Deck 2: Why We Trade

Question 1

A simplified examination of a specific process or phenomenon is provided by:

A) an outline.
B) policies.
C) economic models.
D) a GPS view.

Answer 1

C

Question 2

A key characteristic of economic models is their:

A) variables.
B) equations.
C) simplicity.
D) detail.

Answer 2

C

Question 3

The opportunity cost of an economic model is known as the:

A) measurement of time.
B) variables that can be included.
C) measurement of money and time.
D) exclusion of real-world complications.

Answer 3

D

Question 4

Which model represents how households and businesses interact with each other?

A) production possibilities
B) global flow
C) economic flow
D) circular flow

Question 5

The resource market is comprised of:

A) labor and business.
B) labor and natural resources.
C) business and natural resources.
D) business and government.

Question 6

In the circular flow model, people usually work for _____ in the _____ market.

A) goods and services; resource
B) goods and services; product
C) money; product
D) money; resource

Question 7

In the circular flow model, people usually use money for _____ in the _____ market.

A) goods and services; resource
B) goods and services; product
C) money; product
D) money; resource

Question 8

Jeff Bezos, founder and CEO of Amazon, participates in the _____ market as he makes decisions regarding the use of factors of production used by Amazon.

A) technology
B) economic
C) resource
D) digital

Question 9

Galina participates in the _____ market when she buys clothes in her local Macy's.

A) product
B) economic
C) resource
D) digital

Question 10

Goods and services are found in the _____ market.

A) resource
B) product
C) digital
D) government

Question 11

Regarding the circular flow model, _____ is income to households and _____ to businesses.

A) revenue; money
B) spending; revenue
C) revenue; an expense
D) money; an expense

Question 12

A simplified model that shows how households and businesses interact with one another in the product market and resource market is known as the:

A) basic economic model.
B) production possibilities model.
C) free trade model.
D) circular flow model.

Question 13

The economic model that depicts the maximum output that can be produced in an economy when resources are used efficiently is known as the:

A) circular flow model.
B) production possibilities frontier model.
C) opportunity cost model.
D) law of increasing costs.

Question 14

The _____ is an economic model that shows the limit of what an economy can produce when all resources are used efficiently.

A) circular flow model
B) production possibilities frontier model
C) opportunity cost model
D) law of increasing costs

Question 15

The limits to what an economy can produce result from:

A) scarcity.
B) income.
C) production.
D) costs.

Question 16

(Figure: Production Possibilities Frontier, PPF) Point B represents:

A) an inefficient use of resources.
B) an unattainable goal based on current resources.
C) the maximum use of resources.
D) a probable use of resources.

Question 17

(Figure: Production Possibilities Frontier, PPF) Point D represents:

A) an inefficient use of resources.
B) an unattainable goal based on current resources.
C) the maximum use of resources.
D) a probable use of resources.

Question 18

(Figure: Production Possibilities Frontier, PPF) Point F represents:

A) an inefficient use of resources.
B) an unattainable goal based on current resources.
C) the maximum use of resources.
D) a probable use of resources.

Question 19

(Figure: Video Games and Cell Phones PPF) If this economy is producing 4,000 video games, what is the opportunity cost of 2,000 more video games?

A) 1,000 cell phones
B) 3,000 cell phones
C) 6,000 cell phones
D) 9,000 cell phones

Question 20

(Figure: Video Games and Cell Phones PPF) If this economy is producing 2,000 video games, what is the opportunity cost of 2,000 more video games?

A) 1,000 cell phones
B) 2,000 cell phones
C) 3,000 cell phones
D) 9,000 cell phones

Question 21

(Figure: Video Games and Cell Phones PPF) If this economy is producing at point f, how many cell phones are being produced?

A) 1,000
B) 3,000
C) 6,000
D) 9,000

Question 22

(Figure: Video Games and Cell Phones PPF) If this economy is producing at point f, how many video games are being produced?

A) 2,000
B) 3,000
C) 6,000
D) 9,000

Question 23

(Figure: Video Games and Cell Phones PPF) If this economy is specializing in cell phones, how many video games are being produced?

A) 8,000
B) 6,000
C) 4,000
D) 0

Question 24

(Figure: Video Games and Cell Phones PPF) At point b, this economy is producing _____ video games and _____ cell phones.

A) 2,000; 3,000
B) 3,000; 4,000
C) 4,000; 6,000
D) 8,000; 7,000

Question 25

_____ cost is what is given up in order to acquire or do something else.

A) Opportunity
B) Marginal
C) Maximum
D) Minimum

Question 26

(Figure: Cars and Watches PPF) What is the opportunity cost of moving from point C to point D?

A) 1,000 watches
B) 2,000 watches
C) 3,000 cars
D) 4,000 cars

Question 27

(Figure: Cars and Watches PPF 2) What is the opportunity cost of moving from point B to point C?

