93. When one producer can create more of a good
than another producer using the same quantity of resources, the first producer
has:
a. a
zero-sum game.
b. gains
from trade.
c. an
absolute advantage.
d. a
comparative advantage.
e. increasing
relative costs.
ANS: C
95. Michael and Angelo are both artists who can
create sculptures or paint paintings each day. The following table describes
their maximum outputs per day. Does either person have an absolute advantage?
|
|
Sculptures
|
Paintings
|
|
Michael
|
10
|
5
|
|
Angelo
|
6
|
2
|
a. Yes,
Michael has an absolute advantage in both sculptures and paintings.
b. Yes,
Angelo has an absolute advantage in both sculptures and paintings.
c. Yes,
Michael has an absolute advantage in paintings, and Angelo has an absolute
advantage in sculptures.
d. Yes,
Michael has an absolute advantage in sculptures, and Angelo has an absolute
advantage in paintings.
e. No,
neither has an absolute advantage.
ANS: A
The
figures below depict the production possibilities frontiers (PPFs) for two
people who can allocate the same amount of time between building wooden boats
and solving crimes. Refer to these figures to answer the next two questions.
99. Which
statement best describes absolute advantage?
a. DiNozzo
has an absolute advantage in the production of wooden boats.
b. DiNozzo
has an absolute advantage in both.
c. Gibbs
has an absolute advantage in solving crimes, whereas DiNozzo has an absolute
advantage in making wooden boats.
d. Gibbs
has an absolute advantage in both.
e. Gibbs
has an absolute advantage in making wooden boats, whereas DiNozzo has an
absolute advantage in solving crimes.
ANS: D
100. What
is DiNozzo’s opportunity cost for solving a crime?
a. 20
solved crimes
b. 30
solved crimes
c. 5
solved crimes
d. 1/20
of a boat
e. 1/10
of a boat
ANS: D
101. Which
statement best describes the absolute advantage as shown in the graphs?
a. Pam
has an absolute advantage in the production of both.
b. Jim
has an absolute advantage in the production of both.
c. Jim
has an absolute advantage in the production of pizzas, and Pam has an absolute
advantage in the production of stromboli.
d. Pam
has an absolute advantage in the production of pizzas, and Jim has an absolute
advantage in the production of stromboli.
e. They
both have an absolute advantage in the production of stromboli.
ANS: D
103. If
Elaine can produce more output from a set amount of resources than Jerry can,
you know that:
a. Elaine
has a comparative advantage.
b. Jerry
has a comparative advantage.
c. Elaine
has an absolute advantage.
d. Jerry
has an absolute advantage.
e. Elaine
has a normative advantage.
ANS: C
105. The
ability of one producer to produce a good at a lower opportunity cost than
another producer is called:
a. a
normative statement.
b. a
zero-sum game.
c. absolute
advantage.
d. comparative
advantage.
e. the
law of increasing relative cost.
ANS: D
107. You
have a comparative advantage in producing a good whenever:
a. you
enjoy producing that good.
b. you
can produce more of the good than someone else can using the same resources.
c. your
opportunity cost is constant.
d. your
opportunity cost of producing that good is lower than that of other producers.
e. you
have specific training in the production of that good.
ANS: D
109. If
Jim can sell paper at a lower opportunity cost than Dwight can, then:
a. Jim
has an absolute advantage in paper sales.
b. Dwight
has an absolute advantage in paper sales.
c. Jim
has a positive advantage in paper sales.
d. Jim
has a comparative advantage in paper sales.
e. Dwight
has a comparative advantage in paper sales.
ANS: D
111. Consider
the following scenario. Two friends, Rachel and Joey, enjoy baking bread and
making apple pies. Rachel takes two hours to bake one loaf of bread and one
hour to make one pie. Joey takes four hours to bake one loaf of bread and four
hours to make one pie. If Rachel and Joey decide to specialize in order
to maximize their combined output, who should produce what?
a. Joey
should specialize in making pies because he has an absolute advantage.
b. Rachel
should specialize in making pies and Joey should specialize in making bread.
c. Joey
should specialize in making pies and Rachel should specialize in making bread.
d. Rachel
should specialize in making bread and pies because she has a comparative
advantage in both.
e. Rachel
should not specialize because she is better at producing both.
