Question 1

To gain from comparative advantage, countries must not only trade, they must also

Accepted Answer

The answer of To gain from comparative advantage, countries must...

Question 2

Markets I. enable buyers and sellers to get information.
II. are defined by economists as geographical locations where trade occurs.
III. have evolved because they facilitate trade.
Which of the above statements are correct?

Accepted Answer

Statement I is correct because markets provide information to buyers and sellers about prices, availability of goods, and other market conditions. Statement II is incorrect because markets are not necessarily defined by geographical locations - they can exist in the form of online platforms or other non-physical spaces. Statement III is correct because markets have evolved to facilitate trade and exchange between buyers and sellers, and are an integral part of modern economies.

Question 3

There are two goods, X and Y.If the opportunity cost of producing good X is lower for Pam than for Gino, then

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The answer of There are two goods, X and Y.If...

Question 4

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich.Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich.Both individuals gain if

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The answer of Tom takes 20 minutes to cook an...

Question 5

The flows in the market economy that go from firms to households are ________. The flows in the market economy that go from households to firms are ________.

Accepted Answer

In a market economy, the flows from firms to households consist of the real flows of goods and services and the income flows of wages, rent, interest, and profits. Conversely, the flows from households to firms include the real flows of labor, land, capital, and entrepreneurship and the flow of expenditure on goods and services. This reflects the circular flow of economic activity where households provide factors of production to firms and spend their income on goods and services produced by firms, while firms pay households for the use of factors of production and supply goods and services to households.

Question 6

Trade is organized using the social institutions of all of the following except

Accepted Answer

Labor unions are not typically involved in the organization of trade. The other options listed are all important social institutions involved in the organization of trade.

Question 7

Which of the following describes comparative advantage?

Accepted Answer

Comparative advantage refers to the ability of a party to produce a particular good or service at a lower opportunity cost than another party. In this case, Farmer John has a lower opportunity cost of producing wheat because he only gives up 2 baskets of corn to produce one basket of wheat, whereas Farmer Ben gives up 3 baskets of corn to produce one basket of wheat. Therefore, Farmer John has a comparative advantage in producing wheat, while Farmer Ben has a comparative advantage in producing corn.

Question 8

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich.Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich.If Tom and Jerry specialize and trade eggs and sandwiches with each other,

Accepted Answer

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich, which means he can produce either one egg or one sandwich in 20 + 5 = 25 minutes. So, his opportunity cost of producing one egg is one sandwich, and the opportunity cost of producing one sandwich is one egg/25 minutes. 
Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich, which means he can produce either one egg or one sandwich in 15 + 3 = 18 minutes. So, his opportunity cost of producing one egg is one sandwich/3 minutes, and the opportunity cost of producing one sandwich is one egg/18 minutes. 
From this, we can see that Tom has a comparative advantage in making sandwiches, while Jerry has a comparative advantage in cooking eggs. Thus, by specializing in their respective tasks and trading with each other, they can both benefit by consuming a combination of sandwiches and eggs that lie outside of their individual production possibilities frontier.

Question 9

Use the information below to answer the following questions.
Fact 2.4.1
In one hour, Sue can produce 50 caps or 10 jackets, and Tessa can produce 70 caps or 7 jackets.
-Refer to Fact 2.4.1.Sue's opportunity cost of producing a cap is ________ jackets and Tessa's opportunity cost of producing a cap is ________ jackets.

Accepted Answer

Sue's opportunity cost of producing a cap is 10/50 = 0.2 jackets
Tessa's opportunity cost of producing a cap is 7/70 = 0.1 jackets
Thus, the best choice is to have Tessa produce caps and Sue produce jackets since Tessa has a lower opportunity cost for producing caps.

Question 10

In Portugal, the opportunity cost of a bale of wool is 3 bottles of wine.In England, the opportunity cost of 1 bottle of wine is 3 bales of wool.Given this information,

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The answer of In Portugal, the opportunity cost of a...

Question 11

In an economy lacking property rights, it would be ________ to realize the gains from trade, and there would be ________ specialization compared to an economy with property rights.

Accepted Answer

In an economy lacking property rights, individuals may not have control over the resources they need to produce goods and services. This makes it more difficult to realize the gains from trade, as there may be uncertainty over who has the right to sell or use certain resources. Additionally, without property rights, there may be less specialization, as individuals may not have the incentive to invest in specialized skills or equipment if they cannot secure the benefits of such investment.

Question 12

Intellectual property ________.

Accepted Answer

Intellectual property refers to intangible products of creative efforts such as inventions, literary and artistic works, designs, symbols, and logos. These creations are protected by copyrights and patents to prevent unauthorized use and ensure the control and commercialization of the intellectual property. Land and buildings are not classified as intellectual property. Stocks, bonds, and money in the bank are not products of creative effort and thus are not classified as intellectual property.

Question 13

Use the information below to answer the following questions.
Fact 2.4.1
In one hour, Sue can produce 50 caps or 10 jackets, and Tessa can produce 70 caps or 7 jackets.
-Refer to Fact 2.4.1.________ has a comparative advantage in producing caps.If Sue and Tessa each specialize in producing the good in which they have a comparative advantage and trade 1 jacket for 7 caps, ________.

Accepted Answer

The answer of Use the information below to answer the...

Question 14

The main functions of markets include

Accepted Answer

Markets enable buyers and sellers to gather information about each other, including product availability, quality, and price. This information is essential for efficient and effective economic activity. While markets do promote self-interest, they can also lead to socially desirable outcomes through competition and the allocation of resources to their most valued uses. However, this is not the main function of markets.

Question 15

Mexico and Canada produce both oil and apples using labour only.A barrel of oil is produced with 4 hours of labour in Mexico and 8 hours of labour in Canada.A bushel of apples is produced with 8 hours of labour in Mexico and 12 hours of labour in Canada.Canada has

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The answer of Mexico and Canada produce both oil and...

Question 16

Property rights

Accepted Answer

Property rights encourage economic growth because they create incentives to invest in capital. When individuals or businesses have the right to own and use property, they are more likely to invest in improving that property and creating new forms of capital that can be used to generate income. This ultimately leads to increased economic growth as more capital leads to more goods and services being produced.

Question 17

A property right is

Accepted Answer

A property right is a social arrangement that governs ownership, use, and disposal of anything that people value. It is a legal concept that allows individuals or groups to exercise control over a particular asset or resource. Property rights are fundamental to the functioning of markets and a key component of economic growth and development.

Question 18

Tom and Don have different opportunity costs of producing two goods.If Tom and Don specialize in producing the goods in which each has a comparative advantage and they exchange goods, then

Accepted Answer

If Tom and Don specialize in producing the goods in which each has a comparative advantage, they can increase their overall production efficiency and achieve a combination of goods that is outside their individual production possibility frontier. By exchanging goods, they can both consume a combination of goods that they would not have been able to produce on their own, leading to mutual gains from trade.

Question 19

The kitchen manager at an Italian restaurant is deciding what assignments he should give to his two cooks, John and David.John can make 25 pizzas or 40 servings of pasta per hour and David can make 20 pizzas or 30 servings of pasta per hour.Which is the manager's best choice?

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The answer of The kitchen manager at an Italian restaurant...

Quiz 2: The Economic Problem