A) 1,000 cars
B) 2,000 cars
C) 1,000 watches
D) 2,000 watches

Question 28

The bowed-out, concave shape of the production possibilities frontier is explained by the:

A) circular flow model.
B) law of increasing costs.
C) theory of marginal cost.
D) maximization model.

Question 29

When operating on the production possibilities frontier, producing more of one good generally results in less of the other good due to the:

A) opportunity cost.
B) changing technology.
C) theory of marginal cost.
D) maximization model.

Question 30

Obtaining the maximum possible output with a given set of resources or obtaining output for the lowest possible cost is known as:

A) allocative efficiency.
B) allocative effectiveness.
C) productive efficiency.
D) productive effectiveness.

Question 31

Minimizing production costs per unit is also known as:

A) allocative efficiency.
B) allocative effectiveness.
C) productive efficiency.
D) productive effectiveness.

Question 32

Obtaining the maximum well-being from producing the right set of goods and services is known as:

A) allocative efficiency.
B) allocative effectiveness.
C) productive efficiency.
D) productive effectiveness.

Question 33

Efficiency in the distribution and allotment of goods and services is known as:

A) allocative efficiency.
B) allocative effectiveness.
C) productive efficiency.
D) productive effectiveness.

Question 34

Ensuring that the optimal mix of goods and services is produced is known as:

A) allocative efficiency.
B) allocative effectiveness.
C) productive efficiency.
D) productive effectiveness.

Question 35

Maximizing output or minimizing waste is known as:

A) allocative efficiency.
B) allocative effectiveness.
C) productive efficiency.
D) productive effectiveness.

Question 36

A sustained increase in the amount of goods and services produced is known as:

A) allocative efficiency.
B) productive efficiency.
C) minimizing opportunity costs.
D) economic growth.

Question 37

Sources of economic growth include:

A) innovation, investments in physical capital, and improvements in human capital.
B) new technology, changes in the unemployment rate, and changes in the exchange rate.
C) investments in physical capital, changes in the unemployment rate, and changes in the exchange rate.
D) changes in the exchange rate, improvements in human capital, and changes in the unemployment rate.

Question 38

The introduction of the Apple iPhone in 2007 was an example of:

A) investment in physical capital.
B) innovation and technology.
C) investment in human capital.
D) innovation in manufacturing.

Question 39

A firm is considering opening a manufacturing plant in rural West Virginia. In analyzing costs, the firm has determined that labor in the area does not have the skill set to enable the firm to operate effectively. If it selects the West Virginia site, the firm will be faced with the additional cost of training employees. This is an example of:

A) investments in physical capital.
B) innovation and technology.
C) investments in human capital.
D) innovation in manufacturing.

Question 40

(Figure: Cars and Bicycles PPF 1) This figure shows:

A) economic stagnation.
B) economic growth.
C) a stagnant economy.
D) a reduction in economic efficiency.

Question 41

Which of the following may cause an economy's production possibilities frontier (PPF) to shift to the left?

A) The country's workforce increases its training and education.
B) Businesses in the country increase their investment in machinery and equipment.
C) Income taxes are reduced.
D) A massive earthquake and tsunami damage much of the country's infrastructure.

Question 42

Which of the following may cause an economy's production possibilities frontier (PPF) to shift to the right?

A) The government is overthrown in a coup.
B) Businesses in the country increase their investment in machinery and equipment.
C) Income taxes are raised.
D) A massive earthquake and tsunami damage much of the country's infrastructure.

Question 43

_____ is the concentration on the production of a single good.

A) Efficiency
B) Opportunity
C) Comparative advantage
D) Specialization

Question 44

Comparative advantage is defined in terms of:

A) efficiency.
B) absolute advantage.
C) opportunity cost.
D) specialization.

Question 45

(Exhibit: Opportunity Cost) Video game production increases from 15,000 games to 20,000 games. In this economy, what is the opportunity cost?
$\begin{array}{|l|l|l|l|l|l|}\hline \text { Cell phones } & 50,000 & 40,000 & 30,000 & 20,000 & 10,000 \\\hline \text { Video games } & 15,000 & 20,000 & 35,000 & 45,000 & 50,000 \\\hline\end{array}$

A) 5,000 video games
B) 10,000 video games
C) 5,000 cell phones
D) 10,000 cell phones

Question 46

(Exhibit: Opportunity Cost) Video game production increases from 35,000 games to 50,000 games. In this economy, what is the opportunity cost?
$\begin{array}{|l|l|l|l|l|l|}\hline \text { Cell phones } & 50,000 & 40,000 & 30,000 & 20,000 & 10,000 \\\hline \text { Video games } & 15,000 & 20,000 & 35,000 & 45,000 & 50,000 \\\hline\end{array}$

A) 20,000 video games
B) 150,000 video games
C) 20,000 cell phones
D) 15,000 cell phones

Question 47

David can wash four cars in one hour or cut two lawns. Ralph can wash three cars in one hour or cut two lawns. David's opportunity cost for cutting one lawn is _____ car washes, and Ralph's opportunity cost for cutting one lawn is _____ car washes.

