Question 1

A professor spends 10 hours per day giving lectures and writing papers. For the professor, a graph that shows his various possible mixes of output (lectures given per day and papers written per day) is called his
A)line of tastes.
B)trade-off curve.
C)production possibilities frontier.
D)consumption possibilities frontier.

Accepted Answer

The graph that shows the various possible mixes of output for the professor is called his production possibilities frontier. This is because it represents the maximum amount of lectures and papers that the professor can produce given the limited resources (i.e. time) available to him. The trade-off between lectures and papers is represented by the slope of the curve, which shows the opportunity cost of producing one output over the other. The line of tastes and consumption possibilities frontier are not applicable in this scenario as they relate to consumer preferences and consumption choices, rather than production possibilities.

Question 2

Table 3-1
Assume that John and Jane can switch between producing bread and wine at a constant rate. 
-Refer to Table 3-1. Assume that John and Jane each work 24 hours. What happens to total production if instead of each person spending 12 hours producing each good, Jane spends 21 hours producing wine and 3 hours producing bread and John spends 3 hours producing wine and 21 hours producing bread?
A)The total production of bread and wine each rise.
B)The total production of bread rises and the total production of wine falls.
C)The total production of bread falls and the total production of wine rises.
D)The total production of bread and wine each fall.

Accepted Answer

The answer of Table 3-1
Assume that John and Jane can...

Question 3

Consider two individuals - Howard and Mai - each of whom would like to wear sweaters and eat tasty food. The gains from trade between Howard and Mai are least obvious in which of the following cases?
A)Howard is very good at knitting sweaters and at cooking tasty food, but Mai's skills in both of these activities are very poor.
B)Howard is very good at knitting sweaters and at cooking tasty food; Mai is very good at knitting sweaters, but she knows nothing about cooking tasty food.
C)Howard's skills in knitting sweaters are fairly good, but his skills in cooking tasty food are fairly bad; Mai's skills in knitting sweaters are fairly bad, but her skills in cooking tasty food are fairly good.
D)Howard's skills are such that he can produce only sweaters, and Mai's skills are such that she can produce only tasty food.

Accepted Answer

In all the other scenarios, there is some level of comparative advantage that can be exploited through trade. However, in scenario D, there is no chance for gains from trade as each person can only produce one of the desired goods.

Question 4

Table 3-3
Production Opportunities  ​
-Refer to Table 3-3. Which of the following combinations of cheese and wine could France produce in 40 hours?
A)2 units of cheese and 20 units of wine
B)4 units of cheese and 15 units of wine
C)6 units of cheese and 5 units of wine
D)8 units of cheese and 20 units of wine

Accepted Answer

According to the table, France can produce 1 unit of cheese in 6 hours and 1 unit of wine in 8 hours. Therefore, in 40 hours, France can produce 6 units of cheese (6 hours per unit x 6 units) and 20 units of wine (8 hours per unit x 20 units). Option C is the only combination that falls within this production capacity.

Question 5

Table 3-4
Assume that Andrea and Paul can switch between producing wheat and producing beef at a constant rate. 
-Refer to Table 3-4. Assume that Andrea and Paul each has 480 minutes available. If each person divides his time equally between the production of wheat and beef, then total production is
A)24 bushels of wheat and 64 pounds of beef.
B)21 bushels of wheat and 33 pounds of beef.
C)16 bushels of wheat and 48 pounds of beef.
D)5 bushels of wheat and 24 pounds of beef.

Accepted Answer

The answer of Table 3-4
Assume that Andrea and Paul can...

Question 6

The most obvious benefit of specialization and trade is that they allow us to
A)work more hours per week than we otherwise would be able to work.
B)consume more goods than we otherwise would be able to consume.
C)spend more money on goods that are beneficial to society, and less money on goods that are harmful to society.
D)consume more goods by forcing people in other countries to consume fewer goods.

Accepted Answer

Specialization and trade allow for countries and individuals to produce and sell goods or services they are most efficient at producing. This leads to increased efficiency and productivity in the economy, resulting in more goods being produced and lower prices. As a result, individuals have more purchasing power and can consume more goods than they otherwise would be able to. This also leads to international trade, where countries can specialize in certain goods or services and trade with other countries, thereby increasing the variety and quantity of goods available to consumers.

Question 7

Table 3-3
Production Opportunities  ​
-Refer to Table 3-3. Assume that England and France each has 40 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is
A)8 units of cheese and 10 units of wine
B)24 units of cheese and 15 units of wine
C)40 units of cheese and 20 units of wine
D)48 units of cheese and 30 units of wine

Accepted Answer

If England and France each divides its time equally between the production of cheese and wine, then each country has 20 labor hours to allocate to each product.

With 20 labor hours, England can produce 4 units of cheese and 5 units of wine (from Table 3-3).

With 20 labor hours, France can produce 6 units of cheese and 3 units of wine (from Table 3-3).

Therefore, the total production would be 10 units of cheese (4 from England and 6 from France) and 8 units of wine (5 from England and 3 from France).

