Question 1

Exhibit 2-8
 
-Refer to Exhibit 2-8.If Maria and Maya each specialize in the good in which she has a comparative advantage and then engage in trade,____________________ can consume a combination of goods that lies beyond her PPF.
A) Maria,but not Maya,
B) Maya,but not Maria,
C) both Maria and Maya
D) neither Maria nor Maya

Accepted Answer

According to the principle of comparative advantage, each person should specialize in producing the good in which they have a lower opportunity cost (i.e. their comparative advantage) and trade with the other person in order to maximize their consumption of both goods. Since Maria and Maya have different opportunity costs for producing each good, if they specialize and trade, they will be able to consume more of both goods than if they each tried to produce both goods on their own. Thus, both Maria and Maya can consume a combination of goods that lies beyond their individual PPFs.

Question 2

Keisha can produce the following combinations of X and Y: 100X and 20Y,50X and 30Y,or 0X and 40Y.The opportunity cost of one unit of Y for Keisha is
A) 5 units of X.
B) 0.2 units of X.
C) 3 units of X.
D) 1/2 unit of X.
E) none of the above

Accepted Answer

The opportunity cost of producing one unit of Y for Keisha can be calculated by looking at the trade-offs between producing X and Y. Moving from producing 100X (and 0Y) to producing 50X (and 30Y) shows that to produce 30Y, Keisha gives up 50X, which means the opportunity cost of 1Y is 50X/30Y = 5/3 units of X. However, this calculation is incorrect based on the provided options and the correct interpretation of the question. The correct approach is to look at the extreme points: moving from 20Y to 40Y, Keisha gives up 100X, so the opportunity cost of 20Y is 100X, or 5X per 1Y (100X/20Y = 5X per Y). This calculation directly matches one of the provided options, indicating a misunderstanding in the initial explanation. The correct interpretation should focus on the direct trade-offs presented in the options, which suggests that for each additional unit of Y produced, there is a specific amount of X that cannot be produced, directly leading to the correct answer without the need for incorrect intermediate steps.

Question 3

Country X has a high unemployment rate.It follows that country X is operating
A) beyond its production possibilities frontier (PPF).
B) on its PPF.
C) inside (below)its PPF.
D) at a productive efficient point.
E) b and d

Accepted Answer

A high unemployment rate suggests that the labor resources in the economy are not being fully utilized. This means that the economy is operating below its production possibilities frontier (PPF) as it is not achieving the maximum level of output that is possible with the available resources.

Question 4

Country 1 produces two goods,A and B.Country 2 produces the same two goods.Currently,country 1 produces 100A and 200B and country 2 produces 300A and 700B.Which of the following statements is true?
A) If country 1 is on its production possibilities frontier,then country 2 must be on its PPF,too.
B) The PPF for country 1 is necessarily closer to the origin (or further to the left)than the PPF for country 2.
C) If country 1 is productive inefficient,then so is country 2.
D) Country 2 is operating on its PPF,but country 1 is clearly not operating on its PPF.
E) none of the above

Accepted Answer

None of the statements necessarily follow from the information given. There is no information about the shape or location of the production possibility frontiers for both countries, and it is possible that one or both countries are currently operating inefficiently.

Question 5

If the law of increasing opportunity costs is operable,and currently the opportunity cost of producing the 1,000th unit of good X is 0.5Y,then the opportunity cost of producing the 2,001st unit of good is X is most likely to be
A) less than 0.5Y.
B) more than 0.5Y but less than 2Y.
C) more than 0.5Y
D) less than 0.5Y but more than zero.
E) none of the above

Accepted Answer

According to the law of increasing opportunity costs, as we produce more and more of a good, the opportunity cost of producing additional units of that good increases. Therefore, the opportunity cost of producing the 2,001st unit of good X is likely to be more than the opportunity cost of producing the 1,000th unit (which is already 0.5Y). Therefore, the correct answer is choice C, more than 0.5Y.

