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According to the graph, if production is occurring at point A, the opportunity cost of producing 10 more shirts is |
| | A) | 105 pairs of pants. |
| | B) | 110 pairs of pants. |
| | C) | 1 pair of pants per shirt. |
| | D) | 5 pairs of pants. |
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2 | |
When resources are better suited for some productive uses than for others, this causes the PPC to be |
| | A) | bowed out. |
| | B) | upward sloping. |
| | C) | downward sloping. |
| | D) | straight. |
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3 | |
Which of the following reflects the principle of increasing marginal opportunity cost? |
| | A) | Two hamburgers cost twice as much as one hamburger. |
| | B) | A large soda costs more than a small soda. |
| | C) | Two more hours studying per week could raise your grade from a C to a B, but to raise it from a B to an A, would require 7 hours more per week. |
| | D) | Marginal costs increase whenever marginal benefits do. |
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4 | |
When trade is voluntary, |
| | A) | only the seller benefits. |
| | B) | only the buyer benefits. |
| | C) | either the buyer or the seller can benefit, but not both. |
| | D) | both the buyer and the seller benefit. |
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5 | |
If online economics courses can be created and administered in the United States for $1500 per pupil but equivalent courses can be created and administered in India for $150 per pupil, then the law of one price suggests |
| | A) | there will be strong economic pressure to outsource such courses to India. |
| | B) | the eventual price of such courses will be $1625. |
| | C) | there will be strong economic pressure to insource such courses to the US. |
| | D) | Americans will be made worse off by outsourcing. |
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6 | |
Economists argue that the key benefit of countries engaging in trade based on comparative advantage, is that it |
| | A) | allows both counties to consume beyond their individual PPCs because each of the traded goods is produced in the country with the lowest opportunity cost. |
| | B) | allows countries to produce efficiently inside their individual PPCs. |
| | C) | is the only way both countries can consume on their individual PPCs. |
| | D) | allows both countries to maximize the opportunity costs of each of the goods they produce. |
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7 | |
Which of the following is a reason real-world international trade can be difficult? |
| | A) | most modern countries can produce everything themselves. |
| | B) | many countries, especially poor ones, don't have a comparative advantage in anything. |
| | C) | international trade requires complex rules and laws which are usually enforced by the government. However, there is no central world government and many countries lack effective national governments. |
| | D) | One country's gains from trade comes at another's expense so they won't want to trade. |
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8 | |
The reasons economists give for government intervention in the market can be summed up by the phrase |
| | A) | Invisible Hand |
| | B) | market failures |
| | C) | laissez faire |
| | D) | government failures |
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9 | |
It is difficult for the market to provide appropriate levels of a public good because |
| | A) | the good is already being provided by the government. |
| | B) | firms know they can set a very high price for public goods. |
| | C) | markets are good for profits but not for efficiency. |
| | D) | free riders may refuse to pay for a good in the hope that others will. |
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10 | |
If all of society's resources are fully and efficiently employed, then it must be producing |
| | A) | At the lower right of the PPC. |
| | B) | At some point on the PPC. |
| | C) | Above the PPC. |
| | D) | below the PPC. |
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