Question 1

If there is a direct relationship between two variables, the graph relating those two variables will be:
A)upward-sloping.
B)downward-sloping.
C)vertical.
D)horizontal.

Accepted Answer

An upward-sloping graph indicates a direct relationship between two variables, meaning that as one variable increases, the other variable also increases. This is the most appropriate choice. Downward-sloping graph indicates an inverse relationship, vertical graph represents no relationship, and horizontal graph represents a constant relationship.

Question 2

The morel is a prized mushroom that is often abundant in the Western United States in years after forest fires.Suppose two companies are buying morels from workers willing to find them.One company offers to pay workers $5.00 per pound, and the other company will pay workers only $4.00 per pound.Economists would say that:
A)the company willing to pay only $4.00 has a comparative advantage in selling morels.
B)the higher-paying company will attract the more creative and innovative pickers and the lower-paying company will attract the others.
C)the lower-paying company will attract the more creative and innovative pickers and the higher-paying company will attract the others.
D)this situation violates the law of one price and is not likely to persist.

Accepted Answer

The answer of The morel is a prized mushroom that...

Question 3

The text argues that the United States has had a comparative advantage in goods and services that:
A)require creativity and innovation.
B)are artistic and well crafted.
C)are mass-produced.
D)are luxury goods.

Accepted Answer

The text argues that the United States has had a comparative advantage in goods and services that require creativity and innovation, such as technology, pharmaceuticals, and entertainment. This is due in part to the country's highly developed research infrastructure and strong intellectual property protection laws.

Question 4

What kind of relationship exists between the price of gas and the quantity demanded for gas if the quantity demanded for gas falls when the price of gas increases?
A)direct.
B)inverse.
C)normal.
D)perverse.

Accepted Answer

The relationship is inverse because as the price of gas increases, the quantity demanded decreases, which is a typical demand behavior.

Question 5

Juan works at Texas Burgers in El Paso and earns $8.00 per hour.His twin brother Felipe works in Mexico Burgers in Ciudad Juarez just across the border and earns $3.00 per hour for exactly the same work.An economist looking at this situation sees:
A)an incentive for Felipe to cross the border to get a job and thus reduce the gap.
B)an incentive for Felipe to quit and find another job in Mexico.
C)the tendency of the rich to get richer and the poor to get poorer, widening the gap.
D)evidence that the law of one price has no support in the real world.

Accepted Answer

The wage gap between the two brothers provides an incentive for Felipe to cross the border and get the same job as Juan. This would reduce the wage gap and increase equality between the two brothers.

Question 6

In China many farmers have switched from producing rice to producing vegetables and fruit because they can earn a great deal more money from these specialty crops.Within China there are some who applaud this change, but others worry that China soon may become dependent on rice imports.Even with the low cost of Chinese labor, does the fact that China is importing rice suggest that other countries now have a comparative advantage in rice production?
A)No; China must have a comparative advantage in rice if it imports rice.
B)Yes; but only if there are other countries with even cheaper labor.
C)Yes; countries with more expensive labor can offset that cost with abundant land and farm equipment.
D)Maybe; because rice is a standardized product, the role of innovation and creativity in its production is important.

Accepted Answer

The answer of In China many farmers have switched from...

Question 7

Adam Smith argued that greater specialization and division of labor are likely to:
A)improve standards of living.
B)reduce standards of living.
C)reduce worker productivity.
D)replace workers with machines, resulting in massive unemployment.

Accepted Answer

Adam Smith argued in his book "The Wealth of Nations" that greater specialization and division of labor would lead to an increase in productivity, efficiency, and output, ultimately leading to higher standards of living for everyone. This is because workers can become highly skilled at a particular task or set of tasks, leading to greater efficiency, and reducing the time and resources required to produce goods and services. As a result, prices would fall, and everyone would be able to afford more goods and services, leading to an overall increase in standards of living.

