Michael parkin economics pdf


 

ECONOMICS TENTH EDITION MICHAEL PARKIN University of Western Ontario Editor in Chief Donna Battista Senior Acquisitions Editor Adrienne D'Ambrosio. Full file at medical-site.info Test-Bank Macroeconomics, 12e (Parkin) Chapter 2 The Economic Problem 1. Microeconomics/Michael Parkin. Michael Parkin is Professor Emeritus in the Department of Economics at Microsoft® Word and Adobe® PDF files of the.

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Michael Parkin Economics Pdf

Request PDF on ResearchGate | Microeconomics / Michael Parkin | Editado simultáneamente en español Incluye índice. Michael Parkin. DATE OF BIRTH: February 21, MARITAL STATUS: Married : Dr. Robin Bade. Children: Catherine (), Richard (), Ann (). Albers, Alison B., Michael Siegel, and Debbie M. Cheng (). Effect of Smoking pdf>. Alberta Bade, Robin, and Michael Parkin (). Foundations of Economics (4th ed.). Addison.

Skip to main content. Log In Sign Up. Full file at https: Answers to the Review Quiz Page 2 1. List some examples of the scarcity that you face. Examples of scarcity common to students include not enough income to afford both tuition and a nice car, not enough learning capacity to study for both an economics exam and a chemistry exam in one night, and not enough time to allow extensive studying and extensive socializing. Page 7 1. Describe the broad facts about what, how, and for whom goods and services are produced. What gets produced is significantly different today than in the past.

In a year, Claire can produce 16 tons of beef or 40 bushels of corn, while Dag can produce 5 tons of beef or 25 bushels of corn. The opportunity cost of producing a ton of beef is A 10 bushels of corn for Dag and 8 bushels of corn for Claire. B 5 bushels of corn for Dag and 2. C 20 bushels of corn for Dag and 50 bushels of corn for Claire. Reflective thinking Abe can catch 10 pounds of fish an hour or pick 10 pounds of fruit.

Zeb can catch 30 pounds of fish an hour or pick 20 pounds of fruit. A higher, lower B lower, higher C higher, higher D lower, lower Answer: Reflective thinking 2 Using Resources Efficiently 1 Marginal cost is the opportunity cost A that your activity imposes on someone else.

B that arises from producing one more unit of a good or service. C of a good or service that exceeds its benefit. D of a good or service divided by the number of units produced. Marginal Cost Skill: A opportunity cost of producing; increases as production B opportunity cost of producing; decreases as production C price that must be paid to consume; increases as consumption D price that must be paid to consume; decreases as consumption Answer: B the total cost, less the production of the other good or service.

C greater than the opportunity cost. D equal to the opportunity cost of producing one more unit of a good or service. Reflective thinking 4 The quantity of shoes produced is measured along the horizontal axis of a PPF and the quantity of shirts is measured along the vertical axis. As you move down toward the right along the PPF, the marginal cost of A shoes decreases. B shoes increases. C shirts increases. D shoes and shirts is equal at the midpoint between the vertical and horizontal axis.

Opportunity Cost and Marginal Cost Skill: Analytical thinking 5 Marginal cost A increases as more is produced. B remains constant as more is produced. C decreases as more is produced. D decreases as marginal benefits decrease.

Reflective thinking 6 When the opportunity cost of producing more of a good is increasing, the marginal cost of producing more of the good is A decreasing. B constant. C increasing. D More information is needed to answer the question.

B shows that as more of a good is produced, opportunity costs of producing another unit increase. C is bowed inward so that its slope can become negative. D Both answers A and B are correct. Reflective thinking Quantity of beans Quantity of bushels carrots bushels 5 0 4 5 8 9 2 12 1 14 0 15 8 The table above represents different points along a production possibilities curve. What is the marginal cost of moving from 2 bushels to 3 bushels of beans?

A 9 bushels of carrots per bushel of beans B 12 bushels of carrots per bushel of beans C 3 bushels of carrots per bushel of beans D 21 bushels of carrots per bushel of beans Answer: B stays the same as more computers are produced.

C decreases as more computers are produced. D is the same as the marginal cost of producing a television set. Analytical thinking 11 In the figure above, the marginal cost of the second computer is A 2 television sets per computer. B 3 television sets per computer. C 5 television sets per computer. D 30 television sets per computer.

Analytical thinking 12 In the figure above, the marginal cost of the fifth computer is A 0 television sets per computer. B 4 television sets per computer.

C 20 television sets per computer. D 35 television sets per computer. B upward because of decreasing opportunity cost. C downward because of increasing opportunity cost. D downward because of decreasing opportunity cost.

