Question 1

Suppose that,given the same number of workers,the United States can produce five times as many computers or 10 times as many airplanes as Mexico.Which of the following statements is true?
A)The United States has an absolute advantage in the production of computers,and Mexico has an absolute advantage in the production of airplanes.
B)The United States has an absolute advantage in the production of airplanes,and Mexico has an absolute advantage in the production of computers.
C)The United States has an absolute advantage in the production of both airplanes and computers.
D)Mexico has an absolute advantage in the production of both airplanes and computers.

Accepted Answer

C

Question 2

Trade:
A)involves a winner and a loser.
B)often hurts both parties in the long run.
C)is a zero sum proposition.
D)can benefit both parties.

Accepted Answer

Trade can benefit both parties. Through trade, each party can specialize in producing what they are most efficient at, leading to increased efficiency and economic growth. Additionally, it can increase competition, leading to lower prices and improved product quality for consumers.

Question 3

A more realistic production possibilities curve:
A)is more convex than one assuming constant opportunity costs.
B)is more convex than one assuming increasing opportunity costs.
C)is more concave than one assuming constant opportunity costs.
D)is straighter than one assuming constant opportunity costs.

Accepted Answer

A more realistic production possibilities curve would have a concave shape because it would assume that resources are not perfectly adaptable to alternative uses, and that as production of one good increases, more and more resources would need to be diverted from the other good, leading to increasing opportunity costs.

Question 4

The concept of the invisible hand was first introduced to economics by:
A)David Ricardo.
B)Adam Smith.
C)Thomas Malthus.
D)Milton Friedman.

Accepted Answer

The concept of the invisible hand was first introduced to economics by Adam Smith in his book "The Wealth of Nations" published in 1776. Smith argued that the self-interested actions of individuals in a free market economy ultimately benefit society as a whole through the invisible hand of the market.

Question 5

Suppose that,given the same number of workers,the United States can produce two times as many TVs or 20 times as many potatoes as Chile.Which of the following statements is true?
A)Chile should trade with the United States for potatoes because the United States has an absolute advantage in the production of potatoes.
B)Chile should trade with the United States for TVs because the United States has an absolute advantage in the production of potatoes.
C)The United States can benefit from trading TVs but not potatoes with Chile.
D)None of these statements is necessarily true.

Accepted Answer

The United States has an absolute advantage in the production of both TVs and potatoes. Therefore, Chile should trade with the United States for both TVs and potatoes.

Question 6

If a country possesses the absolute advantage in the production of one good:
A)then it must also possess the absolute advantage in the production of the other good.
B)then it must also possess the comparative advantage in the production of that good.
C)then it must also possess the comparative advantage in the production of the other good.
D)it can produce more of that good given the same resources.

Accepted Answer

Possessing absolute advantage in the production of one good means that the country can produce more of that good given the same resources. Therefore, the country can specialize in the production of that good and achieve higher productivity and efficiency. However, it does not necessarily mean that the country possesses comparative advantage in the production of that good or any other good. Comparative advantage takes into account the opportunity cost of producing one good in terms of foregone production of another good.

Question 7

Choosing to produce at any point within a production possibilities frontier:
A)is inefficient,meaning the society would not be using all its available resources in their best possible use.
B)is efficient,meaning the society would be using all its available resources in their best possible use.
C)is unobtainable,meaning the society cannot produce that combination of goods.
D)is efficient,meaning the society would be using all its available resources,though not in their best use.

Accepted Answer

The answer of Choosing to produce at any point within...

Question 8

If we consider the reality that each worker has different skills,then the production possibilities frontier:
A)would display a constant opportunity cost of a good as more of that good is produced.
B)would display a decreasing opportunity cost of a good as more of that good is produced.
C)would display an increasing opportunity cost of a good as more of that good is produced.
D)cannot be drawn,as too many variables would need to be taken into consideration.

Accepted Answer

If each worker has different skills, then the production possibilities frontier would display an increasing opportunity cost of a good as more of that good is produced. As more units of a good are produced, workers with fewer skills would need to be diverted from the production of other goods, leading to a higher opportunity cost for each additional unit produced.

Question 9

The invisible hand refers to:
A)the coordination that occurs from everyone working in their own self-interest.
B)the coordination that occurs from a government agency finding efficiencies.
C)the coordination that occurs from everyone working for the overall good of society.
D)the coordination that occurs from a government coordinating economic activity.

Accepted Answer

The concept of the invisible hand refers to the idea that the market economy tends to self-organize and allocate resources efficiently when individuals act in their own self-interest. This idea was popularized by economist Adam Smith, who believed that a self-regulating market system would lead to the greatest overall benefit for society.

Question 10

A production possibilities frontier is a line or curve that:
A)shows all the possible combinations of outputs that can be produced using all available resources.
B)shows what can be produced when all available resources are efficiently used.
C)shows the best combinations of outputs that can be produced using all available resources.
D)explains why societies make the choices they do.

Accepted Answer

The answer of A production possibilities frontier is a line...

Question 11

The concepts of specialization and gains from trade explain:
A)international trade.
B)why globalization has expanded recently.
C)consumer decisions.
D)both international trade and the choices individuals make.

Accepted Answer

The concepts of specialization and gains from trade explain both international trade and the choices individuals make. Specialization allows individuals or countries to focus on producing goods or services in which they have a comparative advantage, while gains from trade occur when individuals or countries exchange with each other, benefiting from each other's specialized production. These concepts are fundamental to understanding the benefits of international trade and the choices individuals make in deciding how to allocate their time and resources.