Question 8

Which of the following is an example of the law of one price?
A)Exchange rates tend to have equivalent values.For example, one euro equals one U.S.dollar.
B)Because people have essentially the same basic needs wherever they live, they tend to buy the same bundle of goods.
C)Because wages are so much lower in China, eventually all U.S.jobs will be outsourced to China, leaving the United States to import all goods at one price.
D)Because their countries have similar institutions, computer programmers in Germany and the United States either are or will be paid about the same.

Accepted Answer

The answer of Which of the following is an example...

Question 9

If U.S.workers are paid $16 an hour and Indian workers are paid the equivalent of $4 an hour but U.S.workers can produce four times as many goods as Indian workers in the same amount of time:
A)workers in the United State are paid too much.
B)production will migrate to the United States.
C)production will migrate to India.
D)there is no reason to move production from the United States to India.

Accepted Answer

The answer of If U.S.workers are paid $16 an hour...

Question 10

Which of the following factors will help the United States regain comparative advantages in industries in which it has lost comparative advantages?
A)The value of the U.S.dollar falls.
B)The value of the U.S.dollar rises.
C)The United States imports more goods.
D)Wages in the United States rise.

Accepted Answer

When the value of the U.S. dollar falls, exports from the United States become relatively cheaper compared to imports, making U.S. products more attractive to foreign buyers. This could potentially boost demand for U.S. products and help regain comparative advantages in industries where the U.S. has lost ground.

Question 11

If the hourly wage of German workers is $6, the hourly wage of Canadian workers is $10, and German workers produce half as much output per hour as Canadian workers, all else equal, it would be efficient to locate production facilities in:
A)Germany since the cost per unit of output will be higher.
B)Germany since the cost per unit of output will be lower.
C)Canada since the cost per unit of output will be higher.
D)Canada since the cost per unit of output will be lower.

Accepted Answer

Even though Canadian workers have a higher hourly wage, they produce twice as much output per hour as German workers. This means that the cost per unit of output in Canada would be lower than in Germany. Therefore, it would be efficient to locate production facilities in Canada.

Question 12

If the quantity demanded for a good rises as the price falls, the curve representing this relationship will be:
A)upward-sloping.
B)downward-sloping.
C)horizontal.
D)impossible to determine.

Accepted Answer

This is the basic law of demand, which states that as the price of a good decreases, the quantity demanded increases. This relationship is represented by a downward-sloping curve.

Question 13

The Apple iPod has been a trendy product.It was designed by Apple in the United States, manufactured in factories in Asia, and sold throughout the world.Many other firms, both American and foreign, began to try to develop alternatives to the iPod.The iPod is an example of American comparative advantage in:
A)innovation.
B)mass production.
C)hand production.
D)consumerism.

Accepted Answer

The iPod exemplifies American comparative advantage in innovation due to its design and development by Apple, a U.S. company, which led to its global popularity and influence.

Question 14

An inverse relationship occurs between two variables when as one goes:
A)up the other goes up.
B)up the other goes down.
C)up the other does not change.
D)down the other goes down.

Accepted Answer

An inverse relationship occurs when as one variable increases, the other variable decrease. It is a negative correlation.

Question 15

Which of the following is an example of the law of one price in action?
A)Prices are just one of the many factors that firms use when deciding where to locate production.
B)If one county has a comparative advantage in producing a particular good, another country must have a comparative advantage in producing another good.
C)Wages in India are lower than wages in the United States, and so firms move their call centers to India.This tends to raise wages in India and depress wages in the United States.
D)Because most industries in the United States are dominated by one or two firms, the dominant firm sets the price and other firms in the industry follow.

Accepted Answer

The law of one price states that in a perfectly competitive market, identical goods should sell for the same price in different locations. Wages in India being lower than wages in the United States means that firms are able to produce the same good for a lower cost in India. This tends to lead to the price of the good being lower in India than in the United States, as firms take advantage of the lower production costs to offer lower prices to consumers.

Question 16

Refer to the graph below.  Point A represents a price of:
A)3 and a quantity of3.
B)3 and a quantity of5.
C)5 and a quantity of3.
D)5 and a quantity of5.

