Question 1

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 implies that the rate at which Anne can switch between writing term papers and completing homework assignments is constant. This means that she can allocate her time and resources between the two activities in a fixed ratio, without encountering any diminishing returns or increasing opportunity costs. Option A is incorrect because there is always a trade-off between different activities when resources are limited. Option C is incorrect because the rate of switching varies based on the initial allocation of resources. Option D is incorrect because the requirement of spending half of the time on each activity does not necessarily imply a straight line production possibilities frontier.

Question 2

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

D

Question 3

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 a constant opportunity cost, which means the rate of tradeoff between the two goods being produced is constant. This means that producing one more unit of a good always requires giving up the same amount of the other good.

Question 4

A certain cowboy spends 10 hours per day mending fences and herding cattle.For the cowboy,a graph that shows his various possible mixes of output (fences mended per day and cattle herded 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 cowboy (fences mended per day and cattle herded per day) is known as his production possibilities frontier (PPF) because it illustrates the maximum amount of output that can be obtained by him given his limited resources (i.e. 10 hours per day). The PPF shows the trade-offs between the two outputs, indicating that increasing one output will lead to a decrease in the other output, illustrating the concept of opportunity cost. Therefore, the best choice is C.

Question 5

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 6

People who provide you with goods and services
A) are acting out of generosity.
B) do so because they get something in return.
C) have chosen not to become interdependent.
D) are required to do so by the government.

Accepted Answer

People who provide goods and services do so because they receive something in return, usually money or another form of compensation. This is the basic principle of trade and commerce, where people offer their skills, products or services in exchange for something they need or want.

Question 7

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

If they choose not to trade with one another, their production and consumption possibilities will be limited to what they can produce on their own, represented by their individual production possibilities frontiers. Trade enables individuals to consume beyond their production possibilities frontiers, but since there are only two individuals in this scenario, there is no opportunity for trade. Therefore, the best choice is D.

Question 8

Which of the following is not a reason people choose to depend on others for goods and services?
A) to improve their lives
B) to allow them to enjoy a greater variety of goods and services
C) to consume more of each good without working any more hours
D) to allow people to produce outside their production possibilities frontiers

Accepted Answer

Depending on others for goods and services cannot allow people to produce outside their production possibilities frontiers. This option does not make sense and is not a valid reason for choosing to depend on others. The other options (A, B, and C) are valid reasons why people choose to depend on others for goods and services.

Question 9

When an economist points out that you and millions of other people are interdependent,he or she is referring to the fact that we all
A) rely upon the government to provide us with the basic necessities of life.
B) rely upon one another for the goods and services we consume.
C) have similar tastes and abilities.
D) are concerned about one another's well-being.

Accepted Answer

An economist pointing out interdependence is highlighting that we all rely on each other for goods and services. No one person can produce all the goods and services they need themselves, so we must rely on others to provide what we need. This is the foundation of a market economy.

Question 10

Regan grows flowers and makes ceramic vases.Jayson also grows flowers and makes ceramic vases,but Regan is better at producing both goods.In this case,trade could
A) benefit both Jayson and Regan.
B) benefit Jayson, but not Regan.
C) benefit Regan, but not Jayson.
D) benefit neither Jayson nor Regan.

Accepted Answer

Since Regan is better at producing both goods, she has a comparative advantage in both activities. This means that she can produce both goods at a lower opportunity cost than Jayson. Therefore, they can both benefit from trade. For example, Regan can specialize in flower production, while Jayson can specialize in vase production. By trading, they can both obtain more of both goods than they would have been able to produce on their own.

Question 11

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 12

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 illustrates the combinations of output that an economy can produce, given its resources and technology. It does not provide information on what an economy should produce or consume, which are subjective decisions based on societal values and preferences. Therefore, only choice C is correct.

Question 13

Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate.
 
-Refer to Table 3-1.Which of the following combinations of wheat and beef could Andia produce in one 8-hour day?
A) 6 bushels of wheat and 35 pounds of beef
B) 9 bushels of wheat and 25 pounds of beef
C) 15 bushels of wheat and 20 pounds of beef
D) 24 bushels of wheat and 40 pounds of beef

Accepted Answer

The answer of Table 3-1
Assume that Andia and Zardia can...