Reflective thinking 14 Marginal benefit is the benefit A that your activity provides to someone else. B of producing a good or service when the total benefit from the good or service exceeds its total cost. C that is received from consuming one more unit of a good or service. D of consuming another good or service divided by the total number of goods or services produced.

Marginal Benefit Skill: Reflective thinking 15 Marginal benefit is the A benefit that a person receives from consuming one more unit of a good or service. B amount of one good or service that a person gains when another good or service is consumed. C minimum amount a person is willing to pay for one more unit of a good or service.

D dollars sacrificed to download a good or service. Reflective thinking 16 The marginal benefit from a good is the amount a person is willing to pay for A all of the good the person consumes.

B one more unit of the good. C all of the units of the good the person consumes divided by the number of units he or she downloads. D one more unit of the good divided by the number of units downloadd. A benefit; person must pay B cost; person is willing to pay C benefit; person is willing to pay D cost; person's preferences are Answer: Reflective thinking 18 The marginal benefit of a good or service A increases as more is consumed.

B decreases as more is consumed C remains constant as more is consumed. D decreases as less is consumed Answer: Reflective thinking 19 The principle of decreasing marginal benefit means that as the quantity of a good consumed A decreases, its marginal benefit decreases.

B increases, its marginal benefit decreases. C increases, its total benefit decreases. D None of the above answers is correct. Reflective thinking 20 As a person consumes more of a good, the A marginal benefit increases. B marginal benefit decreases. C marginal benefit increases or decreases depending whether or not the economy is on the PPF. D price of the good falls. B additional benefit from obtaining one more of a good or service increases as more is consumed.

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C total benefit from obtaining more of a good or service decreases as more is consumed. D total benefit from obtaining more of a good or service remains the same as more is consumed. I The marginal benefit curve shows the benefit firms receive by producing another unit of a good. II Marginal benefit increases as more of a good is consumed.

Reflective thinking 23 Susan likes to drink sodas. A more; higher the marginal benefit B less; higher the opportunity cost C less; lower the marginal benefit D more; lower the marginal benefit Answer: A of producing; increases as production B of producing; decreases as production C from consuming; increases as consumption D from consuming; decreases as consumption Answer: B the quantity of one good that must be forgone to get more of another good.

C the quantity of one good that people are willing to forgo to get another unit of another good. D there are increasing opportunity costs. Reflective thinking 26 Marginal benefit curves slope A upward because of increasing opportunity cost. B upward, but not because of increasing opportunity cost.

D downward, but not because of increasing opportunity cost. A upward; upward B upward; downward C downward; downward D downward; upward Answer: Reflective thinking 28 Suppose that the government is trying to decide between allocating its resources to build more dams or to build more freeways. A increases; increases B increases; decreases C decreases; increases D decreases; decreases Answer: Marginal Benefit and Marginal Cost Skill: Analytical thinking 30 Resource use is allocatively efficient when A we produce the goods with the highest opportunity cost.

B we produce the goods with the lowest opportunity cost. C we cannot produce more goods and services. D we produce the amount of the different goods we value most highly. Allocatively Efficient Use of Resources Skill: Written and oral communication 31 When we cannot produce more of any good without giving up some other good that we value more highly, we have achieved A production.

B equity. C allocative efficiency. D the production point where the marginal benefit exceeds the marginal cost by as much as possible. B we should produce more to achieve the allocatively efficient use of resources. C we should produce less to achieve the allocatively efficient use of resources. D we cannot tell if more or less should be produced to achieve the allocatively efficient use of resources. Written and oral communication 33 When an economy produces at its allocatively efficient production point A scarcity is not a problem.

B resources are not limited. C a society can increase the production of all goods. D a society can increase the production of one good only by decreasing the production of some other good that is valued more highly. Written and oral communication 34 Allocative efficiency occurs when A we cannot produce more of any good without giving up some other good that we value more highly. B we cannot produce more of any one good without giving up some other good.

C marginal benefit exceeds marginal cost. Written and oral communication 35 Allocative efficiency occurs when it is A possible to produce more of one good without giving up the production of some other good. B possible to produce more of all goods. C not possible to produce more of one good without giving up the production of some other good that is valued less highly.

D not possible to produce more of one good without giving up the production of some other good that is valued more highly. B cannot produce more of a good or service without giving up some other good or service that we value more highly. C produce the goods and services that people want. D cannot produce more of a good or service without giving up some other good or service that we need.

Reflective thinking 37 Which of the following statements can used to describe efficiency? Efficiently using resources means that producers make the highest profits possible.

Using resources efficiently means that we cannot produce more of one good without producing less of another good that has a higher value. Resource use is efficient when we produce goods and services that people value most highly.

Reflective thinking 38 Resource use is allocatively efficient when marginal benefit is A greater than marginal cost. B equal to marginal cost. C less than marginal cost.

D at its maximum value. Written and oral communication 39 Resource use is allocatively efficient A when marginal benefit equals marginal cost. B whenever marginal benefit exceeds marginal cost. C whenever marginal cost exceeds marginal benefit.

D when the maximum possible quantity is being produced. B total cost of what the resource produces is equal to the total benefit of what is produced. C marginal benefit of what the resource produces has diminished to zero. D marginal cost of what the resource produces is equal to the marginal benefit of what is produced.

Written and oral communication 41 A country produces only pencils and erasers. A cost; benefit; an eraser B cost; cost; an eraser C benefit; benefit; an eraser D benefit; cost; a pencil Answer: Written and oral communication 42 If the marginal benefit of consuming another unit of a good is positive, then to reach the allocatively efficient level of output more of the good should be produced and consumed A no matter what.

B as long as the consumer can afford to pay for it. C if the total benefit of the good is greater than its total cost. D if the marginal benefit of the good is greater than its marginal cost.

A any quantity other than 40 B 40 C more than 40 D fewer than 40 Answer: Analytical thinking 44 The table above shows the marginal benefit from pizza and the marginal cost of pizza in cans of soda forgone. A 70 B 10 C more than 70 D 40 Answer: The table shows the marginal benefit and marginal cost schedules for sun screen and camel rides. A 1 ride per day because the marginal benefit exceeds the marginal cost by as much as possible B 2 rides per day C 4 rides per day D 6 rides per day because that is the maximum number of rides Answer: Analytical thinking Quantity of Marginal Marginal cost pizza benefit 5 25 11 6 20 13 7 15 15 8 10 17 46 The table above represents the marginal cost and marginal benefit associated with pizza in terms of movies.

What quantity of pizza should be produced if resources are to be used efficiently? A 5 pizzas B 6 pizzas C 7 pizzas D 8 pizzas Answer: A 5 pounds of shrimp per gallon of gasoline B 3 pounds of shrimp per gallon of gasoline C 2 pounds of shrimp per gallon of gasoline D 1 pound of shrimp per gallon of gasoline Answer: Analytical thinking 48 According to the diagram in the figure above, what is the marginal cost of producing the 3 millionth gallon of gasoline per month?

A 5 pounds of shrimp per gallon of gasoline B 4 pounds of shrimp per gallon of gasoline C 3 pounds of shrimp per gallon of gasoline D 1 pound of shrimp per gallon of gasoline Answer: B 2 million gallons of gasoline per month. C 3 million gallons of gasoline per month. D 4 million gallons of gasoline per month. A marginal cost; marginal benefit B marginal cost; trade line C marginal benefit; trade line D production possibilities frontier; trade line Answer: B bottles of soda that people must forgo to get another bicycle.

C benefits of producing more bicycles is greater than the benefits of producing more soda. D benefits of producing more soda is greater than the benefits of producing more bicycles. Analytical thinking 52 In the above figure, when bicycles are produced each month, we can see that A the marginal benefit from another bicycle is greater than the marginal cost of another bicycle.

B more bicycles should be produced to reach the allocatively efficient level of output. C the economy is very efficient at the production of bicycles because the marginal benefit exceeds the marginal cost.

Analytical thinking 53 In the above figure, if bicycles are produced per month, A marginal benefit is greater than marginal cost. B fewer bicycles should be produced to reach the allocatively efficient level of output. C the marginal cost of production is 2 bottles of soda per bicycle. A marginal cost of a computer exceeds the marginal benefit of a computer, so more computers B marginal cost of a computer exceeds the marginal benefit of a computer, so fewer computers C marginal benefit of a computer exceeds the marginal cost of a computer, so more computers D marginal benefit of a computer exceeds the marginal cost of a computer, so fewer computers Answer: Analytical thinking 56 In the figure above, the allocatively efficient output of computers is A 2 million per year.

B 3 million per year. C 4 million per year. D the largest amount possible. B between 0 and 3 televisions per computer. C 3 televisions per computer. D more than 3 televisions per computer. Analytical thinking 58 In the figure above, at the allocatively efficient level of computer production the marginal cost of producing a computer is A 0 televisions per computer.

D an amount not given in the answers above. Analytical thinking 60 If the marginal benefit from another computer exceeds the marginal cost of the computer, then to use resources allocatively efficiently A more resources should be used to produce computers.