Accepted Answer

The answer of Refer to the graph below.  Point...

Question 17

According to the law of one price,
A)it is illegal to pay different people different amounts for the same work.
B)it is illegal to charge different people different amounts for the same product.
C)competition, combined with transferable goods and resources, drives the prices of similar goods toward equality.
D)competition, combined with inherent advantages, drives the prices of similar goods toward equality.

Accepted Answer

The law of one price states that in an efficient market, identical goods should have only one price due to competition and the ability to transfer goods and resources.

Question 18

If there is an inverse relationship between two variables, the graph relating the two variables will be:
A)upward-sloping.
B)downward-sloping.
C)vertical.
D)horizontal.

Accepted Answer

An inverse relationship between two variables means that as one variable increases, the other variable decreases. This is represented graphically by a downward-sloping line.

Question 19

If the hourly wage of U.S.workers is $16, the hourly wage of Mexican workers is $2, and U.S.workers produce 9 times as much output per hour as Mexican workers, then, all else equal, it would be efficient to locate production facilities in:
A)the United States since the cost per unit of output will be higher.
B)the United States since the cost per unit of output will be lower.
C)Mexico since the cost per unit of output will be higher.
D)Mexico since the cost per unit of output will be lower.

Accepted Answer

The answer of If the hourly wage of U.S.workers is...

Question 20

If the hourly wage of U.S.workers is $16, the hourly wage of Mexican workers is $2, and U.S.workers produce 5 times as much output per hour as Mexican workers, then, other things equal, it would be efficient to locate production facilities in:
A)the United States since the cost per unit of output will be higher.
B)the United States since the cost per unit of output will be lower.
C)Mexico since the cost per unit of output will be higher.
D)Mexico since the cost per unit of output will be lower.

Accepted Answer

The cost per unit of output is determined by both the hourly wage and the productivity of workers. In this scenario, U.S. workers have a higher hourly wage but also produce 5 times as much output per hour as Mexican workers. Therefore, the cost per unit of output in the U.S. is ($16/5) = $3.20, while the cost per unit of output in Mexico is ($2) = $2.

So, it would be efficient to locate production facilities in Mexico, where the cost per unit of output will be lower.

Quiz 2: The Production Possibility Model, Trade, and Globalization

If there is a direct relationship between two variables, the graph relating those two variables will be:

The text argues that the United States has had a comparative advantage in goods and services that:

What kind of relationship exists between the price of gas and the quantity demanded for gas if the quantity demanded for gas falls when the price of gas increases?

Juan works at Texas Burgers in El Paso and earns $8.00 per hour.His twin brother Felipe works in Mexico Burgers in Ciudad Juarez just across the border and earns $3.00 per hour for exactly the same work.An economist looking at this situation sees:

Adam Smith argued that greater specialization and division of labor are likely to:

Which of the following is an example of the law of one price?

If U.S.workers are paid $16 an hour and Indian workers are paid the equivalent of $4 an hour but U.S.workers can produce four times as many goods as Indian workers in the same amount of time:

Which of the following factors will help the United States regain comparative advantages in industries in which it has lost comparative advantages?

If the hourly wage of German workers is $6, the hourly wage of Canadian workers is $10, and German workers produce half as much output per hour as Canadian workers, all else equal, it would be efficient to locate production facilities in:

If the quantity demanded for a good rises as the price falls, the curve representing this relationship will be:

An inverse relationship occurs between two variables when as one goes:

Which of the following is an example of the law of one price in action?

Refer to the graph below. Point A represents a price of:

According to the law of one price,

If there is an inverse relationship between two variables, the graph relating the two variables will be:

If the hourly wage of U.S.workers is $16, the hourly wage of Mexican workers is $2, and U.S.workers produce 9 times as much output per hour as Mexican workers, then, all else equal, it would be efficient to locate production facilities in:

If the hourly wage of U.S.workers is $16, the hourly wage of Mexican workers is $2, and U.S.workers produce 5 times as much output per hour as Mexican workers, then, other things equal, it would be efficient to locate production facilities in: