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Test Canvas : TestBanks Chapter 02: Economic Models: Trade-offs and Trade
Microeconom ics, 3e
Test Canvas: TestBanks Chapter 02: Economic Models: Trade-offs
and Trade
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1. True/False: Economic models that make unrealistic...
Question Economic models that make unrealistic assumptions may be useful in analyzing
some economic problems.
2. True/False: On any given production possibility f...
Question On any given production possibility frontier, we see the minimum quantity of one
good that can be produced for any given production of the other.
3. True/False: Suppose residents of Montana operate ...
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Suppose residents of Montana operate on their production possibility frontier and
want to see increased wheat production as well as an increase in the production of
fly-fishing rods. According to the production possibility frontier, this cannot happen
without new resources or technological improvement.
4. True/False: A typical, bowed-out production possi...
Question A typical, bowed-out production possibility frontier between two goods—guns and
butter—shows that the opportunity cost of butter in terms of guns increases as
more butter is produced. This implies that the opportunity cost of guns in terms of
butter decreases as more guns are produced.
5. True/False: If the United States is more producti...
Question If the United States is more productive than Mexico in all lines of production, then
the United States cannot benefit from trade with Mexico.
6. True/False: Bangladesh produces much of the cloth...
Question Bangladesh produces much of the clothing we wear because it is more productive
in producing clothes than we are in the United States.
7. True/False: Nations can gain from trade with othe...
Question Nations can gain from trade with other nations even if they are less productive in all
industries than the nations they trade with.
8. True/False: Reference: Ref 2-26 (Table: Fish and...
Question
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Reference: Ref 2-26
(Table: Fish and Coconut Production Possibilities) Look at the table Fish and
Coconut Production Possibilities. The table shows the maximum amount of fish or
coconuts that Tom and Hank can produce when each produces only one of the
goods. The table implies that Hank has an absolute advantage in the production of
both goods.
9. True/False: Reference: Ref 2-26 (Table: Fish and...
Question
Reference: Ref 2-26
(Table: Fish and Coconut Production Possibilities) Look at the table Fish and
Coconut Production Possibilities. The table shows the maximum amount of fish or
coconuts that Tom and Hank can produce when each produces only one of the
goods. The table implies that Tom has a comparative advantage in the production
of both goods.
10. True/False: Absolute advantage is the basis for g...
Question Absolute advantage is the basis for gains from trade.
11. True/False: The principle of comparative advantag...
Question The principle of comparative advantage suggests that if New York and Florida
exchange taxi parts for oranges, each state will be made worse off.
12. True/False: A firm is an organization that produc...
Question A firm is an organization that produces goods.
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13. True/False: Fertilizer, used to grow pumpkins, is...
Question Fertilizer, used to grow pumpkins, is an example of a factor of production.
14. True/False: Labor and capital are the only two fa...
Question Labor and capital are the only two factors of production.
15. True/False: “Teachers in northern New Hamps...
Question “Teachers in northern New Hampshire should earn more money” is a normative
statement.
16. True/False: Positive economics is the branch of e...
Question Positive economics is the branch of economics that makes prescriptions about the
way the economy should work.
17. True/False: “Steel tariffs will prevent job...
Question “Steel tariffs will prevent job losses in the steel industry” is a positive statement.
18. True/False: “The unemployment rate should b...
Question “The unemployment rate should be higher” is a normative statement.
19. True/False: “Many economists agree that inc...
Question “Many economists agree that income taxes should be increased for rich people” is
a positive statement.
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20. True/False: Economists disagree more over normati...
Question Economists disagree more over normative economics than positive economics.
21. Multiple Choice: A simplified representation that is u...
Question A simplified representation that is used to study a real situation is called:
a trade-off.
22. Multiple Choice: The models that economists construct:
Question The models that economists construct:
23. Multiple Choice: When building a model, economists:
Question When building a model, economists:
are careful to avoid the scientific method.
24. Multiple Choice: The models used in economics:
Question The models used in economics:
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Answer are usually limited to variables that are directly related.
25. Multiple Choice: Economic models are:
Question Economic models are:
Answer created and used to duplicate reality.
26. Multiple Choice: The importance of an economic model i...
Question The importance of an economic model is that it allows us to:
Answer build a complex and accurate model of the economy.
27. Multiple Choice: The production possibility frontier i...
Question The production possibility frontier illustrates that:
Answer the economy will automatically end up at full employment.
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28. Multiple Choice: Reference: Ref 2-1 (Table: Productio...
Question
Reference: Ref 2-1
(Table: Production Possibilities Schedule I) Look at the table Production
Possibilities Schedule I. If the economy produces 2 units of consumer goods per
period, it also can produce at most ________ units of capital goods per period.
Answer 30
29. Multiple Choice: Reference: Ref 2-1 (Table: Productio...
Question
Reference: Ref 2-1
(Table: Production Possibilities Schedule I) Look at the table Production
Possibilities Schedule I. If the economy produces 10 units of capital goods per
period, it also can produce at most ________ units of consumer goods per period.
Answer 5
30. Multiple Choice: Reference: Ref 2-1 (Table: Productio...
Question
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Reference: Ref 2-1
(Table: Production Possibilities Schedule I) Look at the table Production
Possibilities Schedule I. The opportunity cost of producing the fourth unit of
consumer goods is ________ units of capital goods.