A) 2; 1.5
B) 4; 3.5
C) 1.5; 2
D) 3.5; 4

Question 48

(Exhibit: Determining Comparative Advantage) Eric has a lower opportunity cost for:
$\begin{array}{|l|l|l|}\hline & \text { Opportunity Cost of 1 Bread } & \text { Opportunity Cost of } 1 \text { Cake } \\\hline \text { Eric ( } 4 \text { loaves of bread }=2 \text { cakes }) & 1 / 2 \text { of a cake } & 2 \text { loaves of bread } \\\hline \text { Daisy }(5 \text { loaves of bread }=3 \text { cakes }) & 3 / 5 \text { of a cake } & 12 / 3 \text { loaves of bread } \\\hline\end{array}$

A) baking bread.
B) baking a cake.
C) neither bread nor cake.
D) both bread and cake.

Question 49

(Exhibit: Determining Comparative Advantage) Daisy has a lower opportunity cost for:
$\begin{array}{|l|l|l|}\hline & \text { Opportunity Cost of 1 Bread } & \text { Opportunity Cost of } 1 \text { Cake } \\\hline \text { Eric ( } 4 \text { loaves of bread }=2 \text { cakes }) & 1 / 2 \text { of a cake } & 2 \text { loaves of bread } \\\hline \text { Daisy }(5 \text { loaves of bread }=3 \text { cakes }) & 3 / 5 \text { of a cake } & 12 / 3 \text { loaves of bread } \\\hline\end{array}$

A) baking bread.
B) baking a cake.
C) neither bread nor cake.
D) both bread and cake.

Question 50

(Exhibit: Determining Comparative Advantage) Who has a comparative advantage in baking bread?
$\begin{array}{|l|l|l|}\hline & \text { Opportunity Cost of 1 Bread } & \text { Opportunity Cost of } 1 \text { Cake } \\\hline \text { Eric ( } 4 \text { loaves of bread }=2 \text { cakes }) & 1 / 2 \text { of a cake } & 2 \text { loaves of bread } \\\hline \text { Daisy }(5 \text { loaves of bread }=3 \text { cakes }) & 3 / 5 \text { of a cake } & 12 / 3 \text { loaves of bread } \\\hline\end{array}$

A) Eric
B) Daisy
C) neither Eric nor Daisy
D) both Eric and Daisy

Question 51

(Exhibit: Determining Comparative Advantage) Who has a comparative advantage in baking cakes?
$\begin{array}{|l|l|l|}\hline & \text { Opportunity Cost of 1 Bread } & \text { Opportunity Cost of } 1 \text { Cake } \\\hline \text { Eric ( } 4 \text { loaves of bread }=2 \text { cakes }) & 1 / 2 \text { of a cake } & 2 \text { loaves of bread } \\\hline \text { Daisy }(5 \text { loaves of bread }=3 \text { cakes }) & 3 / 5 \text { of a cake } & 12 / 3 \text { loaves of bread } \\\hline\end{array}$

A) Eric
B) Daisy
C) neither Eric nor Daisy
D) both Eric and Daisy

Question 52

_____ is the ability to produce more of a product than a trading partner can.

A) Efficiency
B) Absolute advantage
C) Comparative advantage
D) Specialization

Question 53

(Exhibit: Determining Comparative Advantage) Who has an absolute advantage in baking cakes?
$\begin{array}{|l|l|l|}\hline & \text { Opportunity Cost of 1 Bread } & \text { Opportunity Cost of } 1 \text { Cake } \\\hline \text { Eric ( } 4 \text { loaves of bread }=2 \text { cakes }) & 1 / 2 \text { of a cake } & 2 \text { loaves of bread } \\\hline \text { Daisy }(5 \text { loaves of bread }=3 \text { cakes }) & 3 / 5 \text { of a cake } & 12 / 3 \text { loaves of bread } \\\hline\end{array}$

A) Eric
B) Daisy
C) neither Eric nor Daisy
D) both Eric and Daisy

Question 54

(Exhibit: Determining Comparative Advantage) Who has an absolute advantage in baking bread?
$\begin{array}{|l|l|l|}\hline & \text { Opportunity Cost of 1 Bread } & \text { Opportunity Cost of } 1 \text { Cake } \\\hline \text { Eric ( } 4 \text { loaves of bread }=2 \text { cakes }) & 1 / 2 \text { of a cake } & 2 \text { loaves of bread } \\\hline \text { Daisy }(5 \text { loaves of bread }=3 \text { cakes }) & 3 / 5 \text { of a cake } & 12 / 3 \text { loaves of bread } \\\hline\end{array}$

A) Eric
B) Daisy
C) neither Eric nor Daisy
D) both Eric and Daisy

Question 55

Gains from trade are based on _____ rather than:

A) opportunity cost; specialization.
B) comparative advantage; absolute advantage.
C) absolute advantage; specialization.
D) specialization; comparative advantage.

