1 . In Zagora, a worker can produce either 5 books or 10 gadgets in an hour. In Plovdiv, a worker can produce either 3 books or 5 gadgets in an hour. Which statement about this situation is true?
A. Zagora has a comparative advantage in the production of books.
B. Zagora has a comparative advantage in the production of gadgets.
C. Zagora has the absolute advantage in both types of production, and workers in Plovdiv can't possibly compete against the super-productive workers in Zagora.
D. Plovdiv workers are clearly earning lower wages, and workers in Zagora can't be expected to compete against the low-wage workers in Plovdiv.
E. None of the above.

2. Free trade has the effect of:
A. making every individual in an economy better off.
B. decreasing an economy's production possibilities.
C. making all producers in an economy better off.
D. increasing the purchasing options of consumers in an economy.
E. making all workers in an economy worse off.

3. Protectionist measures are enacted because they:
A. allow countries to preserve culturally important ways of life at a very low cost.
B. typically benefit a large number of people at a cost to only a very small number.
C. typically benefit a small number of people greatly and impose small costs on a large number of people.
D. make everyone in an economy better off.
E. preserve a nation's critical natural resources.

4. Restrictions on imports of foreign steel into the U.S. will:
A. help both U.S. steel producers and U.S. automobile producers.
B. help U.S. steel producers and hurt U.S. automobile producers.
C. hurt U.S. automobile producers, but help U.S. automobile consumers.
D. hurt foreign steel producers and help U.S. steel consumers.
E. help both U.S. steel producers and foreign steel producers.

5. Suppose Bulgaria is accused of "dumping" milk on the Ukrainian market. As a result, the Ukrainian government is considering an embargo against milk from Bulgaria. As a result of this proposed embargo:
A. Ukrainian consumers of milk, such as small children, would be made better off, as would Ukrainian milk producers.
B. Ukrainian consumers of milk, such as small children, would be helped, but Ukrainian milk producers would be hurt.
C. Ukrainian consumers of milk, such as small children, would be hurt, as would milk producers in both Bulgaria and Ukraine.
D. milk producers in Bulgaria would be helped due to the resulting increase in milk prices.
E. Ukrainian consumers of milk, such as small children, would be made worse off, but Ukrainian milk producers would be made better off.

6. The term "balance of payments" refers to a nation's:
A. merchandise exports minus imports.
B. record of all international transactions.
C. capital inflows minus outflows.
D. official reserves inflows minus outflows.
E. capital outflows minus inflows.

7. If a bottle of French wine priced at 100 francs can be purchased for $50, the exchange rate is:
A. 0.50 francs per dollar.
B. 4.00 francs per dollar.
C. 0.50 dollars per franc.
D. 2.00 dollars per franc.
E. None of the above

Question

1 . In Zagora, a worker can produce either 5 books or 10 gadgets in an hour. In Plovdiv, a worker can produce either 3 books or 5 gadgets in an hour. Which statement about this situation is true?
A. Zagora has a comparative advantage in the production of books.
B. Zagora has a comparative advantage in the production of gadgets.
C. Zagora has the absolute advantage in both types of production, and workers in Plovdiv can't possibly compete against the super-productive workers in Zagora.
D. Plovdiv workers are clearly earning lower wages, and workers in Zagora can't be expected to compete against the low-wage workers in Plovdiv.
E. None of the above.
 
2. Free trade has the effect of:
A. making every individual in an economy better off.
B. decreasing an economy's production possibilities.
C. making all producers in an economy better off.
D. increasing the purchasing options of consumers in an economy.
E. making all workers in an economy worse off.
 
3. Protectionist measures are enacted because they:
A. allow countries to preserve culturally important ways of life at a very low cost.
B. typically benefit a large number of people at a cost to only a very small number.
C. typically benefit a small number of people greatly and impose small costs on a large number of people.
D. make everyone in an economy better off.
E. preserve a nation's critical natural resources.
 
4. Restrictions on imports of foreign steel into the U.S. will:
A. help both U.S. steel producers and U.S. automobile producers.
B. help U.S. steel producers and hurt U.S. automobile producers.
C. hurt U.S. automobile producers, but help U.S. automobile consumers.
D. hurt foreign steel producers and help U.S. steel consumers.
E. help both U.S. steel producers and foreign steel producers.
 
