refer to the graph below.
If the production possibility curve shifts along the Good Y axis, which point will remain as a
point of efficiency?
A. A
B. B
C. C
D. D
47. Refer to the graphs shown. The discovery of a new supply of resources used only in the
production of guns can be shown by which movement?
A. From A to B to C to D in diagram a
B. From C to D to A to B in diagram a
C. From X to Y to X to Z in diagram b
D. From X to Z to X to Y in diagram b
48. Refer to the graph shown. Destruction of some of the resources necessary to produce both
guns and butter would result in what movement?
A. From A to B to C to D in diagram a.
B. From C to D to A to B in diagram a.
C. From X to Y to X to Z in diagram b.
D. From X to Z to X to Y in diagram b.
49. Refer to the graph below.
In the 1980s, desktop publishing reduced the cost of producing books. Assuming no change in
the cost of producing CDs, which of the shifts reflects this change in technology?
A. I
B. II
C. III
D. IV
50. Refer to the graph below.
Which of the shifts explains what would happen to the production possibility curve if restrictions
were imposed on tuna fishing?
A. I
B. II
C. III
D. IV
51. Refer to the graph below.
Which of the shifts explains what would happen to the production possibility curve if a cyclone
destroys five major garment factories in the Philippines?
A. I
B. II
C. III
D. IV
52. Refer to the graph below.
Which of the shifts explains what will happen to the production possibility curve if political
unrest and strikes disrupt all sectors of an economy equally?
A. I
B. II
C. III
D. IV
53. Refer to the graph below.
Which of the shifts explains what would happen to the production possibility curve if improved
technologies increased the production of prekindergarten (Pre-K) toys by 25 percent and the
production of children's toys by 50 percent?
A. I
B. II
C. III
D. IV
54. Refer to the graph below.
Which of the shifts explains what will happen to the production possibility curve if the cost of
producing books goes down while the cost of producing CDs goes up?
A. I
B. II
C. III
D. IV
55. A resource is said to have a comparative advantage if:
A. it is better suited to the production of one good than to the production of an alternative good.
B. it is equally suited to the production of all goods.
C. its suitability to the production of one good changes as it produces more of that good.
D. its suitability to the production of one good does not change as it produces more of that good.
56. If no resources had a comparative advantage in the production of any good, the production
possibility curve would be:
A. bowed outward.
B. bowed inward.
C. a horizontal line.
D. a downward-sloping straight line.
57. If a country takes advantage of the comparative advantage of some resources over others, its
production possibility curve is likely to be:
A. flat.
B. straight.
C. bowed outward.
D. bowed inward.
58. Which of the following is the best example of an economic precept?
A. Predictable irrationality
B. The supply/demand model
C. The production possibility model
D. Laissez-faire
59. Laissez-faire is an economic:
A. theorem because it is based on deductive analysis of a model that is based on assumptions.
B. theorem because it is the logical conclusion of a model with carefully stated relationships
among variables.
C) precept because it is based on a model and normative judgments about the relevance of the
model to the real world.
D. precept because it is the logical conclusion of a model with widely held assumptions.
60. According to Adam Smith, individuals are directed to do those things for which they have a
comparative advantage by:
A. their self interest.
B. corporate management.
C. government policy.
D. the educational system.
61. The text attributes the growth of economies over the last 200 years largely to:
A. the development of markets.
B. the discovery of additional resources.
C. a decrease in the size of the world population.
D. laissez-faire policies.
62. Given the production possibility tables for the First and Second Bakeries shown, we know
that the opportunity cost of producing cookies:
A. is higher at First Bakery.
B. is higher at Second Bakery.
C. is the same at both bakeries.
D. cannot be computed without further information.
63. Given the production possibility tables for First and Second Bakeries shown, we know that
the opportunity cost of producing pies:
A. is higher at First Bakery.
B. is higher at Second Bakery.
C. is the same at both bakeries.
D. cannot be computed without further information.
64. Given the production possibility tables for First and Second Bakeries shown, we can
determine that:
