6) Refer to Table 2-1. What is Finland's opportunity cost of producing one cell phone?

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1 Principle of Macroeconomics, Chapter two Chapter three Summer B, 2017, FIU Chapter two 1) The principle of is that the economic cost of using a factor of production is the alternative use of that factor that is given up. A) marginal cost B) opportunity cost C) normative economics D) entrepreneurship 2) To compete in the automobile market, Tesla must make many strategic decisions such as whether to introduce a new car model, how to sell and service its cars, and where to advertise. At Tesla's Fremont, California plant, managers must decide on the monthly production quantities of their S and X models. In making this decision, the managers A) face no trade-off because the Fremont plant only produces these two models of the many Tesla models produced worldwide. B) face a trade-off, because producing more of one model means producing less of the other. C) will choose to only produce the quantity of S and X models where marginal cost equals zero. D) will always decide on production quantities in which revenues are maximized. 3) The production points on a production possibilities frontier are the points along and inside the production possibilities frontier. A) attainable B) unattainable C) productively efficient D) allocatively efficient Table 2-1 Lumber (per board One Cell Phone foot) Estonia 40 hours 8 hours Finland 16 hours 4 hours Table 2-1 shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. 4) Refer to Table 2-1. Does either Estonia or Finland have an absolute advantage and if so, in what product? A) Finland has an absolute advantage in lumber. B) Estonia has an absolute advantage in lumber. C) Finland has an absolute advantage in both products. D) Estonia has an absolute advantage in cell phones. 5) Refer to Table 2-1. What is Estonia's opportunity cost of producing one cell phone? A) 0.2 board feet of lumber B) 5 board feet of lumber C) 8 board feet of lumber D) 32 board feet of lumber 6) Refer to Table 2-1. What is Finland's opportunity cost of producing one cell phone?

2 A) 0.25 board feet of lumber B) 4 board feet of lumber C) 12 board feet of lumber D) 16 board feet of lumber 7) Refer to Table 2-1. What is Estonia's opportunity cost of producing one board foot of lumber? A) 0.2 cell phones B) 5 cell phones C) 8 cell phones D) 32 cell phones 8) Refer to Table 2-1. What is Finland's opportunity cost of producing one board foot of lumber? A) 0.25 cell phones B) 4 cell phones C) 12 cell phones D) 16 cell phones 9) Refer to Table 2-1. Estonia has a comparative advantage in the production of A) both products. B) lumber. C) cell phones. D) neither product. 10) Refer to Table 2-1. Finland has a comparative advantage in the production of A) both products. B) lumber. C) cell phones. D) neither product. 11) Refer to Table 2-1. If the two countries specialize and trade, who should export lumber? A) There is no basis for trade between the two countries. B) Estonia C) Finland D) They should both be exporting lumber. 12) A worker is hired in a A) goods and services market. B) product market. C) government market. D) factor market. 13) In the circular flow model, households A) sell goods and services in the input market. B) and firms spend earnings from resource sales on goods and services in the factor market. C) hire resources sold by firms in the factor market. D) spend earnings from resource sales on goods and services in the product market. 14) Economic growth is represented on a production possibilities frontier model by the production possibilities frontier A) shifting outward. B) shifting inward. C) becoming steeper. D) becoming flatter. 15) Without technological advancement, how can a nation achieve economic growth? A) by producing more high-value goods and fewer low-value goods

