Question 1

The invisible hand refers to the coordination that occurs from:

Accepted Answer

A)   everyone working in his or her own self-interest.
B)   a government agency finding efficiencies.
C)   everyone working for the overall good of society.
D)   a government coordinating economic activity.E) A) and D)
F) A) and C)

Question 2

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. A bundle of goods that Country B could potentially make would be:

Accepted Answer

A)   (400 iPods, 2,000 tablets) .
B)   (300 iPods, 500 tablets) .
C)   (200 iPods, 1,500 tablets) .
D)   (100 iPods, 2,000 tablets) .E) B) and C)
F) A) and D)

Question 3

A realistic production possibilities curve:

Accepted Answer

A)   is concave while a simple PPF has constant opportunity costs.
B)   is straight lined while a simple PPFhas constant opportunity costs.
C)   is straight lined while a simple PPF is bowed outward.
D)   is concave while a simple PPFhas increasing opportunity costs.E) All of the above
F) C) and D)

Question 4

Tom and Jerry have two tasks to do all day: make dishes and build fences. If Tom spends all day making dishes, he will have make 16 dishes. If he instead devotes his day to building fences, Tom will build 4 fences. If Jerry spends his day making dishes, he will make 14 dishes; if he spends the day building fences, he will build 7 fences. Based on their production possibilities frontiers, Tom and Jerry:

Accepted Answer

A)   can both benefit from trade because absolute advantage exists.
B)   could both benefit from trade because comparative advantage exists.
C)   cannot benefit from trade because Tom has the absolute advantage in both goods.
D)   will not decide to trade because no comparative advantage exists.E) A) and C)
F) B) and C)

Question 5

Consider the production possibilities frontier displayed in the figure shown. Which of the following statements is true? The opportunity cost of one watermelon:

Accepted Answer

A)   will decrease as more watermelons are produced.
B)   is constant.
C)   will increase as more watermelons are produced.
D)   is zero at point C.E) A) and D)
F) All of the above

Question 6

When a producer is operating efficiently it is producing:

Accepted Answer

A)   at a point on its production possibilities frontier.
B)   at a point on or under its production possibilities frontier.
C)   only one good.
D)   the good in which it has an absolute advantage.E) C) and D)
F) A) and B)

Question 7

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

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 8

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. On the other hand, a Bangladeshi worker can produce 100 pairs of gloves or grow 200 radishes per day. Using the concepts of advantage and trade, we can say that the opportunity cost of one pair of gloves is:

Accepted Answer

A)   lower for the United States than Bangladesh, therefore the United States has a comparative advantage in glove production.
B)   higher for the United States than Bangladesh, therefore the United States has a comparative advantage in radish production.
C)   the same for both the United States and Bangladesh, therefore no comparative advantage exists.
D)   the same for both the United States and Bangladesh, therefore they both have the comparative advantage in glove production.E) All of the above
F) None of the above

Question 9

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Two possible consumption bundles that Country B could produce are:

Accepted Answer

A)   (7,200 bananas, 2,400 tomatoes)  and (3,600 bananas, 1,200 tomatoes) 
B)   (7,200 bananas, 0 tomatoes)  and (4,000 bananas, 1,200 tomatoes) 
C)   (3,600 bananas, 1,200 tomatoes)  and (1,800 bananas, 1,600 tomatoes) 
D)   (1,800 bananas, 1,800 tomatoes)  and (900 bananas, 2,200 tomatoes) E) A) and C)
F) B) and C)

Question 10

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. On the other hand, a Bangladeshi worker can produce 100 pairs of gloves or grow 200 radishes per day. Which of the following statements is true? Bangladesh should:

Accepted Answer

A)   specialize in glove production since it possesses the comparative advantage in glove production.
B)   despecialize in radish production since it possesses the comparative advantage in radish production.
C)   produce both gloves and radishes since it has the absolute advantage in glove production.
D)   only produce radishes since it has the absolute advantage in radish production.E) B) and D)
F) A) and D)

Question 11

Suppose the figure shown represents the production possibilities frontier for Country A. Which of the following combinations of goods could Country A consume in the absence of trade?

Accepted Answer

A)   (15 airplanes, 15 trucks) 
B)   (10 airplanes, 25 trucks) 
C)   (10 airplanes, 30 trucks) 
D)   (5 airplanes, 30 trucks) E) B) and C)
F) A) and B)

Question 12

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?