B fewer resources should be used to produce computers. C if the marginal benefit exceeds the marginal cost by as much as possible, the efficient amount of resources are being used to produce computers. D None of the above is correct because marginal benefit and marginal cost have nothing to do with using resources allocatively efficiently. B proof that scarcity is not a binding constraint. C a free gift of nature. D something that has occurred only rarely in history.

Economic Growth Skill: Reflective thinking 2 Economic growth can be represented by A a movement down the production possibilities frontier PPF. B a movement up the production possibilities frontier PPF. Reflective thinking 3 When economic growth occurs, the A economy moves along its production possibilities frontier.

B production possibilities frontier shifts outward. C production possibilities frontier becomes steeper. D production possibilities frontier shifts outward but no longer limits the amount that can be produced. Reflective thinking 4 After Hurricane Katrina devastated parts of Mississippi and New Orleans in , we can be sure that the production possibilities frontier for that area temporarily A shifted inward, toward the origin.

B shifted outward, away from the origin. C became flatter. D became steeper. B capital accumulation. D investment in human capital. Reflective thinking 6 A key factor that leads to economic growth is A human capital accumulation. B increasing current consumption. C avoiding the opportunity cost of investment. Reflective thinking 7 Technological progress makes the production possibilities frontier A shift inward toward the origin. B become more linear and less bowed.

C shift outward from the origin. D become less linear and more bowed. Reflective thinking 8 Economic growth is shown on the production possibilities frontier as A a movement from one point on the PPF to another.

B an outward shift in the PPF. C an inward shift in the PPF. D the curvature of the PPF. B making the production possibilities frontier less bowed out. C shifting the production possibilities frontier outward. D shifting the production possibilities frontier inward. Analytical thinking 10 Using a production possibilities frontier, economic growth is illustrated by a A point inside the curve. B point on the curve. C movement from one point on the curve to another point on the curve.

D rightward shift of the curve. Analytical thinking 11 Capital accumulation definitely A has no impact on the production possibilities frontier. B shifts the production possibilities frontier inward. C makes the production possibilities frontier steeper. D shifts the production possibilities frontier outward. Reflective thinking 12 President Obama has proposed a goal that everyone complete at least one year of formal education or training beyond high school.

This policy would A increase human capital and increase economic growth. B increase physical capital and increase economic growth.

C increase financial capital and increase economic growth. D eliminate opportunity costs and increase economic growth. A people willing to increase their skills in which case, economic growth is free B producing more goods than people want to consume C capital accumulation and the avoidance of opportunity cost D capital accumulation and technological advance Answer: Reflective thinking 14 The production possibilities frontier shifts as A tastes and preferences change.

B the money supply grows or shrinks. C technology changes. D the unemployment rate changes. Reflective thinking 15 Technological change A generates economic growth. B shifts the PPF leftward. C creates inefficiency. D Both answers A and C are correct. Reflective thinking 16 As an economy's capital stock increases, the economy A generally experiences increased unemployment of other resources, such as labor.

B generally decides to engage in international trade. C experiences economic growth. D gains an absolute advantage in the production of capital goods. B must decrease the future production of consumer goods. C shifts the production possibilities frontier inward in the future. D shifts the production possibilities frontier outward in the future.

Analytical thinking 18 Suppose a scientific breakthrough made free solar power available in unlimited quantities in the United States. The effect of this invention would be to move the A United States beyond its production possibilities frontier. B United States inside its production possibilities frontier. Analytical thinking 19 In March a factory used new technology to produce its output. Then in August a fire destroys half the factory. A inward; outward B outward; inward C outward; outward D inward; inward Answer: Analytical thinking 20 Suppose the United States discovers a way to produce clean nuclear fuel.

The effect of this discovery would be to A lead the United States to produce less nuclear fuel. C shift the U. PPF outward.

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D shift the U. PPF inward. Unusually good weather for growing corn shifts A the horizontal intercept rightward and the vertical intercept upward. B the horizontal intercept rightward but does not shift the vertical intercept.

C the vertical intercept upward but does not shift the horizontal intercept.

D neither the horizontal intercept nor the vertical intercept. Analytical thinking 22 In the figure above, how can the economy represented by the production possibilities frontier move from point C to point F? A Increase the available amount of resources. B Increase the level of technology.

C Redistribute the existing resources to produce more apples and fewer oranges. D First move to point B and then move to point F. Analytical thinking 24 In the figure above, what can be said about point B? A It can be reached only after economic growth occurs. B It can be attained only if some resources are left unused.