Thus, choice B (24 units of cheese and 15 units of wine) is the best choice.

Question 8

A production possibilities frontier is bowed outward when
A)the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good.
B)an economy is self-sufficient instead of interdependent and engaged in trade.
C)the rate of tradeoff between the two goods being produced is constant.
D)the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

Accepted Answer

The production possibilities frontier (PPF) is bowed outward when the opportunity cost of producing one good increases as more of it is produced, which means the rate of trade-off between the two goods depends on the quantities being produced. This reflects increasing opportunity costs.

Question 9

Table 3-3
Production Opportunities  ​
-Refer to Table 3-3. Which of the following combinations of cheese and wine could England not produce in 40 hours?
A)12 units of cheese and 7 units of wine
B)16 units of cheese and 6 units of wine
C)20 units of cheese and 5 units of wine
D)26 units of cheese and 4 units of wine

Accepted Answer

England only has 40 hours of labor available, and producing 26 units of cheese and 4 units of wine would require more than 40 hours of labor. All other combinations are either within or below the 40-hour labor constraint.

Question 10

For a self-sufficient producer, the production possibilities frontier
A)is the same as the consumption possibilities frontier.
B)is greater than the consumption possibilities frontier.
C)is less than the consumption possibilities frontier.
D)is always a straight line.

Accepted Answer

The production possibilities frontier (PPF) for a self-sufficient producer represents both the maximum production capabilities and the consumption possibilities, as there is no trade with others to obtain additional goods or services.

Question 11

Table 3-3
Production Opportunities  ​
-Refer to Table 3-3. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for France. If we were to do this, measuring cheese along the horizontal axis, then
A)the slope of England's production possibilities frontier would be -4 and the slope of France's production possibilities frontier would be -0.4.
B)the slope of England's production possibilities frontier would be -0.25 and the slope of France's production possibilities frontier would be -2.5.
C)the slope of England's production possibilities frontier would be 0.25 and the slope of France's production possibilities frontier would be 2.5.
D)the slope of England's production possibilities frontier would be 4 and the slope of France's production possibilities frontier would be 0.4.

Accepted Answer

The slope of a production possibilities frontier is calculated by dividing the amount of the vertical axis (in this case wine) by the amount of the horizontal axis (in this case cheese). So, for England, the slope would be -8/32 or -0.25. For France, the slope would be -1/0.4 or -2.5.

Question 12

An economy's production possibilities frontier is also its consumption possibilities frontier
A)under all circumstances.
B)under no circumstances.
C)when the economy is self-sufficient.
D)when the rate of tradeoff between the two goods being produced is constant.

Accepted Answer

The answer of An economy's production possibilities frontier is also...

Question 13

A production possibilities frontier is a straight line when
A)the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good.
B)an economy is interdependent and engaged in trade instead of self-sufficient.
C)the rate of tradeoff between the two goods being produced is constant.
D)the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

Accepted Answer

A straight line production possibilities frontier indicates that the rate of tradeoff between the two goods being produced is constant. This means that for every unit of one good that is produced, the same amount of the other good must be given up. Therefore, the opportunity cost of producing one good does not change as more or less of that good is produced, resulting in a linear relationship between the two goods on the production possibilities frontier.

Question 14

Abby bakes brownies and Liam grows flowers. In which of the following cases is it impossible for both Abby and Liam to benefit from trade?
A)Abby does not like flowers and Liam does not like brownies.
B)Abby is better than Liam at baking brownies and Liam is better than Abby at growing flowers.
C)Liam is better than Abby at baking brownies and at growing flowers.
D)Both Abby and Liam can benefit from trade in all of the above cases.

Accepted Answer

If Abby doesn't like flowers and Liam doesn't like brownies, then there is no way for both of them to benefit from trade. The whole point of trade is that each person specializes in what they are good at producing and then trades with others who are good at producing something different. If one person doesn't value what the other produces, then trade is not possible.

Question 15

Consider two individuals - Marquis and Serena - each of whom would like to wear sweaters and eat tasty food. The gains from trade between Marquis and Serena are most obvious in which of the following cases?
A)Marquis is very good at knitting sweaters and at cooking tasty food, but Serena's skills in both of these activities are very poor.
B)Marquis and Serena both are very good at cooking tasty food, but neither has the necessary skills to knit a sweater.
C)Marquis's cooking and knitting skills are very poor, and Serena's cooking and knitting skills are also very poor.
D)Marquis's skills are such that he can produce only sweaters, and Serena's skills are such that she can produce only tasty food.

Accepted Answer

The answer of Consider two individuals - Marquis and Serena...

Question 16

Suppose there are only two people in the world. Each person's production possibilities frontier also represents his or her consumption possibilities when
A)neither person faces trade-offs.
B)the frontiers are straight lines.
C)the frontiers are bowed out.
D)they choose not to trade with one another.

Accepted Answer

The answer of Suppose there are only two people in...