Accepted Answer

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)   The United States has absolute advantage in producing both goods.E) All of the above
F) A) and B)

Question 13

The United States and Canada trade hockey skates and apple pie. If the United States has an absolute and a comparative advantage in the production of apple pie, then:

Accepted Answer

A)   Canada must have the comparative advantage in the production of skates.
B)   Canada must have the absolute advantage in the production of skates.
C)   Canada must have the absolute and comparative advantage in the production of skates.
D)   the United States must also have the comparative advantage in the production of skates.E) All of the above
F) A) and B)

Question 14

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. A bundle of goods that Country A could not make would be:

Accepted Answer

A)   (500 iPods, 150 tablets) .
B)   (500 iPods, 200 tablets) .
C)   (500 iPods, 250 tablets) .
D)   (500 iPods, 300 tablets) .E) B) and C)
F) A) and B)

Question 15

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Suppose Country B decides to specialize in tomatoes, and Country A specializes in bananas. What terms of trade would both countries agree to? One tomato for:

Accepted Answer

A)   one banana
B)   two bananas
C)   four bananas
D)   six bananasE) B) and C)
F) None of the above

Question 16

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Suppose Country B's population of workers increased to 600. We can say:

Accepted Answer

A)   Country B now possesses the absolute advantage in the production of both goods.
B)   Country B now possesses the absolute advantage in tablets only.
C)   Country B now has the comparative advantage in iPod production.
D)   Country B has no need to trade now.E) A) and D)
F) A) and B)

Exam 2: Specialization and Exchange

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Two possible consumption bundles that Country B could produce are:

Correct Answer
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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?

Correct Answer
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Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. On the other hand, a Bangladeshi worker can produce 100 pairs of gloves or grow 200 radishes per day. Using the concepts of advantage and trade, we can say that the opportunity cost of one pair of gloves is:

Correct Answer
verified

The United States and Canada trade hockey skates and apple pie. If the United States has an absolute and a comparative advantage in the production of apple pie, then:

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

When a producer is operating efficiently it is producing:

Correct Answer
verified

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Suppose Country B's population of workers increased to 600. We can say:

Correct Answer
verified

A realistic production possibilities curve:

Correct Answer
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Suppose the figure shown represents the production possibilities frontier for Country A. Which of the following combinations of goods could Country A consume in the absence of trade?

Correct Answer
verified

The invisible hand refers to the coordination that occurs from:

Correct Answer
verified

Correct Answer
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Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. On the other hand, a Bangladeshi worker can produce 100 pairs of gloves or grow 200 radishes per day. Which of the following statements is true? Bangladesh should:

Correct Answer
verified

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. A bundle of goods that Country B could potentially make would be:

Correct Answer
verified

Consider the production possibilities frontier displayed in the figure shown. Which of the following statements is true? The opportunity cost of one watermelon:

Correct Answer
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Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. A bundle of goods that Country A could not make would be:

Correct Answer
verified

Exam 2: Specialization and Exchange

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Two possible consumption bundles that Country B could produce are:

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. On the other hand, a Bangladeshi worker can produce 100 pairs of gloves or grow 200 radishes per day. Using the concepts of advantage and trade, we can say that the opportunity cost of one pair of gloves is:

Correct AnswerverifiedShow Answer

The United States and Canada trade hockey skates and apple pie. If the United States has an absolute and a comparative advantage in the production of apple pie, then:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a producer is operating efficiently it is producing:

Correct AnswerverifiedShow Answer

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Suppose Country B's population of workers increased to 600. We can say:

Correct AnswerverifiedShow Answer

A realistic production possibilities curve:

Correct AnswerverifiedShow Answer

Suppose the figure shown represents the production possibilities frontier for Country A. Which of the following combinations of goods could Country A consume in the absence of trade?

Correct AnswerverifiedShow Answer

The invisible hand refers to the coordination that occurs from:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day. On the other hand, a Bangladeshi worker can produce 100 pairs of gloves or grow 200 radishes per day. Which of the following statements is true? Bangladesh should:

Correct AnswerverifiedShow Answer

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. A bundle of goods that Country B could potentially make would be:

Correct AnswerverifiedShow Answer

Consider the production possibilities frontier displayed in the figure shown. Which of the following statements is true? The opportunity cost of one watermelon:

Correct AnswerverifiedShow Answer

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. A bundle of goods that Country A could not make would be:

Correct AnswerverifiedShow Answer

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