3 B) through an increase in supplies of factors of production C) by producing more low-value goods and fewer high-value goods D) by decreasing the size of the labor force Figure 2-2 shows various points on three different production possibilities frontiers for a nation. 16) Refer to Figure 2-2. A movement from could occur because of an influx of immigrant labor. A) X to W B) X to Y C) W to V D) W to X 17) Refer to Figure 2-2. A movement from is the result of advancements in plastic production technology. A) V to X B) W to X C) Z to W D) Y to Z 18) Refer to Figure 2-2. Consider the following movements: a. from point V to point W; b.from point W to point Y; c. from point Y to point Z Which of the movements listed above represents advancements in technology with respect to both plastic production and food production? A) a, b, and c B) b and c only C) b only D) c only 19) Refer to Figure 2-2. A movement from is the result of additional government restrictions on the pollution that results from plastic production. A) X to V B) X to W C) Z to W D) Z to Y 20) Refer to Figure 2-2. Consider the following events: a.a decrease in the unemployment rate;b.an increase in technology with respect to both food and plastic production;c. a war that kills a significant portion of a nation's population Which of the events listed above could cause a movement from W to Y? A) a, b, and c B) a and b only C) a and c only D) b only E) c only

4 21) Refer to Figure 2-2. Consider the following movements: a. from point V to point W; b.from point W to point Y; c.from point Y to point Z Which of the movements listed above represents advancements in technology with respect to only plastic production? A) a, b, and c B) b and c only C) b only D) c only 22) The recession of would most likely be represented in a production possibilities frontier graph by A) a point inside the frontier. B) a point outside the frontier. C) a point on the frontier. D) an intercept on either the vertical or the horizontal axis. Table 2-3 shows the output per week of two people, Minnie and Mickey. They can either devote their time to making hats or making umbrellas. Minnie Mickey Hats Umbrellas ) Refer to Table 2-3. Which of the following statements is true? A) Mickey has an absolute advantage in making both products. B) Minnie has an absolute advantage in making both products. C) Minnie has an absolute advantage in making hats and Mickey in making umbrellas. D) Minnie has an absolute advantage in making umbrellas and Mickey in making hats. 24) Refer to Table 2-3. What is Minnie's opportunity cost of making a hat? A) 1/5 of an umbrella B) 1/4 of an umbrella C) 4 umbrellas D) 10 umbrellas 25) Refer to Table 2-3. Which of the following statements is true? A) Minnie has a comparative advantage in making both products. B) Mickey has a comparative advantage in making both products. C) Minnie has a comparative advantage in making hats and Mickey in making umbrellas. D) Mickey has a comparative advantage in making hats and Minnie in making umbrellas. Chapter three 1) If you are considering buying either an Apple Watch or a Samsung Gear S2, and you choose the Samsung only because the price is lower, then you consider A) the Apple Watch to be a normal good and the Samsung Gear S2 to be an inferior good. B) the Apple Watch to be an inferior good and Samsung Gear S2 to be a normal good. C) the Apple Watch and the Samsung Gear S2 to be complements. D) the Apple Watch and the Samsung Gear S2 to be substitutes.

5 2) If, in response to a decrease in the price of coffee, the quantity of coffee demanded increases, economists would describe this as A) an increase in demand. B) an increase in quantity demanded. C) a change in consumer income. D) an increase in consumers' taste for coffee. 3) The phrase "demand has increased" means that A) a demand curve has shifted to the left. B) there has been an upward movement along a demand curve. C) there has been a downward movement along a demand curve. D) a demand curve has shifted to the right. 4) If an increase in income leads to a decrease in the demand for salami, then salami is A) an inferior good. B) a neutral good. C) a necessity. D) a normal good. 5) Suppose that when the price of oranges decreases, Sarita decreases her purchases of peaches. To Sarita, A) oranges and peaches are complements. B) oranges and peaches are inferior goods. C) oranges and peaches are normal goods. D) oranges and peaches are substitutes. 6) Several studies have shown promising links between green tea consumption and cancer prevention. How does this affect the market for green tea? A) The quantity of green tea demanded increases because of a change in tastes in favor of green tea. B) The green tea demand curve shifts to the right because of a change in tastes in favor of green tea. C) The green tea demand curve shifts to the left because this new information will increase the price of green tea. D) The quantity of green tea demanded decreases because this new information will increase the price of green tea. 7) If the price of gasoline increases, what will be the impact in the market for public transportation? A) The demand curve for public transportation shifts to the right. B) The quantity of public transportation demanded increases. C) The demand curve for public transportation shifts to the left. D) The quantity of public transportation demanded decreases. 8) If in the market for bananas the supply curve has shifted to the right, then A) the supply of bananas increased. B) the quantity of bananas supplied has increased. C) the supply of bananas has decreases. D) the quantity of bananas supplied has decreased.

