Question 1

Which is an example of capital in the production process of an amusement park?

Accepted Answer

Capital refers to man-made resources used in the production process, such as machinery and equipment. The roller coaster is a prime example of capital in an amusement park as it is a man-made resource used to produce the service (the amusement park experience). The other choices, such as the electricity or the ticket-taker, may be considered factors of production but not capital.

Question 2

If countries specialized and then traded, world production would increase.

Accepted Answer

When countries specialize in producing goods and services that they can produce efficiently and trade with other countries, each country can benefit from the other country's specialization, leading to an increase in the overall production and efficiency of the global economy. This is known as comparative advantage, and it allows for greater efficiency and productivity, thereby increasing world production.

Question 3

As it relates to the production possibilities frontier, an increase in technology for one good while holding all else constant will cause a complete outward shift of the production possibilities frontier.

Accepted Answer

An increase in technology for one good, while holding all else constant, will cause the production possibilities frontier to shift outward specifically for that good, not a complete outward shift for all goods.

Question 4

According to the law of comparative advantage, when one country sells goods for which it has the comparative advantage in production and buys goods for which it does not have the comparative advantage in production

Accepted Answer

The law of comparative advantage states that if each country specializes in producing the goods for which it has the comparative advantage, then total output can be expanded and all countries can benefit from trade. Therefore, the correct option is C, as total output to each person can be expanded.

Question 5

If an economy faces increasing opportunity costs with respect to the production of two goods, then the production possibilities frontier between the two goods will be

Accepted Answer

When an economy faces increasing opportunity costs, it means that to produce more of one good, it has to give up increasingly more of the other good. This scenario creates a production possibilities frontier (PPF) that is bowed outward, reflecting the increasing cost of shifting resources from the production of one good to the other.

Question 6

_____ occurs when goods and services are produced with as few resources as possible, while _____ occurs when the mix of goods and services produced is the most desired by society.

Accepted Answer

Production efficiency occurs when goods and services are produced with as few resources as possible, and allocative efficiency occurs when the mix of goods and services produced is the most desired by society.

Question 7

If a society's production possibilities frontier shifts to the right

Accepted Answer

An increase in a society's production possibilities frontier indicates that there has been an increase in its resources or technological progress, allowing for the production of more goods and services. Therefore, the correct answer is D - there is likely an increase in the society's resources. The other choices are incorrect because the society's standard of living is likely to increase (not decrease) with a rightward shift, the society may choose to produce more of both goods instead of having to choose a different mix (not B), and there is no requirement for a decrease in production in other industries.

Question 8

Which are the principal resources that can be changed through actions taken by the government?

Accepted Answer

The government can influence both capital and labor through various policies and actions, such as investing in infrastructure or education, changing labor laws, and implementing tax incentives or subsidies.

Question 9

If the United States has a comparative advantage over France in producing corn, the opportunity cost of the United States producing corn is lower than France's opportunity cost of producing corn.

Accepted Answer

If the US has a comparative advantage in producing corn, it means that they can produce corn at a lower opportunity cost than France. This means that the US has to give up fewer resources and production of other goods in order to produce corn.

Question 10

The payment toward land is called

Accepted Answer

Rent is the payment made for the use of land or real estate. It is a specific term used in economics to describe the income earned from land or property.

Question 11

In economics, the payment toward capital is called

Accepted Answer

The payment toward capital is called interest. Wages are payments to labor, capitalization is the process of calculating the value of a company's assets, and profit is the revenue minus expenses.

Question 12

(Table) Based on the table

Accepted Answer

Both countries can gain from trade as they have different comparative advantages in production. While Canada has a comparative advantage in producing steel, Mexico has a comparative advantage in producing corn. By specializing in their respective areas of comparative advantage and then trading with each other, both countries can increase their overall economic welfare. Canada can obtain corn at a lower price from Mexico than it can produce domestically, and Mexico can obtain steel from Canada at a lower price than it can produce domestically. As a result, both countries can benefit from the trade between them.

Question 13

The two basic determinants of economic growth are _____ and _____.

Accepted Answer

Expanding resources (such as through population growth or natural resource discoveries) and improving technologies (such as through research and development or innovation) are the two basic determinants of economic growth. The other choices listed do not directly relate to economic growth.

Question 14

(Figure: PPF of Econia (a small nation)) Looking at the production possibilities frontier (PPF) of Econia, assume that the country is producing at point D. All of the 300 bales of wheat are eaten but some people remain hungry. Over 100 of the 520 bales of cotton remain unused. Which statement is correct regarding efficiency in Econia?

Accepted Answer

Point D on the production possibilities frontier (PPF) represents a situation of inefficiency in Econia as it is producing less than it is capable of. Specifically, while all 300 bales of wheat are being used, over 100 of the 520 bales of cotton remain unused. Moving to point B on the PPF would result in both greater production and allocative efficiency. At point B, the country would produce more of both cotton and wheat (compared to point D) and could allocate resources in such a way as to eliminate hunger while also reducing the amount of cotton that goes unused. Therefore, D is an inefficient point of production, and moving to B would improve both production and allocative efficiency.

Question 15

Economists refer to the payment toward capital as

Accepted Answer

Economists refer to the payment towards capital as interest, which is the return on investment for providing funds for a project or enterprise. Rent refers to the payment towards the use of a physical asset such as land or building, wages are the payment towards labor, and profit is the surplus revenue after all expenses have been paid.

Question 16

Which is considered a land resource?

Accepted Answer

Mineral deposits are considered a land resource as they are found within the earth's crust and are a naturally occurring asset. The other options, such as a sewing machine, an apprentice, and a copier, are not considered land resources but instead fall under the categories of capital, labor, and equipment respectively.

Question 17

Much of the economic growth we have seen over the past century has been due to population growth.

Accepted Answer

The answer of Much of the economic growth we have...

Question 18

The graph we could draw to represent the combinations of two goods that are possible within a given society at full employment is a(n)

Accepted Answer

The production possibilities frontier represents the maximum combinations of two goods that can be produced using all available resources in a given society at full employment. It shows the trade-offs between producing different goods and the costs associated with producing one good over another. Therefore, the production possibilities frontier is the best representation of the combinations of two goods that are possible within a given society at full employment.

Question 19

If there are two goods and two countries, then one country can have both an absolute and a comparative advantage in both goods.

Accepted Answer

If one country has an absolute advantage in one good, then it cannot have an absolute advantage in the other good. Additionally, if one country has a comparative advantage in one good, then the other country must have a comparative advantage in the other good due to the principle of opportunity cost. Therefore, one country cannot have both an absolute and a comparative advantage in both goods.

Question 20

(Figure: Bread and Honey) As more honey is produced, the opportunity cost of producing honey

Accepted Answer

As more honey is produced, the opportunity cost of producing honey increases. This can be seen in the graph where the production possibility curve is concave to the origin, indicating increasing opportunity cost. Therefore, the answer is B.

Quiz 2: Production, Economic Growth, and Trade