ANS: B
113. The
accompanying figures depict the production possibilities frontiers (PPFs) for
two people who can allocate the same amount of time between making pizzas and
making stromboli. Which statement about comparative advantage is true?
a. Jim
has a comparative advantage in the production of stromboli because his
opportunity cost is lower.
b. Jim
has a comparative advantage in the production of stromboli because his
opportunity cost is higher.
c. Jim
has a comparative advantage in the production of pizzas because his opportunity
cost is lower.
d. Jim
has a comparative advantage in the production of pizzas because his opportunity
cost is higher.
e. Jim
has a comparative advantage in the production of both pizzas and stromboli.
ANS: A
115. Suppose that Sheldon and Leonard can either
run errands or wash dishes. Their maximum output per hour is listed in the
following table. Given the same quantity of resources, at what terms of trade
(relative price ratio) could they specialize and trade so that both consume outside
their own production possibilities frontier (PPF)?
|
|
Errands Run
|
Opportunity Cost of 1 Errand
|
Dishes Washed
|
Opportunity Cost of 1 Dish Washed
|
|
Sheldon
|
1
|
60 dishes
|
60
|
1/60 errand
|
|
Leonard
|
3
|
15 dishes
|
45
|
1/15 errand
|
a. 1
errand run per 75 dishes washed
b. 1
errand run per 30 dishes washed
c. 1
errand run per 12 dishes washed
d. 1
errand run per 10 dishes washed
e. 1
errand run per 6 dishes washed
ANS: B
117. Suppose that, on a particular Saturday, Mark
Zuckerberg and Bill Gates can either plant trees or spread mulch in their
gardens. Their maximum output per day is listed in the following table, along
with blanks where you can calculate the opportunity cost. At what terms of
trade (relative price ratio) could they specialize and trade with one another
so that both have more trees planted and mulch spread than they could
accomplish on their own?
|
|
Trees Planted
|
Opportunity Cost of 1 Tree
|
Amount of Mulch Spread (in cubic yards)
|
Opportunity Cost of Spreading 1 Cubic Yard of Mulch
|
|
Zuckerberg
|
20
|
|
30
|
|
|
Gates
|
15
|
|
30
|
|
a. 12
trees planted per 12 cubic yards of mulch spread
b. 10
trees planted per 12 cubic yards of mulch spread
c. 9
trees planted per 12 cubic yards of mulch spread
d. 7
trees planted per 12 cubic yards of mulch spread
e. 5
trees planted per 12 cubic yards of mulch spread
ANS: D
119. Consumer
goods:
a. are
produced today to be used to produce more goods in the future.
b. are
produced today to be consumed at some point in the future.
c. are
invested today in order to consume more today.
d. are
produced today to be consumed today.
e. generate
economic growth.
ANS: D
121. Goods
that are produced for current consumption are called:
a. capital
goods.
b. consumer
goods.
c. investment
goods.
d. normal
goods.
e. opportunity
goods.
ANS: B
123. Forgoing
current consumption so that those resources can be used to produce new capital
is called:
a. absolute
advantage.
b. comparative
advantage.
c. investment.
d. scarcity.
e. saving.
ANS: C
125. The
process of using current resources to create new capital is:
a. absolute
advantage.
b. comparative
advantage.
c. specialization.
d. investment.
e. free.
ANS: D
127. Over
the last 20 years, countries such as India and China have:
a. consumed
heavily with little regard for the future.
b. invested
heavily and enjoyed significant economic growth.
c. eliminated
the problem of scarcity.
d. produced
outside their production possibilities frontier (PPF).
e. produced
wholly for current consumption.
ANS: B
129. Greater
investment in capital goods today leads to:
a. greater
growth in the production possibilities frontier (PPF) in the future.
b. greater
consumption today.
c. the
end of scarcity.
d. less
opportunity cost.
e. scarcity.
ANS: A
Refer to the following figures to
answer the next two questions.
131. Which
allocation point in the short-run production possibilities frontier (PPF) will
lead to NO GROWTH in the long-run PPF?
a. point
A
b. point
B
c. point
C
d. point
D
e. point
E
ANS: A
132. Which
allocation point in the short-run production possibilities frontier (PPF) will
lead to the most significant growth in the long-run PPF?
a. point
A
b. point
B
c. point
C
d. point
D
e. point
E
ANS: E
