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1

If you move along the production possibility curve and the opportunity cost of producing one good in terms of another never changes, it follows that the production possibility curve:
A)must be a straight line.
B)must be bowed out.
C)must be bowed in.
D)has an indeterminate shape.
2

Comparative advantage arises because:
A)not all resources are equally effective in the production of all goods.
B)all resources are equally effective in the production of all goods.
C)specialization and the division of labor increase efficiency.
D)specialization and the division of labor help markets function more effectively.
3

When you produce wheat, it is relatively inexpensive to produce it initially, but then per unit costs tend to increase as more is produced. This is an example of:
A)increasing marginal opportunity costs.
B)constant marginal opportunity costs.
C)decreasing marginal opportunity costs.
D)none of the above.
4

Suppose that it takes one unit of labor to produce a banjo and one unit of labor to produce a guitar no matter how many of each are produced. Suppose further that labor is the only input in the economy and banjos and guitars are the only outputs. In this case, marginal opportunity cost:
A)is decreasing.
B)is increasing.
C)is constant.
D)cannot be determined.
5

Points inside the production possibilities curve are:
A)unattainable and inefficient.
B)attainable and efficient.
C)unattainable and efficient.
D)attainable and inefficient.
6

An increase in productive resources available for use in an economy will:
A)imply that the law of increasing costs no longer applies.
B)shift the production possibilities curve inward.
C)shift the production possibilities curve outward.
D)have no effect on the production possibilities curve.
7

A country's pattern of comparative advantage:
A)does not change over time.
B)can change over time.
C)determines whether or not it gains from trade.
D)does not depend on the cost of its inputs.
8

The phenomenon of outsourcing is the result of the force of which law?
A)Law of diminishing marginal product.
B)Law of the equality of exchange.
C)Law of one price.
D)Law of unintended consequences.
9

In general, international trade is:
A)more difficult to conduct than domestic trade.
B)as difficult to conduct as domestic trade.
C)less difficult to conduct than domestic trade.
D)no different from domestic trade.
10

An externality is defined as:
A)the effect of a decision on a third party that is ignored by the decision maker.
B)a good that, when consumed by one individual, can still be consumed by others.
C)a good that, when consumed by one individual, cannot be consumed by another.
D)a situation in which the government intervenes and makes things worse.





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