Question 1

The "what" question primarily refers to:

Accepted Answer

The "what" question refers to the mix of goods and services that are produced, in other words, what items will be produced and offered to consumers.

Question 2

Which of these questions would NOT be considered one of the basic economic questions?

Accepted Answer

The basic economic questions are what to produce, how to produce, and for whom to produce. The completion date of a train project is not related to these questions.

Question 3

Which of these would be least likely to increase economic growth?

Accepted Answer

Increasing tariffs can lead to trade wars and reduce the efficiency of domestic industries by limiting competition, which can hinder economic growth.

Question 4

The main reason why a production possibilities frontier would have a concave shape is:

Accepted Answer

A concave production possibilities frontier (PPF) reflects increasing opportunity costs, meaning that as a country specializes in producing more of one good, it must give up increasingly larger amounts of the other good.

Question 5

Suppose that Costa Rica is able to produce 50,000 pounds of coffee or 10,000 medical devices per day; Vietnam is able to produce 40,000 pounds of coffee or 5,000 medical devices per day. Which statement is TRUE?

Accepted Answer

Costa Rica can produce more coffee and medical devices than Vietnam per day, so Costa Rica has an absolute advantage in the production of both coffee and medical devices. However, Costa Rica has a higher opportunity cost of producing medical devices (50,000 pounds of coffee / 10,000 medical devices = 5 pounds of coffee per medical device) than Vietnam (40,000 pounds of coffee / 5,000 medical devices = 8 pounds of coffee per medical device). This means that Costa Rica has a comparative advantage in the production of coffee, while Vietnam has a comparative advantage in the production of medical devices.

Question 6

For a country to have a comparative advantage in a good, it must have:

Accepted Answer

A country has a comparative advantage in producing a good if it can produce it at a lower opportunity cost than another country. This means it sacrifices less of other goods to produce it, not necessarily that it produces more of it.

Question 7

(Figure) The area between which two points on the production possibilities frontier could represent an improvement in productive efficiency?

Accepted Answer

The answer of (Figure) The area between which two points...

Question 8

What does the term "laissez-faire" mean in economics?

Accepted Answer

Laissez-faire is an economic philosophy of free-market capitalism that opposes government intervention.

Question 9

Which of the following is not possible for two countries who trade computers and automobiles with one another?

Accepted Answer

Comparative advantage means having a lower opportunity cost in producing a good. It is not possible for one country to have a comparative advantage in both products because comparative advantage is relative and depends on the opportunity costs between the two countries.

Question 10

Which is NOT one of the three basic economic questions that each society must answer?

Accepted Answer

The three basic economic questions are: What to produce, how to produce, and for whom to produce. "Who decides what goods and services are in demand?" is not one of these fundamental questions.

Question 11

(Figure) The area between which two points on the PPF could represent an improvement in allocative efficiency?

Accepted Answer

The answer of (Figure) The area between which two points...

Question 12

To answer the question of how goods and services are to be produced, society must decide:

Accepted Answer

Society must decide how to combine its scarce resources, such as labor, capital, and land, to produce the desired products. This involves making choices about which production methods to use and how much of each resource to allocate to different products. The other options listed - what products businesses want to produce, what products the government wants, and what products to export - are also important considerations, but they are secondary to the fundamental decision of how to allocate resources.

Question 13

Which of these would NOT be considered a factor of production?

Accepted Answer

A bank loan is not a factor of production; it is a financial resource used to acquire factors of production like labor, land, and capital.

Question 14

Which is NOT considered a basic economic question?

Accepted Answer

"How will the system accommodate change?" is not one of the three basic economic questions typically asked, which are "What to produce?", "How to produce?", and "For whom to produce?".

Question 15

China produces many products at the lowest cost possible, even though Chinese consumers do not desire many of these products (e.g., football helmets). China is achieving:

Accepted Answer

China is achieving production efficiency by producing goods at the lowest cost possible, but not allocative efficiency, as the products do not align with consumer desires.

Question 16

Why is entrepreneurial ability considered a factor of production?

Accepted Answer

Entrepreneurial ability is considered a factor of production because entrepreneurs organize the other factors of production, take on the risks of starting and managing businesses, and drive innovation and economic growth.

Question 17

Trade is:

Accepted Answer

Trade is generally considered a driver of economic growth as it allows countries to specialize in the production of goods and services they can produce most efficiently, leading to increased productivity, innovation, and access to a wider variety of goods and services.

Question 18

(Figure) What would be a reason why an economy is operating at point D?

Accepted Answer

The answer of (Figure) What would be a reason why...

Question 19

If a farmer can grow 100 tubs of grapefruit or 250 tubs of oranges per acre of land, what is the opportunity cost of growing one orange?

Accepted Answer

The opportunity cost of growing one orange is the amount of grapefruit that must be given up to grow that orange. In this case, the farmer can grow 100 tubs of grapefruit or 250 tubs of oranges per acre of land. So, the opportunity cost of growing one orange is 1/2.5 = 0.4 of a grapefruit.

Question 20

Using the productivity rates for Spain and Portugal, which statement is TRUE?

Accepted Answer

The answer of Using the productivity rates for Spain and...

Quiz 2: Production, Economic Growth, and Trade