5. Suppose Bulgaria is accused of "dumping" milk on the Ukrainian market. As a result, the Ukrainian government is considering an embargo against milk from Bulgaria. As a result of this proposed embargo:
A. Ukrainian consumers of milk, such as small children, would be made better off, as would Ukrainian milk producers.
B. Ukrainian consumers of milk, such as small children, would be helped, but Ukrainian milk producers would be hurt.
C. Ukrainian consumers of milk, such as small children, would be hurt, as would milk producers in both Bulgaria and Ukraine.
D. milk producers in Bulgaria would be helped due to the resulting increase in milk prices.
E. Ukrainian consumers of milk, such as small children, would be made worse off, but Ukrainian milk producers would be made better off.
 
6. The term "balance of payments" refers to a nation's:
A. merchandise exports minus imports.
B. record of all international transactions.
C. capital inflows minus outflows.
D. official reserves inflows minus outflows.
E. capital outflows minus inflows.
 
7. If a bottle of French wine priced at 100 francs can be purchased for $50, the exchange rate is:
A. 0.50 francs per dollar.
B. 4.00 francs per dollar.
C. 0.50 dollars per franc.
D. 2.00 dollars per franc.
E. None of the above

		the total number of pizza slices that we have divided by the total number of sodas that we have.
		the number of sodas we have to give up to get one extra pizza slice.
		the number of pizza slices we have to give up to get one extra soda.
		the total number of sodas that we have divided by the total number of pizza slices that we have.

		how money can be allocated among two kinds of goods.
		the limits to the future growth of a nation.
		the various combinations of output a nation can produce at a certain time, given its available resources and technology.
		that if the price of one good decreases, the price of the other has to increase.

		remains constant.
		might increase, decrease, or remain constant depending on how much people value the additional units of the good.
		increases.
		decreases.

		the economy is producing at a point within its PPF.
		PPF disappears.
		the economy is producing at a point beyond its PPF.
		the economy is producing at a point on its PPF.

		its PPF will shift inward.
		its economic growth will slow down.
		its PPF will shift outward.
		some productive factors will become unemployed.

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		the attainable point with full employment of all resources.
		attainable point without full employment of all resources.
		unattainable point without full employment of all resources.
		the unattainable point with full employment of all resources.

		the available factors of production and the state of technology
		the amount of money in the economy
		the prices of goods and services
		the quantity of the goods and services that are produced

		more of both goods can be produced.
		the possibilities of tradeoffs diminish.
		a tradeoff is not possible because nations need all goods.
		the production of one good increases as the production of the other good decreases.

		needs to have an absolute advantage in the production of all goods.
		specializes in producing a good in which it has a lower opportunity cost.
		must produce at a point beyond its PPF.
		should produce at the midpoint of its PPF.

		a comparative advantage
		more production efficiency
		a marginal benefit
		a comparative benefit

		John has a comparative advantage in producing cakes.
		Phyllis has an absolute advantage in both goods.
		Phyllis has a comparative advantage in producing cakes.
		John has an absolute advantage in both goods.

		It decreases.
		It might increase, decrease, or remain constant depending on how much people value the additional units of the good.
		It remains constant.
		It increases.

		goods and services that people want.
		maximum combinations of goods and services that can be produced.
		resources the economy possesses, but not it is the level of technology.
		limits to people's wants.

		to increase the production of one product requires smaller and smaller sacrifices of the other good.
		to decrease the production of one product requires smaller and smaller sacrifices of the other good.
		to increase the production of one product requires larger and larger sacrifices of the other good.
		when the government forces a movement from one point on the PPF to another point, no production is lost.

		China will grow faster than India.
		India will be able to eliminate scarcity faster than China.
		India will be able to eliminate opportunity cost faster than China.
		India will grow faster than China.

		$14 billion
		$14 trillion
		$140 billion
		$140 trillion

		I only.
		I and ii.
		I and iii.
		ii and iii.

		zero opportunity cost.
		producing at a point that lies beyond the PPF.
		opportunity benefit.
		a tradeoff.

		increasing the production of both goods.
		increasing the production of one good and decreasing the production of another.
		holding the production levels of both goods constant.
		decreasing the production of both goods.

		but it can still benefit from specialization and trade.
		so does not need to trade with poor nations to achieve any gains from trade.
		so might not have a comparative advantage in producing any goods.
		so it must have a comparative advantage in the production of all goods.

		more of all goods than another person.
		a good for a lower opportunity cost than another person.
		a good for a lower dollar cost than another person.
		more of a good than another person.

		the linear shape of the production possibilities frontier.
		bowed in the shape of the production possibilities frontier.
		bowed out the shape of the production possibilities frontier.
		the positive slope of the production possibilities frontier.

		shift rightward.
		not shift because the society moves from one point on the frontier to a point inside the frontier.
		not shift because the society moves from a point inside the frontier to a point on the frontier.
		shift leftward.