Question 1

If using the same resources, the U.S. workers can produce more of any good than Mexican workers, then the United States should produce every good.

Accepted Answer

This statement is an oversimplification and does not take into account factors such as comparative advantage, opportunity cost, and the idea of specialization. Just because one country can produce more of a certain good does not mean they should produce all goods. It may be more efficient and beneficial for both countries to specialize in producing goods in which they have a comparative advantage and then trade with each other.

Question 2

If an economy is operating at a point outside the PPC, either the society has resources that are not being fully used or production is not efficient.

Accepted Answer

Operating at a point outside the Production Possibility Curve (PPC) suggests an unattainable level of production with current resources and technology, not inefficiency or underutilized resources.

Question 3

According to economists, human activity is unresponsive to changes in costs.

Accepted Answer

Economists do not believe that human activity is entirely unresponsive to changes in costs. In fact, they argue that changes in prices and costs can influence behavior and decision-making, even if the effects are not always straightforward or immediate.

Question 4

There is no cost of using your own savings in your business.

Accepted Answer

Using your own savings in your business has an opportunity cost, which is the foregone interest or investment income you could have earned if you had used the savings elsewhere.

Question 5

Betty goes out to enjoy a bouffe with her friend instead of practicing calculus problems for her maths examination that is due the following day. This implies that the opportunity cost of the bouffe to Betty is zero.

Accepted Answer

The opportunity cost of going out to enjoy a bouffe with her friend is the time Betty could have spent practicing calculus problems for her maths examination. Since she chose to spend her time on a leisure activity rather than studying for her exam, the opportunity cost is not zero.

Question 6

Figure 2.4
 
-Refer to Figure 2.4 and identify the correct statement.

Accepted Answer

The answer of Figure 2.4
 
-Refer to Figure 2.4 and...

Question 7

The concept of comparative advantage applies:

Accepted Answer

Comparative advantage applies to every case of trade or exchange, regardless of educational level, employment status, or knowledge of salary levels. It is a fundamental principle of economics that explains how trade can benefit both parties involved.

Question 8

Economists refer to the ability of one person or nation to do something with a lower opportunity cost than another as _____.

Accepted Answer

Comparative advantage refers to the ability to produce a good or service at a lower opportunity cost than another person or nation. This concept is important in promoting international trade as it allows countries to specialize in producing the goods and services that they have a comparative advantage in, resulting in increased efficiency, productivity, and overall gains from trade for both parties involved.

Question 9

A nation's production possibilities curve [PPC] will shift outward if its workers receive better training.

Accepted Answer

When workers receive better training, they become more productive and efficient, which increases the overall potential output of the nation. This leads to a shift outward in the production possibilities curve, indicating that the economy can now produce more goods and services than before.

Question 10

A point lying inside the production possibilities curve [PPC] is not an attainable combination.

Accepted Answer

A point lying inside the PPC represents a combination of goods that can be produced with existing resources, but it is not being fully utilized. Therefore, it is attainable but inefficient.

Question 11

If you have a choice between studying and doing another activity, you will devote your time to studying as long as the additional benefit of studying is greater than the additional cost of studying.

Accepted Answer

This statement applies the rational choice theory, which assumes that individuals make decisions based on weighing the cost and benefit of each alternative. Therefore, if the benefit of studying is greater than the cost, the individual will choose to study.

Question 12

A world-renowned brain surgeon can type twice as fast as her secretarial assistant. Which of the following statements is true in this situation?

Accepted Answer

Although the brain surgeon can type faster than her assistant, it is still more efficient for her to focus on her area of expertise, which is brain surgery. By allowing her secretary to handle typing tasks, the surgeon can free up her own time to perform surgeries and earn more income for the hospital or practice. This is an example of comparative advantage, where each person or country specializes in the task where they have the lowest opportunity cost.

Question 13

Individuals, firms, and nations should specialize in those activities which have the highest marginal cost.

Accepted Answer

Individuals, firms, and nations should specialize in those activities which have the lowest marginal cost, not the highest. This allows for greater efficiency and productivity.

Question 14

Which of the following statements is true about comparative advantage?

Accepted Answer

Comparative advantage exists when one person or entity can produce a good or service with a lower opportunity cost than another person or entity. This means that they can produce a good or service at a lower cost, in terms of the value of the next best alternative that must be given up in order to produce it. This concept is relevant in evaluating real-world economic conditions and is not limited to technologically advanced economies. The literacy rate or income level of a country does not necessarily determine its comparative advantage.

Question 15

A person has a comparative advantage in producing a good if:

Accepted Answer

Comparative advantage refers to the ability to produce a good at a lower opportunity cost than others. This means that if someone has a comparative advantage in producing a good, they are giving up less of other goods or opportunities to produce that good compared to others. Absolute cost (A) and advertising expenses (D) have no relevance to comparative advantage, while having a higher opportunity cost (E) would mean that the person is less efficient in producing the good and therefore does not have a comparative advantage. A perfectly elastic demand curve (C) would indicate that the person can sell any quantity at a fixed price but this does not indicate any advantage in producing the good.

Question 16

When there is a choice between the consumption of bundle X and bundle Y, the opportunity cost of consuming bundle X is bundle Y.

Accepted Answer

This statement is true according to the concept of opportunity cost in economics. When choosing to consume one bundle over another, the opportunity cost is the next best alternative forgone or what must be given up to obtain that choice. In this case, the opportunity cost of consuming bundle X is bundle Y, or vice versa.

Question 17

An economy's PPC illustrates the extent to which the economy consumes what it produces.

Accepted Answer

An economy's PPC illustrates the maximum combination of two goods that an economy can produce with its given resources and technology. It does not necessarily reflect how much the economy consumes or consumes efficiently.

Question 18

Julio makes wine and beer. Last year he made 20 bottles of wine and 20 cases of beer. If the price of grapes goes down (making wine cheaper to make), Julio will be able to make the same amount of wine and more beer.

Accepted Answer

If the price of grapes goes down, Julio will be able to make wine at a lower cost, which means he can continue to make the same amount of wine and use the savings to produce more beer, making it a cheaper option. Therefore, he will be able to make the same amount of wine and more beer.

Question 19

Assume that the United States uses 20 worker-hours to produce 1 computer and 5 worker-hours to produce 1 unit of food; assume also that Japan uses 10 worker-hours to produce 1 computer and 30 worker-hours to produce 1 unit of food. Which of the following statements is true?

Accepted Answer

To determine which country has the comparative advantage in food production, we need to compare the opportunity cost of producing food between the two countries. The opportunity cost for the United States to produce 1 unit of food is 5/20 = 1/4 unit of computers, while the opportunity cost for Japan to produce 1 unit of food is 30/10 = 3 units of computers. Therefore, the United States has a lower opportunity cost for producing food and has the comparative advantage in food production.

Question 20

Economic growth can be illustrated by an outward shift of the PPC.

Accepted Answer

When an economy experiences economic growth, it can produce more goods and services than before. This can be shown on a production possibility curve (PPC) by an outward shift, indicating that the economy has expanded its capacity to produce.

Quiz 2: Scarcity and Opportunity Costs