Question 1

Mrs.Abel has a comparative advantage in producing cabbage if,in comparison to Mrs.Bee,Mrs.Abel can grow cabbage:
A) with less labor.
B) with fewer inputs.
C) at a lower equilibrium.
D) at a lower opportunity cost.
E) with less technology.

Accepted Answer

Comparative advantage means being able to produce a good at a lower opportunity cost. Therefore, if Mrs. Abel can grow cabbage at a lower opportunity cost than Mrs. Bee, she has a comparative advantage in producing cabbage. The other options do not define comparative advantage.

Question 2

Which of the following would be a consequence in an economy where there is no money?
A) There would be no way to save for the future.
B) There would be no way to borrow.
C) Exchanges would occur more quickly.
D) Exchanges would take longer.
E) There would be no more exchange.

Accepted Answer

The answer of Which of the following would be a...

Question 3

Refer to the following figures to answer the questions that follow.
 
-Which allocation point in the short-run production possibilities frontier (PPF)will lead to the most significant growth in the long-run PPF?
A) point A
B) point B
C) point C
D) point D
E) point E

Accepted Answer

The answer of Refer to the following figures to answer...

Question 4

To determine which of two producers has a comparative advantage,you would need to know:
A) their increasing relative costs.
B) the opportunity costs of production for both goods.
C) their normative beliefs.
D) their zero-sum games.
E) their levels of investment.

Accepted Answer

To determine which of two producers has a comparative advantage, you need to compare the opportunity costs of production for both goods. Opportunity cost is the cost of giving up one opportunity for another, and it helps determine which producer is relatively more efficient at producing a particular good. The other options (increasing relative cost, normative beliefs, zero-sum games, and levels of investment) do not directly relate to comparative advantage.

Question 5

Money eliminated the need for the double coincidence of wants through its role as:
A) fiat, or declared, money.
B) an accounting unit.
C) something to store value.
D) a medium of exchange.
E) a hard currency.

Accepted Answer

Money serves as a medium of exchange, allowing individuals to trade goods and services without the need for a double coincidence of wants. This means that individuals can exchange their goods or services for money, and later use that money to purchase goods or services from others, regardless of whether there is a direct match of preferences or needs.

Question 6

Suppose that Dwight and Jim can either make salads or grill steaks.Their maximum output per hour is listed in the following table.Given the same quantity of resources,at what terms of trade (relative price ratio)could they specialize and trade so that both consume outside their own production possibilities frontiers (PPFs)?

A) 1 salad per 1 steak
B) 2 salads per 1 steak
C) 2.5 salads per 1 steak
D) 3 salads per 1 steak
E) 3.5 salads per 1 steak

Accepted Answer

To consume outside their own PPFs, Dwight and Jim should specialize in producing the good that they have a comparative advantage in producing. To find the comparative advantage, we need to compare the opportunity costs of producing each good for Dwight and Jim. 
For Dwight, the opportunity cost of producing a steak is 1/3 salads, while the opportunity cost of producing a salad is 3 steaks. 
For Jim, the opportunity cost of producing a steak is 1/2 salads, while the opportunity cost of producing a salad is 2 steaks.
Comparing the opportunity costs, we can see that Dwight has a comparative advantage in producing salads, while Jim has a comparative advantage in producing steaks. 
Therefore, they should specialize in producing the good that they have a comparative advantage in, and then trade with each other. 
At a terms of trade of 2.5 salads per 1 steak, Dwight can produce 5 salads and Jim can produce 2 steaks. Together, they would have 5 salads and 2 steaks, which is outside both of their PPFs.

Question 7

When one producer has a comparative advantage in production,he or she:
A) can produce more output than someone else using the same quantity of resources.
B) can produce a good at a lower opportunity cost than someone else.
C) does not benefit from trade with other producers.
D) is unable to reach his or her production possibilities frontier (PPF).
E) trades only with others who have the same comparative advantage.

Accepted Answer

When a producer has a comparative advantage in production, it means that they can produce a good at a lower opportunity cost than someone else. This means that producer can allocate resources more efficiently and produce more output with the same resources, or produce the same output with fewer resources, than another producer. As a result, the producer with the comparative advantage can benefit from trade by specializing in the production of the good they are most efficient at producing and trading with other producers for goods that they are less efficient at producing.

Question 8

In economic terms,how would you state what has happened when your neighbor says he is unwilling to help you mow your lawn because you are unwilling to help him teach his kids how to speak with a British accent?
A) A medium of exchange was unavailable.
B) Your neighbor's unwillingness to mow your lawn reflects a lack of ability to store value.
C) The double coincidence of wants was not satisfied.
D) Money types were not identical.
E) Your unwillingness to provide British-accent tutoring services reflects that too much paper money is available.

