Question 1

According to the principle of comparative advantage, if the United States trades with Mexico, most likely,&#10;A) the United States will benefit and Mexico will lose.&#10;B) the United States will lose and Mexico will benefit.&#10;C) neither of the countries will benefit.&#10;D) both countries will benefit.

Accepted Answer

The principle of comparative advantage suggests that each country should specialize in producing the goods and services it can produce most efficiently and trade with other countries for goods and services that they cannot produce as efficiently. Therefore, both countries can benefit from trade by producing and trading the goods and services that they have a comparative advantage in. Thus, both the United States and Mexico will benefit from trade with each other.

Question 2

Country X devoted 70 percent of its resources to consumption, while Country Y devoted 80 percent to consumption. Other things being equal, you can predict that&#10;A) Country X's opportunity cost of economic growth is lower than Country Y's.&#10;B) Country Y's rate of capital accumulation is higher than Country X's&#10;C) Country Y's economy will grow faster than Country X's.&#10;D) Country X's economy will grow faster than Country Y's.

Accepted Answer

Country X's economy will grow faster than Country Y's.&#10;

Question 3

&#10;&#10;-The table above lists six points on the production possibilities frontier for cheese and DVDs. What is the opportunity cost of producing the 7th ton of cheese?&#10;A) 16 DVDs&#10;B) 8 DVDs&#10;C) 20 DVDs&#10;D) 28 DVDs

Accepted Answer

8 DVDs&#10;

Question 4

An opportunity cost of economic growth is&#10;A) the capital accumulation given up to increase present consumption.&#10;B) the increased future consumption.&#10;C) the present consumption given up to accumulate capital.&#10;D) None of the above because there is no opportunity cost since if an economy grows, it can produce more of all goods.

Accepted Answer

Economic growth requires investment in capital, such as factories and machines. This investment requires resources that could have been used for consumption. Therefore, the opportunity cost of economic growth is the present consumption given up to accumulate capital.

Question 5

&#10;&#10;-The table above lists six points on the production possibilities frontier for cheese and DVDs. Given this information, which of the following combinations is unattainable?&#10;A) 2 tons of cheese and 56 thousand DVDs&#10;B) 8 tons of cheese and 21 thousand DVDs&#10;C) 6 tons of cheese and 34 thousand DVDs&#10;D) 7 tons of cheese and 20 thousand DVDs

Accepted Answer

The answer of  &#10;&#10;-The table above lists six points...

Question 6

&#10;&#10;-All economic questions arise because&#10;A) of scarcity.&#10;B) production possibilities are unlimited.&#10;C) our wants are limited.&#10;D) people are irrational.

Accepted Answer

Economic questions arise because of scarcity. Scarcity is a fundamental economic problem; it exists when there are limited resources but unlimited wants and needs. Because of scarcity, people have to make choices about how to allocate resources in the most efficient way possible.

Question 7

&#10;&#10;-The opportunity cost of a good is&#10;A) the income you forgo to get it.&#10;B) the lowest valued alternative you give up to get it.&#10;C) the highest valued alternative you give up to get it.&#10;D) all alternatives you give up to get it.

Accepted Answer

The opportunity cost of a good is the highest valued alternative that one gives up in order to acquire that good. Option C is the only one that accurately represents this concept. Option A is incorrect because it only considers the income you forgo to get the good, which may not fully capture the value of other options given up. Option B is incorrect because it only considers the lowest valued alternative, which may not be the most valuable alternative given up. Option D is incorrect because it is too broad - it includes all alternatives, even those that may not be relevant to the decision at hand.

Question 8

&#10;&#10;-The table above lists six points on the production possibilities frontier for cheese and DVDs. From this information you can conclude that production is inefficient if this economy produces&#10;A) 2 tons of cheese and 56 thousand DVDs.&#10;B) 8 tons of cheese and 21 thousand DVDs.&#10;C) 5 tons of cheese and 48 thousand DVDs.&#10;D) 7 tons of cheese and 20 thousand DVDs.

Accepted Answer

The answer of  &#10;&#10;-The table above lists six points...

Question 9

Lizzie takes 20 seconds to stuff an envelope and 10 seconds to seal it. Arnold takes 15 seconds to stuff an envelope and 5 seconds to seal it. Lizzie has a comparative advantage in ________ and Arnold has a comparative advantage in ________.

A) sealing envelopes; stuffing them
B) stuffing envelopes; sealing them
C) neither of these activities; both activities
D) both activities; neither of these activities

Accepted Answer

Lizzie has a lower opportunity cost for stuffing envelopes (she can stuff an envelope in 20 seconds instead of 15 seconds) while Arnold has a lower opportunity cost for sealing envelopes (he can seal an envelope in 5 seconds instead of 10 seconds). Therefore, Lizzie has a comparative advantage in stuffing envelopes and Arnold has a comparative advantage in sealing envelopes.

Question 10

&#10;&#10;-Which of the following is NOT a factor of production?&#10;A) mineral resources&#10;B) money&#10;C) a computer programmer&#10;D) a commercial aircraft

Accepted Answer

Money is not considered a factor of production, but rather a medium of exchange used to facilitate transactions between producers and consumers. The factors of production include land, labor, capital, and entrepreneurship.

Question 11

&#10;&#10;-Jen won $900 in a lottery. She has a choice between using the money to buy a sofa, a television, or going on a vacation. If she chooses to buy a television, the opportunity cost of this decision is&#10;A) zero because she won the money.&#10;B) the sofa and the vacation trip.&#10;C) the sofa, the vacation trip, and $900.&#10;D) the sofa if that was her second choice.

Accepted Answer

The answer of  &#10;&#10;-Jen won $900 in a lottery....

Deck 21: Extension A: Review