C It represents all resources being devoted to the production of apples. D It represents all resources being devoted to the production of oranges. Analytical thinking 25 In the figure above, point D is A less production efficient than point C.

B production efficient and point A is not production efficient. C not production efficient and point B is production efficient. D production efficient and point B is not production efficient. B too much health care is being produced. C the opportunity costs of health care is too high. D point E is a more realistic option in this economy.

Analytical thinking 27 In the figure above, the opportunity cost of moving from point C to point D is A the loss in production in the health care sector. B the increase in production in the education sector.

C zero. D the loss in production in the education sector. Analytical thinking 28 In the figure above, point E could be obtained if A resources were shifted from education to health care. B resources were used more efficiently. C society's resources increased. D resources were shifted from health care to education. A Beta's economic growth rate will exceed Alpha's B Alpha consumes less than Beta today, but it will grow faster than Beta C Alpha's and Beta's economic growth rates will be the same D Beta's future consumption will be greater than Alpha's Answer: Country X chose to produce at point A, while country Y chose to produce at point B.

B put all unemployed resources to work producing desired output. C engage in exchange with other nations. D increase the average level of prices for all goods produced and consumed. The one that will grow most rapidly in the future is most likely to be producing at point A A.

Economic Growth Rate Skill: Analytical thinking 36 Which graph shows the impact of scientists developing a more powerful fertilizer? B is free. C is the major reason we face scarcity. D allows us to increase our consumption in the present and in the future.

The Cost of Economic Growth Skill: Written and oral communication 38 The opportunity cost of more capital goods today is A fewer capital goods in the future. B fewer consumer goods in the future.

C fewer consumer goods today. D more unemployed resources in the future. Reflective thinking 39 The opportunity cost of economic growth is A future consumption that a nation gets if it gives up some present consumption. B future consumption that a nation gives up to consume more today. C present consumption that a nation gives up to accumulate capital. D present investment that a nation gives up to increase its economic growth. Reflective thinking 40 An opportunity cost of economic growth is A essentially zero because economic growth leads to such large gains in the long run.

B the decrease in production of consumption goods in the present time period. C decreased by the creation of capital goods rather than consumption goods. D so high that places such as Hong Kong have had to do without it. B economic growth and technological change. C satisfying today the needs of the poor and the wants of the wealthy. D current consumption and future consumption. Reflective thinking 42 President Obama has proposed a goal that everyone complete at least one year of formal education or training beyond high school.

A decrease; increase B increase; decrease C not change; increase D increase; increase Answer: Analytical thinking 43 Economic growth A creates unemployment. B has no opportunity cost. C shifts the PPF outward. D makes it more difficult for a nation to produce on its PPF. B people decide they want more of one good and less of another. C the prices of the goods and services produced rise. D the resources available to the nation change. B cause a movement along the PPF upward and leftward.

C cause a movement along the PPF downward and rightward. Analytical thinking 46 One of the opportunity costs of economic growth is A capital accumulation. B technological change. C reduced current consumption. D the gain in future consumption. Reflective thinking 47 In general, the more resources that are devoted to technological research, the A greater is current consumption.

B higher is the unemployment rate. C faster the PPF shifts outward. D more the PPF will bow outward. B cause a movement along the PPF up and to the left. C cause a movement along the PPF down and to the right. B produces at the midpoint of its PPF.

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C specializes in the production of one good or a few goods. D makes both intermediate and final goods. Comparative Advantage Skill: Reflective thinking 2 A person has a comparative advantage in producing a particular good if that person A has higher productivity in producing it than anyone else has. B can produce it at lower opportunity cost than anyone else can. C has less desire to consume that good than anyone else has.

D has more human capital related to that good than anyone else has. Reflective thinking 3 Comparative advantage is A the ability to perform an activity at a lower opportunity cost than anyone else. B the ability to perform an activity at a higher opportunity cost than anyone else. C the ability to perform an activity at a zero opportunity cost. D another name for absolute advantage. Reflective thinking 4 A person has a comparative advantage in an activity if that person can A produce more goods in a given amount of time than another person.

B produce fewer goods in a given amount of time than another person. C perform the activity at a lower opportunity cost than anyone else.

D perform that activity at a higher opportunity cost than anyone else. B can perform the activity at a lower opportunity cost than can anyone else. C can do the activity in less time than anyone else.

D can do everything better than anyone else. Reflective thinking 6 A country possesses a comparative advantage in the production of a good if A the opportunity cost in terms of forgone output of alternative goods is lower for this country than it is for its trading partners.

B it possesses an absolute advantage in the production of this good. C it is able to produce more of this good per hour than can any other country. D all of the above. Reflective thinking 7 Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A A has a lower opportunity cost of producing good X than has B. B has a lower opportunity cost of producing good X than of producing good Y. C can produce more units of X in a given time period than can B.

D can produce X using newer technology than can B. Reflective thinking 8 Which of the following describes comparative advantage? A To produce a bushel of wheat Farmer John must give up 2 bushels of corn whereas Farmer Ben must give up 3 bushels of corn. B Company A can produce 4 boxes of cereal in a day whereas Company B can produce 5 boxes of cereal in a day.

D Jane can type 50 words per minute and Joe can type 60 words per minute. In an eight-hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter. Andy has a comparative advantage in the production of A bread, while Bob has a comparative advantage in the production of butter. B butter, while Bob has a comparative advantage in the production of bread.

C bread and neither has a comparative advantage in the production of butter. D both bread and butter. Analytical thinking 10 The kitchen manager at an Italian restaurant is deciding what assignments he should give to his two cooks, John and David. John can make 25 pizzas or 40 servings of pasta per hour and David can make 20 pizzas or 30 servings of pasta.

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Which of the following should be the manager's choice? A Fire David because he is not as productive as John. John will do both jobs. B John will make pizza because he has comparative advantage in making pizza. C David will make pizza because he has comparative advantage in making pizza. D John and David both will spend half their time making pizza and half their time making pasta because each has a comparative advantage in making pizza.

Analytical thinking 11 An economy produces only food and shelter. There are two individuals in the economy: Bill and Mary. Mary's opportunity cost of producing 1 unit of shelter is 2 units of food. Bill's opportunity cost of producing 1 unit of shelter is 4 units of food. A Bill has a comparative advantage over Mary in the production of shelter. B Mary has a comparative advantage over Bill in the production of food. C Mary has a comparative advantage over Bill in the production of shelter.

D Bill has an absolute advantage over Mary in the production of shelter. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage? A guitars B cellos C both goods D neither good Answer: Analytical thinking 13 The opportunity cost of producing one ton of wheat for Country Gamma is 4 tons of corn.

The opportunity cost of producing one ton of wheat for Country Beta is 8 tons of corn. Which country has the comparative advantage in the production of wheat?

D Both countries have the comparative advantage. Analytical thinking 14 Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is A 2 pizzas. C 5 pizzas. D 1 pizza. Comparative Advantage, Opportunity Cost Skill: Which of the following is TRUE? A Beth should produce pizza because she has a higher opportunity cost of producing pizza than does Joe. B Beth should produce pizza because she has a lower opportunity cost of producing pizza than does Joe.

C Joe should produce pizza because he has a higher opportunity cost of producing pizza than does Beth. D Joe should produce pizza because he has a lower opportunity cost of producing pizza than does Beth. Analytical thinking 16 Suppose Joe can prepare 20 sandwiches or 10 pizzas in an hour and Beth can produce 36 sandwiches or 27 pizzas. The concept of comparative advantage concludes that A Beth should produce both goods because she can produce more of both goods in an hour than can Joe.

B Beth should produce sandwiches and Joe should produce pizza. C Beth should produce pizza and Joe should produce sandwiches. D Beth should produce both goods and Joe should produce sandwiches. Analytical thinking 17 Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich.

Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. A cooking eggs; making sandwiches B making sandwiches; cooking eggs C neither of these activities; both activities D both activities; neither of these activities Answer: B Jerry will benefit and Tom will not.

C both will benefit. D none of them will benefit. Analytical thinking 19 Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Both individuals will be better off if A Tom trades sandwiches in exchange for eggs. B Jerry trades sandwiches in exchange for eggs. C they trade, no matter who trades sandwiches and who eggs. D they don't trade. Analytical thinking 20 In one week Alice can produce 5 pairs of shoes or 4 bookshelves while Roger can produce 10 pairs of shoes or 6 bookshelves.

A an absolute; shoes B a comparative; shoes C an absolute; bookshelves D a comparative; bookshelves Answer: Analytical thinking 21 In one week Alice can produce 5 pairs of shoes or 4 bookshelves while Roger can produce 10 pairs of shoes or 6 bookshelves. Alice should specialize in the production of A shoes. B bookshelves.

C either shoes or bookshelves. D neither shoes nor bookshelves. Analytical thinking 23 Betty and Ann live on a desert island. With a day's labor, Ann can produce 8 fish or 4 coconuts; Betty can produce 6 fish or 2 coconuts. A 8 fish per coconut; fish B 2 fish per coconut; coconuts C 6 fish per coconut; coconuts D 0 fish per coconut; coconuts Answer: Analytical thinking 24 Betty and Ann live on a desert island.

With a day's labor, Ann can produce 6 fish or 4 coconuts; Betty can produce 3 fish or 1 coconut. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick pieces of fruit or catch fish.

A Homer has a comparative advantage in catching fish and Teddy has a comparative advantage in picking fruit. B Homer has a comparative advantage in picking fruit and Teddy has a comparative advantage in catching fish.

C Homer has a comparative advantage in both catching fish and picking fruit. D Teddy has a comparative advantage in both catching fish and picking fruit. The table above gives their production possibilities. A Blue Violet has a comparative advantage in teapots. B Sweet Pansy has a comparative advantage in teapots. C Both have a comparative advantage in teapots. D Sweet Pansy has an absolute advantage in teapots.

A coffeepots, teapots B teapots, 75 coffeepots C teapots and coffeepots, nothing D teapots and 25 coffeepots, teapots and 50 coffeepots Answer: The opportunity cost of producing more of A good X is the same for both countries. B good Y is the same for both countries. C good X is lower in country A. D good Y is lower in country A. Analytical thinking 30 In the table above, country A is producing 4 units of X and 8 units of Y and country B is producing 4 units of X and 6 units of Y.

Regarding the production of good X A country A has an absolute advantage. B country B has an absolute advantage. C country A has a comparative advantage. D country B has a comparative advantage. Analytical thinking 31 In the table above, country B is producing 4 units of X and 6 units of Y.

For country B, the opportunity cost of producing an additional unit of X is A 4 units of Y per unit of X. B 2 units of Y per unit of X. D 1 unit of Y per unit of X. C 2 units of X per unit of Y. D 3 units of X per unit of Y. Analytical thinking 33 Both Mergatroid and the Geebocks produce only gizmos and widgets. It is possible for Mergatroid to have A an absolute and a comparative advantage in both products.

B an absolute but not a comparative advantage in both products. C a comparative but not an absolute advantage in both products. D neither a comparative nor an absolute advantage in both products. Absolute Advantage Skill: Reflective thinking 34 A person who has an absolute advantage in the production of all goods will A also have a comparative advantage in the production of all goods.

B not be able to gain from specialization and exchange. C have a production possibilities frontier with a constant slope. D have a comparative advantage in the production of some goods but not in the production of others.

A have a comparative advantage in some goods but not all B produce all goods at lowest opportunity cost C have a comparative advantage in all goods D not gain from specialization and trade Answer: A Homer has an absolute advantage in catching fish and Teddy has an absolute advantage in picking fruit.

B Homer has an absolute advantage in picking fruit and Teddy has an absolute advantage in catching fish. C Homer has an absolute advantage in both catching fish and picking fruit.

D Teddy has an absolute advantage in both catching fish and picking fruit. Analytical thinking Don's production Bob's production possibilities possibilities Pens 10 5 Pencils 20 15 37 The above table shows the number of pencils or pens that could be produced by Don and Bob in an hour.

This schedule shows that A Don has an absolute advantage in the production of pencils, and Bob has an absolute advantage in the production of pens. B Bob has an absolute advantage in the production of pencils, and Don has an absolute advantage in the production of pens. C Don has a comparative advantage in the production of both pencils and pens. D Bob has a comparative advantage in the production of pencils. From the data in the table A France has a comparative advantage in the production of concrete.

B the United States has a comparative advantage in the production of concrete. C France has an absolute advantage in the production of concrete. D the United States has a comparative advantage in the production of both goods. Analytical thinking 39 Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. D 1 hour for Agnes and 2 hours for Brenda. Analytical thinking 40 Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour.

There can be gains from exchange A if Agnes specializes in the production of X and Brenda specializes in the production of Y.

B if Agnes specializes in the production of Y and Brenda specializes in the production of X. C only if Agnes becomes faster at producing X. D only if Brenda becomes faster at producing X or Y. Achieving the Gains From Trade Skill: Analytical thinking 42 Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour.

A Brenda has an absolute advantage in the production of X and Y. B Agnes has a comparative advantage in the production of Y. C Brenda has a comparative advantage in the production of X. D Brenda cannot gain from trade. A decreases B increases C is zero D remains the same Answer: Freda currently produces 10 packets of fudge and no cookies. A drought reduces the amount of wheat produced and the economy produces at point b.

A remains the same B increases C is impossible to calculate without numbers on the axes D decreases Answer: C 5 pairs of pants per shirt. D 2 pairs of pants per shirt. Analytical thinking 47 In the figure above, Jill is producing at point A. Jill's opportunity cost producing one pair of pants is A 2 shirts per pair of pants. B 3 shirts per pair of pants.

If Joe and Jill realize that they each possess a comparative advantage, which outcome can we expect? For students, attending class, doing homework, studying for a test are all activities with opportunity costs. Explain what it means to choose at the margin and illustrate with three choices at the margin that you have made today. Choosing at the margin means choosing to do a little more or a little less of some activity.

Three common examples students encounter are: a When a student faces a chemistry and an economics final exam in one day, the student must determine whether spending the last hour studying a little more chemistry or a little more economics will yield a better contribution marginal benefit to his or her overall GPA. Explain why choices respond to incentives and think of three incentives to which you have responded today.

People making rational decisions compare the marginal benefits of different actions to their marginal costs. Just as everyone else, students respond to incentives; a A student studies because of the incentives offered by grades.

Page 11 1. Distinguish between a positive statement and a normative statement and provide examples. A positive statement is a description of how the world is. It is testable. A normative statement is a description of how the world ought to be. It is, by its very nature, not testable because there is no universally approved criterion by which the statement can be judged. What is a model? Can you think of a model that you might use in your everyday life?

A model is a description of some aspect of the economic world. It includes only those features that are necessary to understand the issue under study. An economic model is designed to reflect those aspects of the world that are relevant to the user of the model and ignore the aspects that are irrelevant. A typical model is a GPS map. It reflects only those aspects of the real world that are relevant in assisting the user in reaching his or her destination and avoids using information irrelevant to travel.

How do economists try to disentangle cause and effect? Economists use models to understand some aspect of the economic world. Testing the predictions of models makes it necessary to disentangle cause and effect. To overcome this problem, economists have three methods of testing their models: Using a natural experiment, using a statistical investigation, and using economic experiments.

A natural experiment is a situation that arises in the ordinary course of life in which one factor being studied varies and the other factors are the same. This method allows the economist to focus on the effect from the factor that differs between the two situations. A statistical investigation looks for correlations between variables but then determining whether the correlation actually reflects causation can be difficult.

How is economics used as a policy tool? Individuals use the economic ideas of marginal benefit and marginal cost when making decisions for such topics as attending college, paying cash or credit for a download, and working. Businesses also use the concepts of marginal benefit and marginal cost when making decisions about what to produce, how to produce, and even how many hours to stay open.

Finally governments also use marginal benefit and marginal cost when deciding issues such as the level of property taxes, the amount to fund higher education, or the level of a tariff on Brazilian ethanol. Apple Inc. Which of the following pairs does not match? Labor and wages Labor earns wages, so this pair matches. Land and rent Land earns rent, so this pair matches.

Entrepreneurship and profit Entrepreneurship earns profit, so this pair matches. Capital and profit Capital earns interest, so this pair does not match. Explain how the following news headlines concern self-interest and the social interest. For instance, more Chinese citizens might drink coffee rather than tea and fewer coffee shops run by Chinese firms might open. The social interest is affected because more people will drink coffee rather than other drinks such as sodas.

Food Must Be Labeled with Nutrition Data The decision to require that food must be labeled with nutrition information is made in the social interest. The night before an economics test, you decide to go to the movies instead of staying home and working your MyEconLab Study Plan.

You get 50 percent on your test compared with the 70 percent that you normally score. Did you face a tradeoff? Yes, you faced a tradeoff. The tradeoff was between a higher test score and an evening with your friends at the movies. What was the opportunity cost of your evening at the movies? The opportunity cost of going to the movies is the fall in your grade.

That is the 20 points forgone from choosing to see the movie rather than study. Explain your answer. However, if there were already plans underway to upgrade the Sochi area infrastructure then the cost is not an opportunity cost of the Sochi Olympics because the cost would have been paid even if Sochi did not host the Olympics. Similarly, if there were already plans underway to build hotels and facilities in Sochi then the cost is not an opportunity cost of the Sochi Olympics because the cost would have been paid even if Sochi did not host the Olympics.

Which of the following statements is positive, which is normative, and which can be tested? The United States should cut its imports. The statement is normative and cannot be tested. China is the largest trading partner of the United States. The statement is positive and can be tested.

Rapper Offers Free Tickets for Concert Eminem will hit the road with Rihanna offering an awesome deal—download one and get one free! Source: Mstars News, February 24, When Eminem gave away tickets, what was free and what was scarce? The seats in the arenas are scarce—there are only a limited number. Also scarce is the time the enthusiastic fans spend in line to acquire the tickets. How does the creation of a successful movie influence what, how, and for whom goods and services are produced?

First, one good or service that is produced is the successful movie.

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