6 9) means the supply curve has shifted to the right, while refers to a movement along a given supply curve in response to an increase in price. A) An increase in supply; a decrease in supply B) A decrease in supply; an increase in supply C) An increase in supply; an increase in quantity supplied D) A decrease in supply; a decrease in quantity supplied 10) Which of the following would cause an increase in the supply of cheese? A) a decrease in the price of wine (assuming that cheese and wine are complements) B) an increase in the price of cheese C) an increase the price of a product that producers sell instead of cheese D) an increase in the number of firms that produce cheese 11) Farmers can plant either corn or soybeans in their fields. Which of the following would cause the supply of soybeans to increase? A) an increase in the price of soybeans B) a decrease in the price of corn C) an increase in the demand for corn D) an increase in the price of soybean seeds 12) At a product's equilibrium price A) anyone who needs the product will be able to buy the product, regardless of ability to pay. B) the federal government will provide the product to anyone who cannot afford it. C) not all sellers who are willing to accept the price will find buyers for their products. D) any buyer who is willing and able to pay the price will find a seller for the product. Figure ) Refer to Figure 3-1. If the price is $25, A) there is a surplus of 300 units. B) there is a shortage of 300 units. C) there is a surplus of 200 units. D) there is a shortage of 200 units.

7 14) Refer to Figure 3-1. At a price of $25, how many units will be sold? A) 400 B) 500 C) 600 D) ) Refer to Figure 3-1. At a price of $25, how many units will be supplied? A) 400 B) 500 C) 600 D) ) Refer to Figure 3-1. If the current market price is $25, the market will achieve equilibrium by A) a price increase, increasing the supply and decreasing the demand. B) a price decrease, decreasing the supply and increasing the demand. C) a price decrease, decreasing the quantity supplied and increasing the quantity demanded. D) a price increase, increasing the quantity supplied and decreasing the quantity demanded. 17) Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. What happens in the market for sushi if the Surgeon General announces that a majority of the raw fish that is imported to make sushi contains high levels of toxic mercury? A) D decreases, S no change, P and Q decrease B) S decreases, D no change, P increases, Q decreases C) D and S decrease, P and Q decrease D) D no change, S increases, P decreases, Q decreases 18) Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline, A) the supply curve shifted to the left resulting in an increase in the equilibrium price. B) the supply curve shifted to the right resulting in an increase in the equilibrium price. C) the demand curve shifted to the left resulting in a decrease in the equilibrium price. D) the demand curve shifted to the right resulting in an increase in the equilibrium price. Figure ) Refer to Figure 3-2. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A). If the price of motorcycle engines increases, and the wages of motorcycle workers increase, how will the

8 equilibrium point change? A) The equilibrium point will move from A to E. B) The equilibrium point will move from A to B. C) The equilibrium point will move from A to C. D) The equilibrium will first move from A to B, then return to A. 20) Refer to Figure 3-2. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D2 and S2 (point E). If the technology to produce motorcycles improves and the number of buyers increases, how will the equilibrium point change? A) The equilibrium point will move from E to A. B) The equilibrium point will move from E to B. C) The equilibrium point will move from E to C. D) The equilibrium point will remain at E. 21) Refer to Figure 3-2. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S1 (point A). If there is an increase in the wages of motorcycle workers and an increase in the price of motorcycle insurance, a complement to motorcycles, the equilibrium could move to which point? A) A B) B C) C D) E 22) Refer to Figure 3-2. The graph in this figure illustrates an initial competitive equilibrium in the market for motorcycles at the intersection of D1 and S2 (point B). If there is an increase in number of companies producing motorcycles and a decrease in income (assume motorcycles are a normal good), the equilibrium could move to which point? A) A B) B C) C D) E