ECON 1B03 Study Guide - Final Guide: Opportunity Cost, Comparative Advantage, Tiger Woods

52 views5 pages

greendinosaur870

16 Sep 2016

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Shanghaibalcony1234 and 37744 others unlocked

ECON 1B03 Full Course Notes

Verified Note

46 documents

Document Summary

Suppose there are 2 people in the economy: farmer larry, the potato farmer, and, rancher mark, the meat rancher. Only two goods are produced: potatoes and meat, and each person can produce both goods. 10 min/kg: larry, mark assume 8 hours in one day, both can produce both things. Larry: all time on meat = 8 kg, all time on potatoes = 32. Mark: all time on meat = 24 kg, all time on potatoes = 48 kg. 8/0. 25 0. 25 = of an hour to create 1 kg of potatoes. Suppose farmer larry and rancher mark do not trade: Production possibilities frontier is also a consumption possibilities frontier. Suppose they spend half of their time on each resource: mark produces and consumes 24 potatoes and 12 meat, larry produces and consumes 16 potatoes and 4 meat. Their ppfs (production possibilities frontier) are: 8 hours = 24 meat or 45 potatoes, 4 hrs each = 12 meat + 32 potatoes.

Related Questions

Question 1 If it was impossible to have a comparative advantage, there would be no gains from trade. True False 4 points

Question 2 If the price of Good X is $10 and price of Good Y is $15, the slope of the budget constraint is 1.5. True False 4 points

Question 3 If the demand and supply curves have equal slopes in absolute value, the burden of a commodity tax will be split equally regardless of on whom the tax is placed. True False 4 points

Question 4 Suppose that supply is fixed at 100 units and demand is Q = 500 P. A price ceiling of $100 creates a shortage of 400 units. True False 4 points

Question 5 Housing shortages caused by rent controls are larger in the long run because the supply of housing is more elastic in the long run. True False 4 points

Question 6 Firms should exit the industry if average costs are greater than marginal costs. True False 4 points

Question 7 If a 3.67 percent increase in price causes a 1.97 percent decrease in quantity demanded, then total revenue must fall following an increase in price. True False 4 points

Question 8 Which of the following choices best illustrates the concept of Adam Smith's invisible hand ? A Vietnamese farmer grows rice; an exporter ships it to the United States, and a grocer in New York sells it to a customer. A fishery's stock of fish becomes depleted due to overfishing as boats from around the world converge. A government regulates a firm to clean up the pollutants it has released as part of its production process. An apartment building is built, which provides much needed housing, on the site of the only playground for children in that town. 4 points

Question 9 Figure: Labor Supply and Welfare Refer to the figure. The budget constraint is: ABC. BD. ABDC. ABD. 4 points Question 10 The price of coffee has increased, yet evidence suggests the demand for coffee has been stable. A possible explanation is that: there has been no change in the supply of coffee. there has been increased use of subsidies in coffee production. wages of workers in coffee production might have decreased. wages of workers in coffee production might have increased. 4 points Question 11 Which of the following statements is TRUE regarding profit maximization in competitive markets? I. When all firms pursue profits, none of them achieve profits. II. When all firms pursue profits, only the most innovative will achieve profits. III. Production is divided in such a way that total costs of production are minimized. I only II only I and III only II and III only 4 points Question 12 Suppose France can produce four phones or three computers with one unit of labor, and Sweden can produce one phone or two computers with one unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that: France should specialize in producing phones and import computers from Sweden. France should specialize in producing computers and import phones from Sweden. France should produce both phones and computers, and import nothing from Sweden. France should import both phones and computers from Sweden. 4 points Question 13 Potato chips and popcorn are substitutes. A subsidy for potato chips will ______the demand for popcorn and the quantity of popcorn sold will ______. (Table: Barrels of Oil) Refer to the table. What is the total amount of producer surplus (per barrel of oil) earned by all four producers if the market price per barrel of oil is $51? Table: Barrels of Oil Minimum willingness to sell Country a single barrel of oil Country A $32.00 Country B 16.00 Country C 17.25 Country D 56.99 increase; increase increase; decrease decrease; decrease decrease; increase 4 points Question 14 In the market for Good X a necessity good without any good substitutes the workers and capital in the industry can easily find work producing other goods. The burden of the tax is likely to fall: more heavily on buyers, given that demand is more inelastic than supply. evenly between buyers and sellers. more heavily on sellers, given that supply is more inelastic than demand. more heavily on buyers, given that demand is more elastic than supply. 4 points Question 15 A U.S. manufacturer arranges to purchase parts from a German supplier for 500,000 euros in six months. The U.S. manufacturer is concerned that the dollar will depreciate against the euro, meaning the dollar cost of the 500,000 euros will rise. What should the U.S. manufacturer do? lobby the Fed to lower interest rates on six-month T-bills buy a futures contract that fixes the dollar cost of 500,000 euros in six months buy an exchange rate contract that pegs the interest rate to the discount rate on interbank loans sell a naked option to cover the output spread 4 points Question 16 Which of the following scenarios would cause a speculator to buy low and sell high ? Farmers expect to have a bumper harvest of corn next year. Imports of corn begin to flood the country. The government is expected to pass legislation making it mandatory for all vehicles to use corn-based fuels within one year. The government is expected to subsidize corn production for farmers. 4 points Question 17 In a market with a price ceiling which of the following is TRUE? Buyers and sellers experience unexploited gains from trade. Resources are allocated to their most efficient uses. The supply of goods is sold by the sellers with the lowest costs. The supply of goods is bought by the buyers with the highest willingness to pay. 4 points Question 18 Consider the following statements: I. Relative to a no-trade situation, if the United States exported wheat, the U.S. domestic wheat price would rise and domestic production of wheat would expand. II. Relative to a no-trade situation, international trade causes prices of all goods to rise. I is true; II is false. I is false; II is true. Both I and II are true. Both I and II are false. 4 points Question 19 As the price of a good fluctuates, a profit-maximizing firm will expand or contract production along its: average cost curve. average product curve. marginal cost curve. marginal product curve. 4 points Question 20 An increase in demand and a decrease in supply occur in a market. What happens to the equilibrium price and quantity? The equilibrium price decreases; the change in the equilibrium quantity is ambiguous. The equilibrium price decreases; the equilibrium quantity increases. The equilibrium price increases; the change in the equilibrium quantity is ambiguous. The equilibrium price increases; the equilibrium quantity decreases.

