Question 1

Capital goods

Accepted Answer

Capital goods are goods that are used to produce other goods or services. They are not consumed directly by individuals, but rather are used in the production process. Examples of capital goods include machinery, tools, buildings, and vehicles. The use of capital goods allows firms to produce more efficiently, which can lead to lower costs and increased output. Therefore, choice C correctly identifies capital goods as goods used in the production of other goods and services.

Question 2

When a society forgoes current consumption to invest in the production of capital goods,

Accepted Answer

When a society forgoes current consumption to invest in the production of capital goods, it is increasing its stock of capital. This will make the society more productive in the future, thus increasing its potential output and the amount it can consume in the future. Therefore, the more the society invests in capital goods, the more it can consume in the future.

Question 3

Economic growth can be pictured in a production possibilities curve diagram by

Accepted Answer

Economic growth is represented by an increase in the production possibilities of an economy. This is illustrated in a production possibilities curve diagram by an outward shift of the curve. This shows that the economy is able to produce more goods and services with the same amount of resources or can produce the same amount of goods and services with fewer resources.

Question 4

A country that must reduce current consumption if it wished to increase future consumption possibilities

Accepted Answer

A country that must reduce current consumption if it wants to increase future consumption possibilities is already producing at its maximum potential, meaning it is on its production possibilities curve. This situation implies that the resources are fully employed, and any increase in current consumption will lead to a reduction in the production of capital goods, which will limit future consumption possibilities. Therefore, the only option is to reduce current consumption to allocate more resources towards capital goods and increase future consumption possibilities.

Question 5

In general,specialization allows

Accepted Answer

Specialization allows individuals or firms to focus on producing goods or providing services in which they have a comparative advantage. This results in greater productivity as they can produce more output with the same amount of input or produce the same output with fewer inputs. Therefore, the correct choice is D) greater productivity.

Question 6

If you are able to earn $20,000 a year teaching,$25,000 a year typing,$30,000 a year driving a cab,and $40,000 a year as a chef,you have a comparative advantage in ________.

Accepted Answer

The answer of If you are able to earn $20,000...

Question 7

Comparative advantage is always a(n)________ concept.

Accepted Answer

Comparative advantage is a relative concept as it compares the opportunity cost of producing a good or service between two countries or individuals. It is based on the fact that one country can produce a good or service at a lower opportunity cost compared to another country or individual. This concept is not based on absolute values but rather on relative values.

Question 8

Increasing relative costs are the result of

Accepted Answer

Relative costs increase when resources are not perfectly adaptable for alternative uses. This means that the opportunity cost of using a resource for one purpose increases as the resource becomes more scarce or in higher demand for other uses. High taxes or an increase in production do not necessarily lead to a rise in relative costs. The statement in option D is also incorrect as the efficient use of resources can lead to lower relative costs.

Question 9

The organization of productive activities among persons and regions so that no one individual or area is totally self-sufficient is known as

Accepted Answer

Specialization refers to the organization of productive activities among persons and regions such that no one individual or area is completely self-sufficient. This allows for a division of labor and exchange of goods and services that takes advantage of comparative advantages, resulting in greater efficiency and productivity. Option A refers to the concept of comparative advantage, which is related to specialization; option B is not a recognized term; and option D refers specifically to delegating work to external parties, which is not the same as specialization.

Question 10

A person has a comparative advantage in an activity whenever she

Accepted Answer

Comparative advantage is based on the concept of opportunity cost, which is the value of the next best alternative that must be given up in order to pursue a certain activity. A person has a comparative advantage in an activity if she can perform that activity at a lower opportunity cost than another person, meaning that she gives up less of an alternative in order to do that activity compared to someone else. Choice B is incorrect because having a comparative advantage does not mean that a person is the best at everything. Choice C is incorrect because absolute advantage is based on the concept of productivity, not opportunity cost. Choice D is incorrect because time is not the main determinant of comparative advantage.

Question 11

The opportunity cost of producing more capital goods today is

Accepted Answer

The opportunity cost of producing more capital goods today is fewer consumer goods today because resources used to produce capital goods cannot be used to produce consumer goods simultaneously.

Question 12

If a country increases the production of its capital goods,then

Accepted Answer

By increasing the production of capital goods, a country is sacrificing the production of consumer goods in the present. However, in the future, the increased production of capital goods will result in higher productivity and more efficient production, leading to a greater production of both capital and consumer goods. So, while the country may have less consumption in the present, it will have more consumption in the future.

Question 13

Suppose a hectare of land yields 100 tonnes of corn and that one tonne of corn provides enough seed for one-quarter of a hectare of land.The opportunity cost of consuming another tonne of corn today is

Accepted Answer

Since one tonne of corn can seed one-quarter of a hectare, and a hectare yields 100 tonnes, consuming one tonne now means losing 25 tonnes next year (1/4 of 100).

Question 14

Economy A and Economy B have the same resources,but workers in Economy A have specialized whereas individuals in Economy B have not.Given this information,you can determine that

Accepted Answer

Specialization allows workers in Economy A to become more efficient and effective in their specific tasks, which leads to a higher output. Hence, Economy A will have a higher output than Economy B.

Question 15

The more goods and services a society consumes today,

Accepted Answer

The answer of The more goods and services a society...

Question 16

If individual X has a comparative advantage in painting fences and individual Y has a comparative advantage in carpentry,we know that

Accepted Answer

Comparative advantage refers to the ability of an individual or a country to produce a particular good or service at a lower opportunity cost than others. In this case, if individual X has a comparative advantage in painting fences, it means that they can paint fences at a lower opportunity cost (in terms of carpentry) than individual Y. Therefore, it is better for individual X to specialize in painting fences and for individual Y to specialize in carpentry, as it would be more efficient for them to produce the good where they have a comparative advantage. Option A may or may not be true as it depends on the actual hours taken by each individual for painting a fence. Option B is not relevant to the concept of comparative advantage. Option C is also not applicable here as comparative advantage is based on opportunity cost and not absolute advantage.

Question 17

If a country's production possibilities curve gets more bowed out over time,we know that

Accepted Answer

The more bowed out shape of the production possibilities curve indicates that resources have become more highly specialized, making the trade-offs between producing different goods more pronounced.

Question 18

A production possibilities curve that is bowed outward indicates that

Accepted Answer

A production possibilities curve that is bowed outward (or concave) indicates that the opportunity cost of producing one good increases as more of it is produced. In other words, producing additional units of output of one good necessitates increased reductions in the other good as more and more of the first is produced. This is because resources are not perfectly adaptable to the production of both goods, and therefore as more resources are shifted towards producing one good, the opportunity cost of producing the other good increases.

Question 19

If all resources are perfectly adaptable for alternative uses,the production possibilities curve will

Accepted Answer

If all resources are perfectly adaptable for alternative uses, the economy can shift resources from one production to another without any cost or loss in efficiency. This makes the production possibilities curve a straight line, as each additional unit of one good given up involves an equal increase in production of another good.

Question 20

The principle of comparative advantage implies that it is desirable to choose the activity that

Accepted Answer

The principle of comparative advantage states that individuals, firms or nations should specialize in producing the goods or services that they have the lowest opportunity cost in producing, and trade with others for goods or services that have high opportunity costs. This will lead to an increase in overall efficiency and welfare. Therefore, the best choice would be the activity that has the lowest opportunity cost.

Quiz 2: Production Possibilities and Economic Systems