Question 1

Suppose there are only two goods: guns and roses.If the relative price of guns falls,then the relative price of roses

Accepted Answer

If the relative price of guns falls, it means that guns have become relatively cheaper compared to roses. As a result, consumers would demand more guns as they are now relatively cheaper, and they would demand fewer roses as they are now relatively more expensive. This increased demand for guns and decreased demand for roses would lead to an increase in the relative price of roses, making them relatively more expensive compared to guns. Therefore, the answer is that the relative price of roses must rise.

Question 2

The price of silver increases from $10 per ounce to $15 per ounce while the price of gold increases from $300 per ounce to $310.In this situation,the price of silver relative to the price of gold has

Accepted Answer

The price of silver has increased by 50% while the price of gold has increased by 3.33%. Therefore, the price of silver has risen relative to the price of gold.

Question 3

The prices typically studied in microeconomics are

Accepted Answer

Microeconomics typically focuses on relative prices, which are the prices of goods or services compared to each other, rather than their absolute or money prices.

Question 4

Suppose there are only two goods: lettuce and grapes.In California,a head of lettuce sells for 50¢ and a bunch of grapes sells for $1.In Nebraska,25¢ must be added to these absolute prices to cover transportation costs.How do these transportation costs affect the relative prices of lettuce and grapes?

Accepted Answer

The answer of Suppose there are only two goods: lettuce...

Question 5

The absolute price of a commodity is the amount of

Accepted Answer

The absolute price of a commodity is measured in currency, so the amount of currency needed to purchase one unit of the commodity is the correct answer. Choice A is describing opportunity cost, choice B is describing the cost of production, and choice D is describing the development of a market, but none of these directly relate to the absolute price of the commodity.

Question 6

Prices are commonly measured in "dollars per unit." In this context,the term dollar as used by the microeconomist

Accepted Answer

The answer of Prices are commonly measured in "dollars per...

Question 7

Suppose that the due to technological innovations,the absolute price of a recordable CD declines by 25% while the absolute price of a recordable cassette tape declines by 10%.In this situation,the price of the CD relative to the price of a tape

Accepted Answer

Since the price of a recordable CD declines more than the price of a cassette tape, the price of the CD relative to the cassette tape falls.

Question 8

Suppose there are only two goods: bread and wine.In Mexico,the absolute price of wine is 30 pesos per bottle.If the relative price of wine in terms of bread is 5 loaves per bottle,then the absolute price of bread is

Accepted Answer

The relative price of wine in terms of bread is 5 loaves per bottle, meaning 1 bottle of wine is equivalent to 5 loaves of bread. Since the absolute price of wine is 30 pesos, dividing this by the relative price (5 loaves) gives the price per loaf of bread: 30 pesos / 5 loaves = 6 pesos per loaf.

Question 9

Suppose that because of inflation,the absolute price of a gallon of milk increases by 20% and the absolute price of a gallon of gasoline increases by 10%.In this situation,the price of milk relative to the price of gasoline

Accepted Answer

The price of milk increases by a larger percentage (20%) compared to the price of gasoline (10%), which means the cost of milk relative to gasoline becomes more expensive, hence the relative price of milk rises.

Question 10

Suppose that there are only two goods in Japan,sushi and saki.The absolute price of a 100-gram plate of sushi is 200 yen,and the absolute price of a liter of saki is 100 yen.What is the relative price of saki in terms of sushi?

Accepted Answer

The relative price of saki in terms of sushi is the price of saki divided by the price of sushi, which is (100 yen/liter) / (200 yen/100 grams) = 50 grams per liter. Therefore, the best choice is C.

Question 11

If everyone had the same abilities,then no one could benefit from trade.

Accepted Answer

Trade can still be beneficial due to differences in preferences, opportunity costs, or the allocation of resources, allowing individuals to specialize and trade based on their interests or resources, rather than just abilities.

Question 12

When inflation causes the absolute prices of all commodities to rise,what happens to the relative prices of those commodities?

Accepted Answer

The answer of When inflation causes the absolute prices of...

Question 13

If inflation causes the absolute prices of all commodities to double,then the relative prices

Accepted Answer

Inflation affects all commodities equally by causing their absolute prices to double. Therefore, the relative prices or the prices of one commodity in relation to another will remain unchanged. For example, if the price of a loaf of bread doubles from $1 to $2, and the price of milk also doubles from $2 to $4, the relative price of bread to milk will remain the same at 0.5 (2/4) before and after inflation.

Question 14

If good wines can be produced in Turkey at costs lower than in the wine exporting countries,but the local population drinks little wine,then Turkey should not produce wine.

Accepted Answer

Just because the local population drinks little wine does not mean that Turkey should not produce wine. Turkey can export its wine to other countries where there is a demand for it, and the lower production costs can give them a competitive advantage in the global market.

Question 15

If each person specializes in his area of comparative advantage and then trades for the goods he wants to have,everyone will be made better off.

Accepted Answer

This statement reflects the concept of comparative advantage in economics, which suggests that by specializing in producing goods or services in which they have a lower opportunity cost, individuals, and countries can produce more efficiently and enjoy greater gains from trade. By trading with others who specialize in producing other goods or services in which they have a comparative advantage, individuals can acquire a greater variety of goods and services at lower costs than if they tried to produce everything themselves. This creates mutual gains and promotes economic growth and prosperity.

Question 16

Trading is beneficial whenever people differ in their abilities or differ in their tastes.

Accepted Answer

Trading allows individuals to specialize in areas where they have a comparative advantage and exchange goods or services with others who have different abilities or preferences. This results in a more efficient allocation of resources and an increase in overall economic welfare.

Question 17

Trade will never be beneficial when both parties have a comparative advantage in producing the same good.

Accepted Answer

Trade can still be beneficial even when both parties have a comparative advantage in producing the same good. This is because they can specialize in different aspects of production and trade with each other, leading to increased efficiency and overall gains from trade.

Question 18

In order for there to be a gain from trade,there has to be a difference in either tastes or abilities.

Accepted Answer

The answer of In order for there to be a...

Question 19

The difference between an absolute price and a relative price is that:

Accepted Answer

Absolute prices are prices in terms of currency, whereas relative prices are prices in terms of another good. For example, the absolute price of a car may be $20,000, but the relative price of a car compared to a house may be 50 cars for one house.

Question 20

If no one in a community desires to watch television,then it would be a waste of resources for the community to produce television sets.

Accepted Answer

The answer of If no one in a community desires...

Quiz 2: Prices,costs and Gains From Trade