Question 56

Gains from trade are based on:

A) opportunity cost.
B) comparative advantage.
C) money.
D) absolute advantage.

Question 57

When trade occurs on the basis of ____, both sides win.

A) comparative advantage
B) absolute advantage
C) price
D) revenue

Question 58

What enables an economy to consume beyond the production possibilities frontier (PPF)?

A) comparative advantage
B) absolute advantage
C) trade
D) growth

Question 59

The opening of markets to foreign trade that leads to an increasing interdependence of world economies is known as:

A) globalization.
B) internationalism.
C) protectionism.
D) growth.

Question 60

McDonald's has locations in more than 100 countries. This is an example of:

A) globalization.
B) internationalism.
C) trade.
D) growth.

Question 61

Boeing, a U.S. aircraft manufacturing company, has suppliers from countries such as Germany, Japan, and Italy. This is an example of:

A) globalization.
B) internationalism.
C) trade.
D) growth.

Question 62

Goods and services that are produced domestically and sold in a foreign country are:

A) high-value goods only.
B) exports.
C) imports.
D) low-value goods only.

Question 63

Suzy purchases shoes in Boise, Idaho, that were made in Italy. These shoes are:

A) a high-value good.
B) an export.
C) an import.
D) a low-value good.

Question 64

Ford Motor Company, a U.S. firm, sells cars in Europe that were made in the United States. This is NOT an example of:

A) imports to the U.S.
B) imports to Europe.
C) exports from the U.S.
D) globalization.

Question 65

The main export of Canada is:

A) transport equipment.
B) clothing and shoes.
C) motor vehicles and parts.
D) capital goods.

Question 66

The main export of Mexico is:

A) transport equipment.
B) clothing and shoes.
C) motor vehicles and parts.
D) capital goods.

Question 67

Another name for net exports is:

A) international trade.
B) trade surplus.
C) trade balance.
D) net imports.

Question 68

_____ occurs when a country imports more than it exports.

A) No international trade
B) A trade surplus
C) Positive trade
D) A trade deficit

Question 69

_____ occurs when a country exports more than it imports.

A) No international trade
B) A trade surplus
C) Positive trade
D) A trade deficit

Question 70

The country of Davilena exported $900,000 in goods and services and imported $680,000 in goods and services. The country has a _____ of:

A) net trade; $1,580,000.
B) trade surplus; $220,000.
C) trade balance; $680,000.
D) trade deficit; $900,000.

Question 71

If a country exports more than it imports, it has a _____ trade balance.

A) negative
B) positive
C) zero
D) unattainable

Question 72

In the _____ market, currencies are traded.

A) resource
B) foreign exchange
C) product
D) barter

Question 73

Maurice is traveling from the United States to China. He will need to exchange his _____ for _____.

A) dollars; yuan
B) yuan; pesos
C) pesos; yen
D) yen; dollars

Question 74

Exchange rates determined by economic or market conditions are _____ rates.

A) fixed
B) pegged
C) currency
D) flexible

Question 75

An adjustment in the exchange rate that makes one country's currency more valuable relative to another country's currency is known as:

A) an appreciation of the currency.
B) a depreciation of the currency.
C) a parity of the currency.
D) a devaluation of the currency.

Question 76

An adjustment in the exchange rate that make one country's currency less valuable relative to another country's currency is known as:

A) an appreciation of the currency.
B) a depreciation of the currency.
C) a parity of the currency.
D) a devaluation of the currency.

Question 77

Appreciation occurs when:

A) two currencies are pegged to each other.
B) two currencies are equal to each other.
C) that currency increases in value relative to another.
D) that currency decreases in value relative to another.

Question 78

Depreciation occurs when:

A) two currencies are pegged to each other.
B) two currencies are equal to each other.
C) that currency increases in value relative to another.
D) that currency decreases in value relative to another.

Question 79

Yesterday, the exchange rate for the U.S dollar and the euro was 1 euro for every $1.10. Today, it is 1 euro for every $1.20. Which currency is appreciating?

A) the euro
B) the U.S. dollar
C) both
D) neither

Question 80

Yesterday, the exchange rate for the U.S dollar and the euro was 1 euro for every $1.10. Today, it is 1 euro for every $1.20. Which currency is depreciating?

A) the euro
B) the U.S. dollar
C) both
D) neither