Accepted Answer

The situation described is an example of the double coincidence of wants not being satisfied, as both parties have different desires or needs that cannot be fulfilled through direct exchange of goods or services. The neighbor's desire for British accent tutoring services does not directly match with the need for lawn mowing assistance.

Question 9

Suppose Jason is a brilliant attorney who can draft especially persuasive legal briefs.He also happens to possess some excellent administrative skills such as typing,filing,assembling binders and notes,and making reservations.Which best describes whether Jason should hire an administrative assistant to help him?
A) Jason should not hire an administrative assistant because he has an absolute advantage in performing administrative functions.
B) Jason should not hire an administrative assistant because he likely has a comparative advantage in performing administrative functions.
C) Jason should hire an administrative assistant because the assistant would likely have an absolute advantage in writing legal briefs.
D) Jason should hire an administrative assistant because the assistant would likely have a comparative advantage in performing administrative functions.
E) Jason should hire an administrative assistant because the assistant would likely have a comparative advantage in writing legal briefs.

Accepted Answer

Even though Jason has some excellent administrative skills, it is likely that he still has a comparative advantage in performing legal work. Therefore, it would be more efficient for him to hire an administrative assistant who would likely have an absolute advantage in performing administrative functions, thus allowing Jason to focus on the legal work where he has a comparative advantage.

Question 10

When money is acting as a medium of exchange,it:
A) stops you from reselling goods once they are purchased.
B) allows you to delay the purchase of goods.
C) allows you to measure the value of goods precisely.
D) allows you to make exchanges more efficiently.
E) allows you to make exchanges less efficiently.

Accepted Answer

Money acts as a medium of exchange by allowing people to make exchanges more efficiently. Without money, people would have to rely on bartering which can be time-consuming and difficult to make equal exchanges. Money allows for a standard unit of value that can be easily exchanged for goods or services, making transactions faster and more efficient.

Question 11

Refer to the following figures to answer the questions that follow.
 
-Which allocation point in the short-run production possibilities frontier (PPF)will lead to NO growth in the long-run PPF?
A) point A
B) point B
C) point C
D) point D
E) point E

Accepted Answer

Point A represents an inefficient allocation of resources, which will not lead to any growth in the long-run PPF.

Question 12

Consider the following scenario to answer the questions that follow.
On a particular Saturday, Mark Zuckerberg and Bill Gates can either plant trees or spread mulch in their gardens. Their maximum output per day is listed in the following table, along with blanks where you can calculate the opportunity cost.
 
-At what terms of trade (relative price ratio)could Zuckerberg and Gates specialize and trade with one another so that both have more trees planted and mulch spread than they could accomplish on their own?
A) 12 trees planted per 12 cubic yards of mulch spread
B) 10 trees planted per 12 cubic yards of mulch spread
C) 9 trees planted per 12 cubic yards of mulch spread
D) 7 trees planted per 12 cubic yards of mulch spread
E) 5 trees planted per 12 cubic yards of mulch spread

Accepted Answer

For both Zuckerberg and Gates to benefit from trade, the terms of trade must fall between their opportunity costs. If Zuckerberg's opportunity cost is higher than Gates' for planting trees, then the terms of trade should be less than Zuckerberg's opportunity cost but more than Gates'. Option D provides a ratio that is likely to fall within this range, allowing both to specialize and trade beneficially.

Question 13

You have a comparative advantage in producing a good whenever:
A) you enjoy producing that good.
B) you can produce more of the good than someone else can using the same resources.
C) your opportunity cost is constant.
D) your opportunity cost of producing that good is lower than that of other producers.
E) you have specific training in the production of that good.

Accepted Answer

Comparative advantage is determined by the opportunity cost of producing a good. If a producer has a lower opportunity cost of producing a good than another producer, then they have a comparative advantage in producing that good. Therefore, option D is the correct answer. Option A is incorrect as enjoyment of producing a good does not necessarily determine comparative advantage. Option B is incorrect as the question is comparing your production to that of another individual, not to the maximum potential production. Option C is also incorrect as comparative advantage is determined by the opportunity cost, which may vary based on the level of production. Option E could be a factor, but not necessarily the determining factor in determining comparative advantage.

Question 14

If Heather can sell paper at a lower opportunity cost than Eitan can,then ________ has a(n)________ advantage in paper sales.
A) Heather; absolute
B) Eitan; absolute
C) Heather; positive
D) Heather; comparative
E) Eitan; comparative

Accepted Answer

The question is asking about comparative advantage which is the ability to produce a good or service at a lower opportunity cost. Therefore, if Heather can sell paper at a lower opportunity cost than Eitan, she has a comparative advantage in paper sales. The answer is not A or B because absolute advantage refers to the ability to produce more of a good or service in a given time period with a given amount of resources. The answer is not C or E because positive advantage is not a commonly used term in economics.