Answer 2
31. Multiple Choice: Figure: Guns and Butter Reference: Re...
Question Figure: Guns and Butter
Reference: Ref 2-2
(Figure: Guns and Butter) Look at the figure Guns and Butter. On this figure, points
A, B, E, and F:
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indicate constant costs for guns and increasing costs for butter.
32. Multiple Choice: Figure: Guns and Butter Reference: Re...
Question Figure: Guns and Butter
Reference: Ref 2-2
(Figure: Guns and Butter) Look at the figure Guns and Butter. This production
possibility frontier is:
33. Multiple Choice: Figure: Guns and Butter Reference: Re...
Question
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Figure: Guns and Butter
Reference: Ref 2-2
(Figure: Guns and Butter) Look at the figure Guns and Butter. If the economy were
operating at point B, producing 16 guns and 12 pounds of butter per period, a
decision to move to point E and produce 18 pounds of butter:
Answer indicates you can have more butter and guns simultaneously.
34. Multiple Choice: Figure: Guns and Butter Reference: Re...
Question
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Figure: Guns and Butter
Reference: Ref 2-2
(Figure: Guns and Butter) Look at the figure Guns and Butter. The combination of
guns and butter at point H:
Answer can be attained but would cost too much.
35. Multiple Choice: Figure: Guns and Butter Reference: Re...
Question
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Figure: Guns and Butter
Reference: Ref 2-2
(Figure: Guns and Butter) Look at the figure Guns and Butter. Suppose the
economy produced 8 guns and 12 pounds of butter per period.
36. Multiple Choice: If an economy has to sacrifice only o...
Question If an economy has to sacrifice only one unit of good X for each unit of good Y
produced throughout the relevant range, then its production possibility frontier has:
Answer a zero slope.
37. Multiple Choice: A production possibility frontier tha...
Question A production possibility frontier that is a straight line sloping down from left to right
would suggest that:
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Answer more of both goods could be produced moving along the frontier.
38. Multiple Choice: Reference: Ref 2-3 (Table: Productio...
Question
Reference: Ref 2-3
(Table: Production Possibilities Schedule II) Look at the table Production
Possibilities Schedule II. If the economy is producing at alternative X, the
opportunity cost of producing at Y instead of X is ________ units of consumer
goods per period.
Answer 0
39. Multiple Choice: Reference: Ref 2-3 (Table: Productio...
Question
Reference: Ref 2-3
(Table: Production Possibilities Schedule II) Look at the table Production
Possibilities Schedule II. If an economy is producing at alternative W, the
opportunity cost of producing at X is ________ unit(s) of consumer goods per
period.
Answer 0
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40. Multiple Choice: Reference: Ref 2-3 (Table: Productio...
Question
Reference: Ref 2-3
(Table: Production Possibilities Schedule II) Look at the figure Production
Possibilities Schedule II. The production of 14 units of consumer goods and 1 unit
of capital goods per period would:
Answer result in full employment.
result in no unused resources.
41. Multiple Choice: In movement along a production possib...
Question In movement along a production possibility frontier, the opportunity cost to society
of getting more of one good:
Answer is constant.
42. Multiple Choice: If an economy has to sacrifice increa...
Question If an economy has to sacrifice increasing amounts of good X for each unit of good
Y produced, then its production possibility frontier is:
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a vertical line.
43. Multiple Choice: The fact that a society's production ...
Question The fact that a society's production possibility frontier is bowed out or concave to
the origin of a graph demonstrates the law of:
concave opportunity cost.
44. Multiple Choice: The economy's factors of production a...
Question The economy's factors of production are not equally suitable for producing different
types of goods. This principle generates:
Answer economic growth.
45. Multiple Choice: Figure: Strawberries and Submarines R...
Question
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Figure: Strawberries and Submarines
Reference: Ref 2-4
(Figure: Strawberries and Submarines) Look at the figure Strawberries and
Submarines. Suppose the economy is operating at point G. This implies that:
Answer the economy can move to a point such as C only if it improves its technology.
46. Multiple Choice: Figure: Strawberries and Submarines R...
Question
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Figure: Strawberries and Submarines
Reference: Ref 2-4
(Figure: Strawberries and Submarines) Look at the figure Strawberries and
Submarines. As the economy moves from point A toward point D, it will find that
the opportunity cost of each additional submarine:
Answer falls.
47. Multiple Choice: Figure: Strawberries and Submarines R...
Question
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Figure: Strawberries and Submarines
Reference: Ref 2-4
(Figure: Strawberries and Submarines) Look at the figure Strawberries and
Submarines. Suppose the economy now operates at point C. Moving to point E
would require that the economy:
Answer achieve full employment and an efficient allocation of resources.
48. Multiple Choice: If an economy is producing a level of...
Question If an economy is producing a level of output that is on its production possibility
frontier, the economy has:
Answer idle resources.
49. Multiple Choice: Figure: Consumer and Capital Goods Re...
Question
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Figure: Consumer and Capital Goods
Reference: Ref 2-5
(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital
Goods. The movement from curve 1 to curve 2 indicates:
50. Multiple Choice: Figure: Consumer and Capital Goods Re...
Question
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Figure: Consumer and Capital Goods
Reference: Ref 2-5
(Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital
Goods. Point Z:
51. Multiple Choice: Technological improvements will:
Question Technological improvements will:
Answer leave the production possibility frontier unchanged.
52. Multiple Choice: A production possibility frontier ill...
Question A production possibility frontier illustrates the ________ facing an economy that
________ only two goods.
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