Question 17

Table 3-2
Assume that England and Holland can switch between producing milk and oats at a constant rate. 
-Refer to Table 3-2. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for Holland. If we were to do this, measuring milk along the horizontal axis, then
A)the slope of England's production possibilities frontier would be -10/4 and the slope of Holland's production possibilities frontier would be -4/3.
B)the slope of England's production possibilities frontier would be -4/10 and the slope of Holland's production possibilities frontier would be -3/4.
C)the slope of England's production possibilities frontier would be 10/4 and the slope of Holland's production possibilities frontier would be 4/3.
D)the slope of England's production possibilities frontier would be 4/10 and the slope of Holland's production possibilities frontier would be 3/4.

Accepted Answer

The slope of a production possibilities frontier measures the opportunity cost of producing one good in terms of the other. In this case, the opportunity cost of producing one more unit of milk is the amount of oats that must be given up. For England, to produce one more unit of milk, it must give up 4 units of oats (from 20 to 16), so the slope of its production possibilities frontier is -4/10. For Holland, to produce one more unit of milk, it must give up 3 units of oats (from 6 to 3), so the slope of its production possibilities frontier is -3/4.

Question 18

The production possibilities frontier illustrates
A)the combinations of output that an economy should produce.
B)the combinations of output that an economy should consume.
C)the combinations of output that an economy can produce.
D)All of the above are correct.

Accepted Answer

The production possibilities frontier (PPF) shows the maximum combinations of two goods that an economy can produce with its existing resources and technology. Therefore, choice C is the correct answer. The PPF does not indicate what an economy should produce or consume, as these decisions depend on individual preferences and market forces. Thus, choices A and B are not correct.

Question 19

Table 3-3
Production Opportunities  ​
-Refer to Table 3-3. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for France. If we were to do this, measuring wine along the horizontal axis, then
A)the slope of England's production possibilities frontier would be -4 and the slope of France's production possibilities frontier would be -0.4.
B)the slope of England's production possibilities frontier would be -0.25 and the slope of France's production possibilities frontier would be -2.5.
C)the slope of England's production possibilities frontier would be 0.25 and the slope of France's production possibilities frontier would be 2.5.
D)the slope of England's production possibilities frontier would be 4 and the slope of France's production possibilities frontier would be 0.4.

Accepted Answer

The answer of Table 3-3
Production Opportunities  ​
-Refer to Table...

Question 20

As a student, Anne spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Anne's production possibilities frontier is a straight line if
A)she faces no trade-off between writing term papers and completing homework assignments.
B)she can switch between writing term papers and completing homework assignments at a constant rate.
C)the rate at which she can switch between homework assignments and term papers depends on the number of homework assignments she is completing and on the number of term papers she is writing.
D)she is required by her professors to spend half of her time on term papers and the other half of her time on homework assignments.

Accepted Answer

A straight line production possibilities frontier indicates that Anne can switch between writing term papers and completing homework assignments at a constant rate. This means that the opportunity cost of producing one more unit of term paper remains constant as Anne moves along the production possibilities frontier, and similarly for homework assignments. This is the only option that accurately describes a straight line production possibilities frontier.

Quiz 3: Interdependence and the Gains From Trade

A professor spends 10 hours per day giving lectures and writing papers. For the professor, a graph that shows his various possible mixes of output (lectures given per day and papers written per day) is called his

Consider two individuals - Howard and Mai - each of whom would like to wear sweaters and eat tasty food. The gains from trade between Howard and Mai are least obvious in which of the following cases?

Table 3-3 Production Opportunities -Refer to Table 3-3. Which of the following combinations of cheese and wine could France produce in 40 hours?

Table 3-4 Assume that Andrea and Paul can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-4. Assume that Andrea and Paul each has 480 minutes available. If each person divides his time equally between the production of wheat and beef, then total production is

The most obvious benefit of specialization and trade is that they allow us to

Table 3-3 Production Opportunities -Refer to Table 3-3. Assume that England and France each has 40 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is

A production possibilities frontier is bowed outward when

Table 3-3 Production Opportunities -Refer to Table 3-3. Which of the following combinations of cheese and wine could England not produce in 40 hours?

For a self-sufficient producer, the production possibilities frontier

Table 3-3 Production Opportunities -Refer to Table 3-3. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for France. If we were to do this, measuring cheese along the horizontal axis, then

An economy's production possibilities frontier is also its consumption possibilities frontier

A production possibilities frontier is a straight line when

Abby bakes brownies and Liam grows flowers. In which of the following cases is it impossible for both Abby and Liam to benefit from trade?

Consider two individuals - Marquis and Serena - each of whom would like to wear sweaters and eat tasty food. The gains from trade between Marquis and Serena are most obvious in which of the following cases?

Suppose there are only two people in the world. Each person's production possibilities frontier also represents his or her consumption possibilities when

The production possibilities frontier illustrates

Table 3-3 Production Opportunities -Refer to Table 3-3. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for France. If we were to do this, measuring wine along the horizontal axis, then