Question 1

In the Ricardian model, the marginal product of labor:
A) first rises, then falls, as more labor is employed to produce a good.
B) first falls, then rises, as more labor is employed to produce a good.
C) continuously falls as more labor is employed to produce a good.
D) does not change as more labor is employed to produce a good.

Accepted Answer

In the Ricardian model, the assumption is that technology is fixed and there are constant returns to scale, meaning the marginal product of labor remains constant as more labor is employed to produce a good.

Question 2

To complete the model of international trade using the PPF, we must also use the idea of indifference curves. One of these curves represent:
A) a set of alternate quantities of both goods (sloped negatively), whereby consumers are equally satisfied in their level of utility gained.
B) consumers who are indifferent to everything.
C) producers who do not care which production method is chosen.
D) a fixed quantity of one good (such as wheat) and a varying amount of the other good.

Accepted Answer

Indifference curves represent a set of alternate quantities of both goods, sloped negatively, whereby consumers are equally satisfied in their level of utility gained. This means that any point on the curve provides the same level of satisfaction, and moving along the curve represents substituting one good for the other while maintaining satisfaction.

Question 3

If the maximum number of units of cloth produced is 300 and the maximum number of units of corn produced is 600, then with an MPL_cloth = 2, what is the number of workers in the economy? A) 100 B) 200 C) 150 D) 600

Accepted Answer

The answer of If the maximum number of units of...

Question 4

The Ricardian model employs the concept of alternate uses of economic resources in production. We refer to this technique as:
A) the production possibilities frontier.
B) the labor theory of value technique.
C) the least-cost option.
D) the labor productivity model.

Accepted Answer

The question is describing the concept of opportunity cost, or the idea that producing more of one good means producing less of another due to limited resources. The production possibilities frontier is a graphical representation of this concept and is the technique used in the Ricardian model. The other choices are not relevant to the question.

Question 5

Mercantilists believed that:
A) exporting goods will leave fewer goods for the local economy.
B) importing goods is beneficial for the economy.
C) exports and imports are both bad for the economy.
D) exports are good and imports are bad for the economy.

Accepted Answer

Mercantilists believed that exports contribute to a country's wealth by bringing in gold or other valuable assets, while imports drain a country's wealth because they require the outflow of valuable assets. Therefore, exports are seen as good, and imports are seen as bad for the economy according to mercantilist thought.

Question 6

If a consumer moves to a higher indifference curve, her satisfaction:
A) falls.
B) rises.
C) remains unchanged.
D) first falls, then levels out.

Accepted Answer

When a consumer moves to a higher indifference curve, it means that she now has access to a bundle of goods that provides her with a higher level of satisfaction than the previous bundle. Therefore, her satisfaction rises.

Question 7

International trade allows countries to:
A) produce outside their PPF.
B) produce inside their PPF.
C) consume inside their PPF.
D) consume outside their PPF.

Accepted Answer

International trade allows countries to consume outside their PPF by importing goods and services that they cannot produce efficiently themselves. This expands their consumption possibilities beyond their domestic production possibilities.

Question 8

The Ricardian model assumes that the marginal product of labor is:
A) increasing.
B) decreasing.
C) constant.
D) zero.

Accepted Answer

The Ricardian model assumes that the marginal product of labor is constant. This means that adding additional workers will result in an equal increase in output, assuming other inputs remain constant.

Question 9

Assume the MPL_t = 5 tennis rackets and MPL_b = 4 baseball bats. If the economy has 100 workers, then the economy can produce: A) a maximum of 500 tennis rackets. B) a maximum of 350 baseball bats. C) 500 tennis rackets and 400 baseball bats. D) either 100 tennis rackets only or 100 baseball bats only.

Accepted Answer

The maximum number of tennis rackets produced is calculated by multiplying the marginal product of labor for tennis rackets (MPLt = 5) by the number of workers (100), resulting in 500 tennis rackets.

Question 10

Production possibilities frontiers in the Ricardian model:
A) are linear (i.e., straight lines), with end points showing a country's production when it produces only one or the other good.
B) are bowed out from the origin, with end points showing a country's production when it produces only one or the other good.
C) are linear and begin from the origin.
D) are curvilinear and increase at a decreasing rate.

Accepted Answer

The Ricardian model assumes constant opportunity costs, which means that the production possibilities frontier is a straight line. The end points of the line show the country's production when it produces only one or the other good.

Question 11

(Figure: Home Production and Consumption) The figure gives Home's international trading pattern. Point P is production with trade, and point C is consumption with trade. Which product does Home export? A) clothing B) chemicals C) It exports neither chemicals nor clothing. D) It exports both chemicals and clothing.

Accepted Answer

The answer of (Figure: Home Production and Consumption) The figure...

Question 12

Ricardo's theory showed that if nations are allowed to trade freely, the result will be that:
A) all trading nations benefit by trade.
B) the manufacturing sector benefits but the consumers lose out.
C) workers benefit but the government loses tax revenue.
D) the gains from trade offset the losses from trade exactly.

Accepted Answer

Ricardo's theory of comparative advantage showed that if nations are allowed to trade freely, all trading nations benefit by trade. This is because they can specialize in the production of the goods in which they have a comparative advantage and trade for other goods they need. This results in more efficient allocation of resources, increased output, and ultimately greater benefits for all trading partners. Choice B is incorrect as Ricardo's theory suggests that both producers and consumers benefit from trade. Choice C is incorrect as the government can also benefit from increased trade through increased tax revenue from increased economic activity. Choice D is incorrect as there may be winners and losers in trade, but overall the gains from trade are greater than the losses.