Question 14

When can two countries gain from trading two goods?
A) when the first country can only produce the first good and the second country can only produce the second good
B) when the first country can produce both goods, but can only produce the second good at great cost, and the second country can produce both goods, but can only produce the first good at great cost
C) when the first country is better at producing both goods and the second country is worse at producing both goods
D) Two countries could gain from trading two goods under all of the above conditions.

Accepted Answer

Two countries can gain from trading two goods under any of the conditions mentioned in options A, B, and C. In option A, both countries have a comparative advantage in producing one good each, which creates an opportunity for mutually beneficial trade. In option B, both countries have a comparative advantage in producing one good each, but the opportunity for trade arises because of differences in the relative costs of production. In option C, even when one country is better at producing both goods, it can still gain from trade because the other country has a comparatively lower opportunity cost of producing one of the goods, resulting in gains from trade for both countries.

Question 15

Ben bakes bread and Shawna knits sweaters.Ben and Shawna both like to eat bread and wear sweaters.In which of the following cases is it impossible for both Ben and Shawna to benefit from trade?
A) Ben cannot knit sweaters and Shawna cannot bake bread.
B) Ben is better than Shawna at baking bread and Shawna is better than Ben at knitting sweaters.
C) Ben is better than Shawna at baking bread and at knitting sweaters.
D) Both Ben and Shawna can benefit from trade in all of the above cases.

Accepted Answer

Both Ben and Shawna can benefit from trade in all of the above cases because they have different skills and preferences.

Question 16

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

Accepted Answer

In this case, Pocoyo and Pato cannot benefit from trade because Pocoyo does not like vegetables and Pato does not like cookies. Therefore, even if they trade, they will not be able to consume what they receive. In all other options, there is a possibility of trade benefiting both parties.

Question 17

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 18

Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate.
 
-Refer to Table 3-1.Assume that Andia and Zardia each has 360 minutes available.If each person divides his time equally between the production of wheat and beef,then total production is
A) 10.5 bushels of wheat and 16.5 pounds of beef.
B) 21 bushels of wheat and 33 pounds of beef.
C) 35 bushels of wheat and 22 pounds of beef.
D) 42 bushels of wheat and 66 pounds of beef.

Accepted Answer

Each person has 360 minutes, so each can spend 180 minutes on each product. Andia can produce 3 bushels of wheat and 3 pounds of beef in 60 minutes each, so in 180 minutes, she can produce 9 bushels of wheat and 9 pounds of beef. Zardia can produce 2 bushels of wheat and 5 pounds of beef in 60 minutes each, so in 180 minutes, she can produce 6 bushels of wheat and 15 pounds of beef. Therefore, the total production is 15 bushels of wheat and 24 pounds of beef. (9+6=15, 9+15=24)

Question 19

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

Through specialization and trade, countries and individuals can focus on producing goods and services at which they have a comparative advantage, leading to increased productivity and output. This allows for greater consumption of goods and services than would otherwise be possible, ultimately leading to higher standards of living.

Question 20

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

For a self-sufficient producer, they produce what they consume and consume what they produce. Therefore, the production possibilities frontier and the consumption possibilities frontier are the same.

Quiz 3: Interdependence and the Gains 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?

A production possibilities frontier is a straight line when

A certain cowboy spends 10 hours per day mending fences and herding cattle.For the cowboy,a graph that shows his various possible mixes of output (fences mended per day and cattle herded per day) is called his

A production possibilities frontier is bowed outward when

People who provide you with goods and services

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

Which of the following is not a reason people choose to depend on others for goods and services?

When an economist points out that you and millions of other people are interdependent,he or she is referring to the fact that we all

Regan grows flowers and makes ceramic vases.Jayson also grows flowers and makes ceramic vases,but Regan is better at producing both goods.In this case,trade could

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

The production possibilities frontier illustrates

Table 3-1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-1.Which of the following combinations of wheat and beef could Andia produce in one 8-hour day?

When can two countries gain from trading two goods?

Ben bakes bread and Shawna knits sweaters.Ben and Shawna both like to eat bread and wear sweaters.In which of the following cases is it impossible for both Ben and Shawna to benefit from trade?

Pocoyo bakes cookies and Pato grows vegetables.In which of the following cases is it impossible for both Pocoyo and Pato to benefit from trade?

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 3-1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-1.Assume that Andia and Zardia each has 360 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

For a self-sufficient producer,the production possibilities frontier