Question 6

Between 1910 and today,the number of farmers in the United States _____________ dramatically as a result of ___________________ in farming in the twentieth century.
A) dropped;technological improvements
B) rose;technological improvements
C) dropped;technological declines
D) rose;technological declines

Accepted Answer

The number of farmers in the United States dropped dramatically as a result of technological improvements in farming in the twentieth century. Advancements such as farm machinery, chemical fertilizers, and hybrid seeds allowed farmers to produce more crops with less labor. This led to larger farms with fewer farmers needed to work the land.

Question 7

Exhibit 2-8
 
-Refer to Exhibit 2-8.Who has the comparative advantage in the production of good Y?
A) Maria
B) Maya
C) Both Maria and Maya
D) Neither Maria nor Maya

Accepted Answer

Maria has the comparative advantage in the production of good Y if she can produce it at a lower opportunity cost than Maya. Comparative advantage is determined by comparing the opportunity costs of producing goods between individuals or countries.

Question 8

Michael can produce the following combinations of X and Y: 10X and 10Y,5X and 15Y,and 0X and 20Y.Vernon can produce the following combinations of X and Y: 100X and 20Y,50X and 30Y,or 0X and 40Y.It follows that
A) Michael has the comparative advantage in producing X and Vernon has the comparative advantage in producing Y.
B) Michael has the comparative advantage in producing Y and Vernon has the comparative advantage in producing X.
C) Neither Michael nor Vernon has a comparative advantage in producing X.
D) Neither Michael nor Vernon has a comparative advantage in producing Y.
E) There is not enough information to answer the question.

Accepted Answer

Comparative advantage is determined by who has the lower opportunity cost in producing a good. For X, Vernon can produce more X for any given amount of Y forgone, indicating Vernon has the comparative advantage in X. For Y, Michael can produce more Y for any given amount of X forgone, indicating Michael has the comparative advantage in Y.

Question 9

Suppose Andrea is taking just two courses and is at a point inside her PPF of grades for those two courses.If Andrea changes her work habits then it is impossible for
A) either one of her grades to rise.
B) both of her grades to rise.
C) both of her grades to fall.
D) either one of her grades to rise while the other grade remains constant.
E) none of the above is impossible in this situation

Accepted Answer

The answer of Suppose Andrea is taking just two courses...

Question 10

The PPF between goods X and Y will be a downward-sloping
A) straight line if increasing opportunity costs exist.
B) straight line if decreasing opportunity costs exist.
C) curve that is bowed inward if increasing opportunity costs exist.
D) straight line if constant opportunity costs exist.

Accepted Answer

If the opportunity costs of producing one good in terms of the other remain constant, then the PPF will be a straight line (linear) because the rate of tradeoff remains the same at all levels of production.

Question 11

An economy can produce the following combinations of goods: 50X and 0Y,40X and 10Y,30X and 20Y,20X and 30Y,10X and 40Y,and 0X and 50Y.The production possibilities frontier (PPF)for the economy is
A) concave downward because the opportunity cost of producing the 10th unit of Y is greater than the opportunity cost of producing the first unit of Y.
B) a straight (downward-sloping)line because the opportunity cost of producing the two goods is constant.
C) concave downward because the opportunity cost of producing the 40th unit of Y is less than the opportunity cost of producing the 10th unit of Y.
D) a straight (downward-sloping)line because the opportunity cost of producing the 10th unit of X is greater than the opportunity cost of producing the 40th unit of X.
E) a straight (downward-sloping)line because the opportunity cost of producing the 30th unit of Y is greater than the opportunity cost of producing the 30th unit of X.

Accepted Answer

The PPF is a straight (downward-sloping) line because the opportunity cost of producing the two goods is constant. This is because resources are assumed to be perfectly adaptable between the two goods in this scenario. There is no sacrifice in the production of one good for the other, and as a result, the opportunity cost is constant.

