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| 1 | |
Use the following opportunity cost table to answer the following question. | | | Opportunity cost of X | Opportunity cost of Y | | Milo | 3 Y | 1/3 X | | Stuart | 1/2 Y | 2 Y |
Which of the following statements is true regarding comparative advantages of Milo and Stuart? |
| | A) | Milo has a comparative advantage in task Y. |
| | B) | Stuart has a comparative advantage in task Y. |
| | C) | Milo has a comparative advantage in task X. |
| | D) | There is not enough information given to determine who has a comparative advantage in either task. |
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| 2 | |
Paula has a comparative advantage in writing papers over Laura, but Laura has an absolute advantage in writing papers over Paula. This implies that: |
| | A) | Paula can write more papers than Laura and has a lower opportunity cost to doing so. |
| | B) | Laura can write more papers than Paula and has a lower opportunity cost to doing so. |
| | C) | Paula can write more papers than Laura, but Laura has a lower opportunity cost to doing so. |
| | D) | Laura can write more papers than Paula, but Paula has a lower opportunity cost to doing so. |
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| 3 | |
Kate can grade 10 exams in an hour or grade 5 papers in an hour. Mike can grade 30 exams or grade 6 papers in an hour. Which of the following statements is true? |
| | A) | Kate has a comparative advantage in grading papers. |
| | B) | Mike has a comparative advantage in grading papers. |
| | C) | Kate has an absolute advantage in grading exams. |
| | D) | Mike has a comparative advantage in both grading papers and exams. |
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| 4 | |
Use the diagram below to answer the following question.  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/007723183x/599162/img2_ch1_.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (17.0K)</a>]]>
The figure above shows Mary and Al's production possibilities curves for hunting meat and gathering wood. Which of the following statements is true? |
| | A) | Mary has an absolute and comparative advantage in hunting meat. |
| | B) | Al has an absolute and comparative advantage in gathering wood. |
| | C) | Mary has an absolute and comparative advantage in gathering wood. |
| | D) | Both a. and b. |
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| 5 | |
A production possibilities curve with a bowed outward shape indicates: |
| | A) | the possibility of inefficient production. |
| | B) | constant opportunity costs as more and more of one good is produced. |
| | C) | increasing opportunity costs as more and more of one good is produced. |
| | D) | decreasing opportunity costs as more and more of one good is produced. |
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| 6 | |
Use the following production possibilities curve, representing GM's ability to produce hybrids and SUVs, to answer the following question.
Hybrid  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/007723183x/599162/img2_ch2_.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (11.0K)</a>]]>
The figure above represents the production possibility curve for Hybrids and SUVs for GM. The opportunity cost associated with GM increasing its production of hybrids from 400 to 600 is: |
| | A) | 100 SUVs |
| | B) | 300 SUVs |
| | C) | 200 hybrids |
| | D) | 0 SUVs. |
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| 7 | |
Adam Smith's description of work in an eighteenth-century Scottish pin factory illustrates that: |
| | A) | specialization and division of labor can result in exponential gains in productivity. |
| | B) | specialization and division of labor generally do not increase production substantially. |
| | C) | the working conditions in factories in the eighteenth century were extremely poor. |
| | D) | society should devote more resources toward the production of pins. |
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| 8 | |
Which of the following would shift the production possibilities curve outward? |
| | A) | A reduction in the population. |
| | B) | An improvement in technology. |
| | C) | An increase in the inflation rate. |
| | D) | A change in the combination of goods produced. |
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| 9 | |
The Principle of Comparative Advantage implies that: |
| | A) | two countries can benefit from trade only if one country is better at producing one good compared to another in absolute terms. |
| | B) | two countries can benefit from specialization and trade even if one country is better at producing one good compared to another in absolute terms. |
| | C) | all countries should specialize in whatever they have a higher opportunity cost to producing. |
| | D) | all countries are better off when each produces all goods for themselves and they do not trade with each other. |
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| 10 | |
Helene has a job that involves face-to-face communication, and Colleen has a job that is heavily rules based. Other things constant: |
| | A) | Helene has a job that is likely to be outsourced while Colleen does not. |
| | B) | Colleen has a job that is likely to be outsourced while Helene does not. |
| | C) | both Colleen and Helene have a job that is likely to be outsourced. |
| | D) | neither Colleen nor Helene have a job that is likely to be outsourced. |
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