Question 15

The ability of one producer to produce a good at a lower opportunity cost than another producer is called:
A) a normative statement.
B) a zero-sum game.
C) absolute advantage.
D) comparative advantage.
E) the law of increasing relative cost.

Accepted Answer

The ability of one producer to produce a good at a lower opportunity cost than another producer is called comparative advantage. This concept is important in trade theory and explains why countries can benefit from trade even if one country can produce all goods more efficiently than another country.

Question 16

Suppose that Sheldon and Leonard can either run errands or wash dishes.Their maximum output per hour is listed in the following table.Given the same quantity of resources,at what terms of trade (relative price ratio)could they specialize and trade so that both consume outside their own production possibilities frontiers (PPFs)?

A) 1 errand run per 75 dishes washed
B) 1 errand run per 30 dishes washed
C) 1 errand run per 12 dishes washed
D) 1 errand run per 10 dishes washed
E) 1 errand run per 6 dishes washed

Accepted Answer

The answer of Suppose that Sheldon and Leonard can either...

Question 17

Which of the following would NOT lead to an outward shift of a future production possibilities frontier (PPF)?
A) population growth
B) increased investment today
C) an increase in technology
D) the discovery of new resources
E) a decline in life expectancy

Accepted Answer

A decline in life expectancy would lead to a decrease in available labor and potentially a decrease in technological progress, which would not lead to an outward shift of a future production possibilities frontier.

Question 18

For both parties to benefit from specialization and trade,the trading parties must agree on:
A) a price somewhere between their opportunity costs of production.
B) a plan not to trade with other parties.
C) who has the absolute advantage in production.
D) the appropriate level of investment for the future.
E) the source of comparative advantage.

Accepted Answer

In order for both parties to benefit, they must agree on a price that is between their opportunity costs of production. This ensures that both parties receive a surplus from the trade and are better off. A plan not to trade with other parties, who has the absolute advantage in production, the appropriate level of investment for the future, and the source of comparative advantage are not necessary for specialization and trade to be beneficial.

Question 19

Why is the barter method of exchange NOT more common in the U.S.economy?
A) The double coincidence of wants frequently occurs.
B) The value of money is too low.
C) The value of money is too high.
D) The double coincidence of wants infrequently occurs.
E) The amount of money in the economy is easy to measure.

Accepted Answer

The barter method of exchange requires a double coincidence of wants between two parties, meaning that each party must have something the other party wants in exchange for what they have. It can be difficult to find someone who has a desired good or service and also wants what you have to offer in exchange. Therefore, the double coincidence of wants infrequently occurs, making the barter method of exchange less common in the U.S. economy.

Question 20

If Elaine can produce more output from a set amount of resources than Jerry can,you know that ________ has a(n)________ advantage.
A) Elaine; comparative
B) Jerry; comparative
C) Elaine; absolute
D) Jerry; absolute
E) Elaine; normative

Accepted Answer

If Elaine can produce more output from a set amount of resources than Jerry can, then Elaine has an absolute advantage. This is because she can produce more output than Jerry regardless of the resource amount available. Comparative advantage considers the opportunity cost of producing a good relative to producing other goods, so it is not relevant in this scenario. Normative advantage involves making value judgments, so it is also not applicable here.

Quiz 2: Economic Models and Gains From Trade

Mrs.Abel has a comparative advantage in producing cabbage if,in comparison to Mrs.Bee,Mrs.Abel can grow cabbage:

Which of the following would be a consequence in an economy where there is no money?

Refer to the following figures to answer the questions that follow. -Which allocation point in the short-run production possibilities frontier (PPF) will lead to the most significant growth in the long-run PPF?

To determine which of two producers has a comparative advantage,you would need to know:

Money eliminated the need for the double coincidence of wants through its role as:

When one producer has a comparative advantage in production,he or she:

In economic terms,how would you state what has happened when your neighbor says he is unwilling to help you mow your lawn because you are unwilling to help him teach his kids how to speak with a British accent?

When money is acting as a medium of exchange,it:

Refer to the following figures to answer the questions that follow. -Which allocation point in the short-run production possibilities frontier (PPF) will lead to NO growth in the long-run PPF?

You have a comparative advantage in producing a good whenever:

If Heather can sell paper at a lower opportunity cost than Eitan can,then has a(n) advantage in paper sales.

The ability of one producer to produce a good at a lower opportunity cost than another producer is called:

Which of the following would NOT lead to an outward shift of a future production possibilities frontier (PPF) ?

For both parties to benefit from specialization and trade,the trading parties must agree on:

Why is the barter method of exchange NOT more common in the U.S.economy?

If Elaine can produce more output from a set amount of resources than Jerry can,you know that has a(n) advantage.