Question 12

Carlos can produce the following combinations of X and Y: 10X and 10Y,5X and 15Y,and 0X and 20Y.The opportunity cost of one unit of X for Carlos is
A) 1 unit of Y.
B) 2 units of Y.
C) 1/2 unit of Y.
D) 1/4 unit of Y.
E) none of the above

Accepted Answer

The answer of Carlos can produce the following combinations of...

Question 13

Suppose Andrea is taking just two courses and is at a point on her PPF of grades for those two courses.Now this PPF shifts inward and Andrea moves to a point on the new PPF.Then it is impossible for
A) both of her grades to fall.
B) both of her grades to rise.
C) one of her grades to rise and the other grade to fall.
D) one of her grades to fall while the other grade stays constant.

Accepted Answer

The answer of Suppose Andrea is taking just two courses...

Question 14

Which scenario below most accurately describes the process by which a technological change can affect employment patterns across industries?
A) A technological advance makes it possible to produce more of good X with less labor.As a result,labor is released from producing good X.Some of this labor ends up producing goods Y and Z.
B) A technological advance makes it possible to produce less of good X with less labor.As a result,labor is released from producing good X.Some of this labor ends up producing good Y.
C) A technological advance makes it possible to produce more of good X with more labor.As a result,more labor is needed to produce good X.There is less labor available to produce goods Y and Z.
D) A technological advance makes it possible to produce more of good X with less labor.As a result,labor becomes more important to the production of good X.More labor ends up producing good X.
E) none of the above

Accepted Answer

Technological advance decreases the amount of labor required to produce good X, which results in labor being released from producing good X. The released labor could potentially end up producing goods Y and Z, as they are not stated to require more labor. Therefore, option A is the most accurate scenario.

Question 15

If Sean can bake bread at a lower opportunity cost than Jason,and Jason can produce paintings at a lower opportunity cost than Sean,it follows that
A) Sean has a comparative advantage in paintings and Jason has a comparative advantage in baking bread.
B) Both Sean and Jason have a comparative advantage in baking bread.
C) Both Sean and Jason have a comparative disadvantage in producing paintings.
D) Sean has a comparative advantage in baking bread and Jason has a comparative advantage in producing paintings.
E) There is not enough information to answer the question.

Accepted Answer

Based on the given information, Sean has a lower opportunity cost in baking bread than in producing paintings, and Jason has a lower opportunity cost in producing paintings than in baking bread. This means Sean has a comparative advantage in baking bread, while Jason has a comparative advantage in producing paintings. Therefore, the correct answer is D, Sean has a comparative advantage in baking bread and Jason has a comparative advantage in producing paintings.

Question 16

The economy was at point A producing 100X and 200Y.It moved to point B where it produces 200X and 300Y.It follows that
A) point A may have been a point below the economy's PPF,while point B may lie on the PPF.
B) the economy's PPF could have shifted outward and point A was a point on the economy's old PPF.
C) the economy has moved from one point on its PPF to another point on the same PPF.
D) a or b
E) a or c

Accepted Answer

The increase in production of both goods X and Y from point A to point B could be due to either the economy moving from a point below its Production Possibility Frontier (PPF) to a point on the PPF (indicating more efficient use of resources) or the PPF itself shifting outward (indicating an increase in the economy's capacity to produce), making both A and B correct explanations.

Question 17

Which of the following is not true about production possibilities frontiers?
A) moving from one point to another on a PPF incurs a tradeoff
B) economic growth is shown by shifting the PPF outward
C) unemployment of resources is shown by shifting the PPF inward
D) a PPF can shift inward or outward

Accepted Answer

Unemployment of resources is not shown by shifting the PPF inward. An inward shift of the PPF represents a decrease in the economy's ability to produce goods and services due to factors such as natural disasters or a decrease in the workforce. Unemployment of resources would be represented by a point inside the PPF, indicating that the economy is not fully utilizing all of its resources.