A. First Bakery has a comparative advantage in the production of both goods.
B. Second Bakery has a comparative advantage in the production of pies.
C. First Bakery has a comparative advantage in the production of pies.
D. neither bakery has a comparative advantage.
65. Mexico has a comparative advantage in producing corn:
A. if its opportunity cost of producing corn is higher than the opportunity cost in other countries.
B. if its opportunity cost of producing corn is the same as the opportunity cost in other countries.
C. if its opportunity cost of producing corn is lower than the opportunity cost in other countries.
D. regardless of the opportunity cost in other countries.
66. Suppose New Zealand uses one unit of labor to produce a kiwi and two units of labor to
produce an apple. Suppose Australia uses two units of labor to produce a kiwi and one unit of
labor to produce an apple. In this case, New Zealand:
A. has a comparative advantage in producing apples.
B. has a comparative advantage in producing kiwis.
C. has a comparative advantage in producing both goods.
D. does not have a comparative advantage in producing either good.
67. Two countries that specialize their production along the lines of comparative advantage and
then trade with each other will be able to:
A. both produce and consume more.
B. produce more and consume less.
C. produce less and consume more.
D. both produce and consume less.
68. Suppose that in Colombia one unit of labor can produce 8 tons of papayas or 2 tons of
bananas and in Brazil, one unit of labor can produce either 4 tons of papayas or 1 ton of bananas.
Given this information, which of the following statements is true?
A. Columbia has a comparative advantage in producing papayas but not bananas.
B. Columbia has a comparative advantage in producing papayas and bananas.
C. These countries would increase combined consumption if they specialized and traded.
D. These countries cannot gain from trading.
69. Suppose that in Colombia one unit of labor can produce 8 tons of papayas or 2 tons of
bananas and in Brazil, one unit of labor can produce either 2 tons of papayas or 4 tons of
bananas. If each country has two units of labor, which of the following consumption
combinations can be attained only with trade?
A. Brazil consumes 8 tons of bananas and no papayas.
B. Colombia consumes 16 tons of papayas and no bananas.
C. Brazil consumes 2 tons of papayas and 4 tons of bananas.
D. Colombia consumes 8 tons of papayas and 4 tons of bananas.
70. Suppose that in Slovakia one unit of labor can produce either 16 tons of wheat or 32 tons of
soy and in Poland one unit of labor can produce either 4 tons of wheat or 2 tons of soy. Given
this information, which of the following statements is true?
A. Slovakia has a comparative advantage in producing neither wheat nor soy.
B. Slovakia has a comparative advantage in producing both wheat and soy.
C. Poland has a comparative advantage in producing soy but not wheat.
D. Poland has a comparative advantage in producing wheat but not soy.
71. Suppose that in Slovakia one unit of labor can produce either 20 tons of wheat or 40 tons of
soy and in Poland one unit of labor can produce either 40 tons of wheat or 20 tons of soy. If
each country has two units of labor, which of the following consumption combinations can be
attained only with trade?
A. Slovakia consumes 80 tons of soy.
B. Slovakia consumes 30 tons of both soy and wheat.
C. Poland consumes 80 tons of wheat.
D. Poland consumes 40 tons of wheat and 20 tons of soy.
72. The production possibility curves of two countries are given below:
Refer to the production possibility curves of the two countries. Without trade, the most each
country could produce would be:
A. 15 chocolate and 15 textiles.
B. 20 chocolate and 20 textiles.
C. 30 chocolate and 30 textiles.
D. 60 chocolate and 60 textiles.
73. The production possibility curves of two countries are given below:
Refer to the production possibility curves of the two countries. If they specialized and traded,
which of the following is the largest bundle each country could have?
A. 15 chocolate and 15 textiles
B. 20 chocolate and 20 textiles
C. 30 chocolate and 30 textiles
D. 60 chocolate and 60 textiles
74. The production possibility frontiers of Northland and Southland are given. Without trade,
Northland produces and consumes 20 apples and 5 bananas and Southland produces and
consumes 10 apples and 40 bananas. Could they increase their consumption bundle by changing
production and trading?