Question 13

With the assumption that the marginal product of labor is constant and that labor is the only variable resource, the slope of the PPF is:
A) positive and increasing.
B) negative and decreasing.
C) negative and constant.
D) unrelated to the issue at hand.

Accepted Answer

With the assumption that the marginal product of labor is constant, the PPF is a straight line with a negative slope, indicating a constant opportunity cost between producing the two goods. Therefore, the slope is negative and constant.

Question 14

What is the marginal product of labor?
A) the average output of a unit of labor
B) the extra output obtained by using one more unit of labor
C) the average output obtained by using one more unit of labor
D) the total output obtained by using one more unit of labor

Accepted Answer

Marginal product of labor refers to the additional output that is produced when one more unit of labor is added while keeping all other factors of production constant. Therefore, the correct answer is B.

Question 15

Assume the MPL_c = 2 cars and the MPL_b = 5 boats. There are 150 workers in this hypothetical economy. What is the maximum number of boats that can be produced? A) 30 B) 300 C) 750 D) 150

Accepted Answer

We need to use the concept of opportunity cost and comparative advantage here. MPL_c can produce either 2 cars or 0.4 boats (since 1 car = 0.2 boats) while MPL_b can produce either 5 boats or 25 cars (since 1 boat = 5 cars). Now, let's assume that all 150 workers are employed in MPL_c to produce cars. They can produce a maximum of 2 cars per worker, which amounts to 150 * 2 = 300 cars in total. However, we know that 1 car = 0.2 boats, which means they can produce a maximum of 60 boats (300 * 0.2) with all their resources. On the other hand, if all 150 workers are employed in MPL_b to produce boats, they can produce a maximum of 5 boats per worker, which amounts to 150 * 5 = 750 boats in total. Therefore, the maximum number of boats that can be produced is 750, which means choice C is the correct answer.

Question 16

As a consumer moves down one of her indifference curves, her satisfaction:
A) falls.
B) rises.
C) remains unchanged.
D) first falls, then levels out.

Accepted Answer

Indifference curves represent combinations of goods that provide a consumer with the same level of satisfaction. Therefore, as a consumer moves along an indifference curve, her satisfaction remains unchanged.

Question 17

When the production possibilities frontier is a straight line, then production occurs under conditions of:
A) increasing costs.
B) decreasing costs.
C) constant costs.
D) increasing, then decreasing, then constant costs.

Accepted Answer

When the production possibilities frontier is a straight line, it indicates that resources are perfectly substitutable for each other and that the production costs remain constant regardless of how much of one good is being produced in relation to the other. Therefore, production occurs under conditions of constant costs.

Question 18

The Ricardian model can be simplified and made more explanatory by assuming that there is only one resource used in producing goods. What did Ricardo assume the resource was?
A) capital
B) technology
C) labor
D) loanable funds

Accepted Answer

Ricardo assumed that the resource used in production was labor.

Question 19

The slope of the PPF can be expressed as:
A) the ratio of abundance of capital to labor.
B) the preferences of consumers in terms of marginal utility.
C) the ratio of the quantities of good 1 and good 2.
D) the negative of the ratio of the marginal products of labor in producing each good.

Accepted Answer

The slope of the PPF represents the opportunity cost of producing one good in terms of the other. It is calculated by taking the change in quantity of one good and dividing it by the change in quantity of the other good. The slope is also equal to the negative of the ratio of the marginal products of labor in producing each good. Therefore, option D is the correct choice.

Question 20

If the maximum number of units of cloth produced is 300 and the maximum number of units of corn produced is 600, then with an MPL_cloth = 2, what is the MPL_corn? A) 4 B) 5 C) 6 D) 7

Accepted Answer

The maximum production of cloth and corn is in a 1:2 ratio (300:600). Given MPL_cloth = 2, the MPL_corn must be double to maintain the same ratio, so MPL_corn = 4.

Quiz 2: Trade and Technology: The Ricardian Model

In the Ricardian model, the marginal product of labor:

To complete the model of international trade using the PPF, we must also use the idea of indifference curves. One of these curves represent:

If the maximum number of units of cloth produced is 300 and the maximum number of units of corn produced is 600, then with an MPL_cloth = 2, what is the number of workers in the economy?

The Ricardian model employs the concept of alternate uses of economic resources in production. We refer to this technique as:

Mercantilists believed that:

If a consumer moves to a higher indifference curve, her satisfaction:

International trade allows countries to:

The Ricardian model assumes that the marginal product of labor is:

Assume the MPL_t = 5 tennis rackets and MPL_b = 4 baseball bats. If the economy has 100 workers, then the economy can produce:

Production possibilities frontiers in the Ricardian model:

(Figure: Home Production and Consumption) The figure gives Home's international trading pattern. Point P is production with trade, and point C is consumption with trade. Which product does Home export?

Ricardo's theory showed that if nations are allowed to trade freely, the result will be that:

With the assumption that the marginal product of labor is constant and that labor is the only variable resource, the slope of the PPF is:

What is the marginal product of labor?

Assume the MPL_c = 2 cars and the MPL_b = 5 boats. There are 150 workers in this hypothetical economy. What is the maximum number of boats that can be produced?

As a consumer moves down one of her indifference curves, her satisfaction:

When the production possibilities frontier is a straight line, then production occurs under conditions of:

The Ricardian model can be simplified and made more explanatory by assuming that there is only one resource used in producing goods. What did Ricardo assume the resource was?

The slope of the PPF can be expressed as:

If the maximum number of units of cloth produced is 300 and the maximum number of units of corn produced is 600, then with an MPL_cloth = 2, what is the MPL_corn?