Question 18

Exhibit 2-8
 
-Refer to Exhibit 2-8.Who has the comparative advantage in the production of good X?
A) Maria
B) Maya
C) Both Maria and Maya
D) Neither Maria nor Maya

Accepted Answer

The answer of Exhibit 2-8
 
-Refer to Exhibit 2-8.Who has...

Question 19

Productive efficiency implies
A) the possibility of gains in one area without losses in another.
B) that more output has been produced.
C) the impossibility of gains in one area without losses in another.
D) that prices are stable.
E) c and d

Accepted Answer

Productive efficiency occurs when an economy or entity cannot produce more of one good without reducing the output of another good, hence the impossibility of gains in one area without losses in another.

Question 20

A person has a comparative advantage in the production of a good when they can produce the product at a(n)________ opportunity cost compared to another person.
A) higher
B) increasing
C) lower
D) equal

Accepted Answer

Comparative advantage is based on the concept of opportunity cost. If one person can produce a good at a lower opportunity cost than another person, then they have a comparative advantage in producing that good. This means that they give up less of other goods and services to produce that good, making them more efficient and productive in the long run. Therefore, the person who can produce the good at a lower opportunity cost has a comparative advantage.

Quiz 2: Production Possibilities Frontier Framework

Exhibit 2-8 -Refer to Exhibit 2-8.If Maria and Maya each specialize in the good in which she has a comparative advantage and then engage in trade,____________________ can consume a combination of goods that lies beyond her PPF.

Keisha can produce the following combinations of X and Y: 100X and 20Y,50X and 30Y,or 0X and 40Y.The opportunity cost of one unit of Y for Keisha is

Country X has a high unemployment rate.It follows that country X is operating

Country 1 produces two goods,A and B.Country 2 produces the same two goods.Currently,country 1 produces 100A and 200B and country 2 produces 300A and 700B.Which of the following statements is true?

If the law of increasing opportunity costs is operable,and currently the opportunity cost of producing the 1,000th unit of good X is 0.5Y,then the opportunity cost of producing the 2,001st unit of good is X is most likely to be

Between 1910 and today,the number of farmers in the United States _ dramatically as a result of _______ in farming in the twentieth century.

Exhibit 2-8 -Refer to Exhibit 2-8.Who has the comparative advantage in the production of good Y?

Michael can produce the following combinations of X and Y: 10X and 10Y,5X and 15Y,and 0X and 20Y.Vernon can produce the following combinations of X and Y: 100X and 20Y,50X and 30Y,or 0X and 40Y.It follows that

Suppose Andrea is taking just two courses and is at a point inside her PPF of grades for those two courses.If Andrea changes her work habits then it is impossible for

The PPF between goods X and Y will be a downward-sloping

An economy can produce the following combinations of goods: 50X and 0Y,40X and 10Y,30X and 20Y,20X and 30Y,10X and 40Y,and 0X and 50Y.The production possibilities frontier (PPF) for the economy is

Carlos can produce the following combinations of X and Y: 10X and 10Y,5X and 15Y,and 0X and 20Y.The opportunity cost of one unit of X for Carlos is

Suppose Andrea is taking just two courses and is at a point on her PPF of grades for those two courses.Now this PPF shifts inward and Andrea moves to a point on the new PPF.Then it is impossible for

Which scenario below most accurately describes the process by which a technological change can affect employment patterns across industries?

If Sean can bake bread at a lower opportunity cost than Jason,and Jason can produce paintings at a lower opportunity cost than Sean,it follows that

The economy was at point A producing 100X and 200Y.It moved to point B where it produces 200X and 300Y.It follows that

Which of the following is not true about production possibilities frontiers?

Exhibit 2-8 -Refer to Exhibit 2-8.Who has the comparative advantage in the production of good X?

Productive efficiency implies

A person has a comparative advantage in the production of a good when they can produce the product at a(n) ________ opportunity cost compared to another person.