Question 12

Trade:
A)only benefits the stronger nation.
B)only benefits the weaker nation.
C)can benefit everyone involved.
D)can only benefit one party of the trade,but we cannot say which without more information.

Accepted Answer

Trade can benefit everyone involved by allowing countries to specialize in producing the goods they are most efficient at, leading to increased productivity and economic growth. This can result in both increased exports and imports, leading to a mutually beneficial situation for both the stronger and weaker nations involved in the trade.

Question 13

An increase in productivity as a result of a new technology would cause the production possibilities frontier to:
A)shift in.
B)shift out.
C)not move until society chose to move it.
D)become more meaningful in policy decisions.

Accepted Answer

An increase in productivity would allow for an increase in output using the same amount of inputs. This means that the economy can produce more goods and services than before. As a result, the production possibilities frontier would shift outwards, indicating the ability to produce more of both goods or services.

Question 14

Trade:
A)increases total production,which can benefit everyone involved.
B)increases total production,which benefits only the more wealthy nation.
C)decreases total production across nations,but increases it for some.
D)decreases total production across nations,but benefits everyone because they are individually more productive.

Accepted Answer

Trade allows countries to specialize in producing the goods and services that they are most efficient at producing, leading to an increase in total production. This can benefit everyone involved as it allows for greater economic growth and a wider variety of goods and services available.

Question 15

The production possibilities frontier:
A)can show all possible combinations of goods,but not tell us which society should choose.
B)can show all possible combinations of goods,and which society should choose.
C)cannot show all possible combinations of goods because society is typically inefficient.
D)can show us which possible combinations of goods society should choose,but cannot tell us which points will be inefficient.

Accepted Answer

The production possibilities frontier shows all the possible combinations of goods that a society can produce given its resources and technology. However, it does not provide any guidance on which combination a society should choose. This depends on the society's preferences and priorities, which are not captured by the production possibilities frontier alone. Therefore, option A is the correct answer.

Question 16

If a wealthy nation like the United States trades with a poorer,less developed nation like Cambodia,then it is likely true that:
A)the United States is taking advantage of Cambodia and is the only beneficiary to the trade.
B)Cambodia is pressured to enter trade and not benefiting at all.
C)both the United States and Cambodia can benefit from trading.
D)the United States is being charitable and not benefiting from the trade at all.

Accepted Answer

Both the United States and Cambodia can benefit from trading. Trade allows both countries to specialize in what they do best and exchange goods and services. The United States may import goods from Cambodia that are cheaper to produce, while Cambodia may export goods and services that are in higher demand in the United States. Therefore, both countries can benefit from participating in trade.

Question 17

Hurricane Katrina destroyed much of New Orleans and other parts of the South.Which of the following statements is true?
A)The hurricane caused the production possibilities frontier of the United States to shift in.
B)The hurricane caused the production possibilities to increase,since it created a lot of work to rebuild the city and surrounding areas.
C)The hurricane caused the production possibilities frontier of the United States to shift out.
D)None of these statements is true.

Accepted Answer

The destruction caused by Hurricane Katrina reduced the available resources and infrastructure, leading to a decrease in the economy's capacity to produce goods and services, thus shifting the production possibilities frontier inward.

Question 18

The slope of a production possibilities frontier measures:
A)the opportunity cost of producing one good in terms of the other.
B)the trade-off inherent in the production of one good versus the other.
C)how much of one good that must be given up in order to produce the other.
D)All of these statements are true.

Accepted Answer

The slope of a production possibilities frontier measures all of the above statements. It represents the opportunity cost of producing one good in terms of the other, which is the trade-off inherent in the production of one good versus the other, and also indicates how much of one good must be given up in order to produce the other.

Question 19

If we consider the reality that each worker has different skills,then the production possibilities frontier:
A)would have a convex shape.
B)would have a concave shape.
C)would be a straight line.
D)would shift outward.

Accepted Answer

When each worker has different skills, the production possibilities frontier would have a concave shape because as more of a certain good is produced, the opportunity cost of producing that good increases as resources must be shifted away from producing other goods where those skilled workers would be more productive. This leads to decreasing marginal returns and a concave shape.

Question 20

If society were to experience an increase in its available resources:
A)its production possibilities frontier would shift out.
B)its production possibilities frontier would shift in.
C)its production possibilities frontier would not move,but society could change its production choice.
D)its production possibilities frontier would become convex.

Accepted Answer

An increase in available resources would allow for more output without sacrificing the production of other goods. This would result in a shift out of the production possibilities frontier as the economy could produce more of both goods.

Quiz 2: Specialization and Exchange

Suppose that,given the same number of workers,the United States can produce five times as many computers or 10 times as many airplanes as Mexico.Which of the following statements is true?

Trade:

A more realistic production possibilities curve:

The concept of the invisible hand was first introduced to economics by:

Suppose that,given the same number of workers,the United States can produce two times as many TVs or 20 times as many potatoes as Chile.Which of the following statements is true?

If a country possesses the absolute advantage in the production of one good:

Choosing to produce at any point within a production possibilities frontier:

If we consider the reality that each worker has different skills,then the production possibilities frontier:

The invisible hand refers to:

A production possibilities frontier is a line or curve that:

The concepts of specialization and gains from trade explain:

Trade:

An increase in productivity as a result of a new technology would cause the production possibilities frontier to:

Trade:

The production possibilities frontier:

If a wealthy nation like the United States trades with a poorer,less developed nation like Cambodia,then it is likely true that:

Hurricane Katrina destroyed much of New Orleans and other parts of the South.Which of the following statements is true?

The slope of a production possibilities frontier measures:

If we consider the reality that each worker has different skills,then the production possibilities frontier:

If society were to experience an increase in its available resources: