Question 1

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?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) A) and C)
F) A) and B)

Question 2

What kind of relationship exists between the price of gas and the quantity demanded for gas if the quantity demanded for gas falls when the price of gas increases?

Accepted Answer

A)  direct.
B)  inverse.
C)  normal.
D)  perverse.E) A) and B)
F) A) and C)

Question 3

If the principle of increasing marginal opportunity cost holds, the opportunity cost of producing each additional unit of a good should fall as production of that good rises.

Accepted Answer

A) True 
 B)False

Question 4

The slope of a line that is vertical is:

Accepted Answer

A)  zero.
B)  1.
C)  infinite.
D)  dependent on where it intersects the horizontal axis.E) A) and B)
F) All of the above

Question 5

Refer to the graph below.  Productive inefficiency occurs at what point?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) A) and B)
F) All of the above

Question 6

Given the production possibility tables for First and Second Bakeries shown, we know that the opportunity cost of producing pies:

Accepted Answer

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.E) None of the above
F) B) and D)

Question 7

A resource is said to have a comparative advantage if:

Accepted Answer

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.E) B) and C)
F) A) and B)

Question 8

Two nations with differing comparative advantages will be able to consume more if each produces the good for which the opportunity cost is highest and trades for the good for which opportunity cost is lowest.

Accepted Answer

A) True 
 B)False

Question 9

Consider the table below, in which each production choice represents a point on a production possibility curve.  This production possibility table could be graphed as a:

Accepted Answer

A)  straight line with negative slope.
B)  curved line with negative slope.
C)  straight line with zero slope.
D)  curved line with positive slope.E) A) and D)
F) A) and C)

Question 10

Countries gain from trade by producing:

Accepted Answer

A)  the goods they produce at the highest opportunity cost.
B)  the goods they can produce at the lowest opportunity cost.
C)  where the production possibility curve has a slope of-1.
D)  all goods in equal amounts.E) B) and C)
F) A) and B)

Question 11

The principle of increasing marginal opportunity cost does not hold in which of the following cases?

Accepted Answer

A)  All inputs are equally adaptable to the production of all goods.
B)  Some inputs are more adaptable to the production of certain goods.
C)  Some inputs are less adaptable to the production of certain goods.
D)  Each input is adaptable to the production of a limited number of goods.E) A) and D)
F) A) and B)

Question 12

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?

Accepted Answer

A)  15 chocolate and 15 textiles
B)  20 chocolate and 20 textiles
C)  30 chocolate and 30 textiles
D)  60 chocolate and 60 textilesE) C) and D)
F) A) and B)

Question 13

The production possibility model can be used to demonstrate the concept of opportunity cost.

Accepted Answer

A) True 
 B)False

Question 14

This production possibility table illustrates:

Accepted Answer

A)  increasing marginal opportunity cost.
B)  decreasing marginal opportunity cost.
C)  constant marginal opportunity cost.
D)  zero opportunity cost.E) B) and D)
F) B) and C)

Question 15

In the linear equation y = mx + b, an increase in b will:

Accepted Answer

A)  shift the curve up.
B)  shift the curve down.
C)  cause the curve to become steeper.
D)  cause the curve to become flatter.E) All of the above
F) A) and D)

Question 16

The production possibility table below on the left is for growing broccoli and asparagus in a 320-square-foot garden in one season.  Which curve on the graph on the right corresponds to this table?

Accepted Answer

A)  I
B)  II
C)  III
D)  IVE) A) and C)
F) C) and D)

Question 17

John can clean the house in three hours and do the laundry in four.Jane can clean the house in two hours or do the laundry in two.Can they benefit by specialization and trade?

Accepted Answer

A)  Neither can benefit because John has nothing to offer.
B)  John could benefit from an exchange, but Jane cannot because she is better at both.
C)  Both can benefit because John has a comparative advantage in laundry.
D)  Both can benefit because John has a comparative advantage in cleaning.E) A) and B)
F) A) and C)

Question 18

With the resources available, you can make the combinations of Ums and Umies (trinkets from a place called Bandarban)  shown in the table.The opportunity cost of producing 60 Umies instead of 30 Umies is:

Accepted Answer

A)  10 Ums
B)  20 Ums
C)  30 Ums
D)  40 UmsE) A) and C)
F) All of the above

Question 19

Two countries that specialize their production along the lines of comparative advantage and then trade with each other will be able to:

Accepted Answer

A)  both produce and consume more.
B)  produce more and consume less.
C)  produce less and consume more.
D)  both produce and consume less.E) B) and D)
F) B) and C)

Question 20

Refer to the graph shown.  If Countries X and Y face the production possibility curves A and B, respectively, Country Y has a comparative advantage in the production of:

Accepted Answer

A)  neither agricultural goods nor industrial goods.
B)  both agricultural goods and industrial goods.
C)  agricultural goods only.
D)  industrial goods only.E) B) and C)
F) A) and B)

Exam 2: The Production Possibility Model, Trade, and Globalization

Refer to the graph shown. If Countries X and Y face the production possibility curves A and B, respectively, Country Y has a comparative advantage in the production of:

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The slope of a line that is vertical is:

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Countries gain from trade by producing:

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Two countries that specialize their production along the lines of comparative advantage and then trade with each other will be able to:

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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?

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If the principle of increasing marginal opportunity cost holds, the opportunity cost of producing each additional unit of a good should fall as production of that good rises.

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With the resources available, you can make the combinations of Ums and Umies (trinkets from a place called Bandarban) shown in the table.The opportunity cost of producing 60 Umies instead of 30 Umies is:

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The principle of increasing marginal opportunity cost does not hold in which of the following cases?

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The production possibility table below on the left is for growing broccoli and asparagus in a 320-square-foot garden in one season. Which curve on the graph on the right corresponds to this table?

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A resource is said to have a comparative advantage if:

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Two nations with differing comparative advantages will be able to consume more if each produces the good for which the opportunity cost is highest and trades for the good for which opportunity cost is lowest.

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Consider the table below, in which each production choice represents a point on a production possibility curve. This production possibility table could be graphed as a:

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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?

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Refer to the graph below. Productive inefficiency occurs at what point?

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John can clean the house in three hours and do the laundry in four.Jane can clean the house in two hours or do the laundry in two.Can they benefit by specialization and trade?

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In the linear equation y = mx + b, an increase in b will:

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Given the production possibility tables for First and Second Bakeries shown, we know that the opportunity cost of producing pies:

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This production possibility table illustrates:

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What kind of relationship exists between the price of gas and the quantity demanded for gas if the quantity demanded for gas falls when the price of gas increases?

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The production possibility model can be used to demonstrate the concept of opportunity cost.

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