periwinklebear649

1) Which of the following transactions would be included in GDP?

a) The purchase of a Monet painting.

b) The purchase of paper clips.

c) The purchase of Telstra shares.

d) The purchase of a used car.

2) Economics is the study of

a) the choices everybody makes to attain their goals, given their scarce resources.

b) supply and demand.

c) how to make money in a market economy.

d) how to make money in the stock market.

3) The economy is considered to be at full employment when

a) all unemployment is voluntary.

b) all unemployment is frictional or structural.

c) there are no unemployed workers.

d) there are more unemployed workers than job vacancies

4) An example of an intermediate good would be

a) a can of cool drink sold by a super‐market.

b) a microwave used at home.

c) the bread that goes into a sandwich sold by a lunch bar.

d) the petrol purchased by consumers for their cars

5) From 2004 to 2005, the CPI for medical care increased from 260.8 to 272.8. What was the inflation rate for medical care?

a) 12 percent

b) 11.1 percent

c) 4.9 percent

d) 4.6 percent

6) A shift outwards of the nation's production possibility frontier can occur from

a) a reduction in unemployment.

b) an increase in the size of the labour force.

c) a change in the amounts of one good desired.

d) a natural disaster like a hurricane or severe earthquake

7) What assumptions about humans do economists make?

a) People are greedy and selfish.

b) None, because economics takes humans as given.

c) People are rational and respond to incentives.

d) Humans prefer to live in a society that values fairness above all else.

8) The labour force is the

a) a number of people employed minus the number of people unemployed.

b) ratio of the number of people employed by the number of people unemployed.

c) ratio of the number of people employed to the working-age population.

d) the number of people employed plus the number of people unemployed.

9) The production possibility frontier shows

a) attainable combinations of two products that may be produced with available resources.

b) the various products that can be produced now and in the future.

c) what an equitable distribution of products among citizens would be.

d) the rate of substitution between capital and labour.

10) Which of the following transactions would be included in the official calculation of GDP?

a) Bridgestone sells $2 million worth of tyres to General Motors Holden

b) You illegally download music off the Internet to put on your new iPod.

c) A new iPod.

d) A student buys a used textbook at the bookstore.

11) What are the three fundamental questions that any economy must answer?

a) What will be the prices of goods, how will these goods be produced, and who gets them?

b) What will be the prices of goods, what will be produced, and who gets them?

c) What will be produced, how will these goods be produced, and who gets them?

d) How much will be saved, what will be produced, and how can these goods be fairly distributed?

12) If the nominal interest rate is 6% and the inflation rate is 2%, then the real interest rate is

a) 3%.

b) 2%.

c) 4%.

d) 8%.

14) Suppose that a very simple economy produces three goods: movies, burgers, and bikes. Suppose the quantities produced and their corresponding prices for 2004 and 2009 are shown in the following table:

	2004		2009
	Quantity	Price	Quantity	Price
Movies	20	$6	30	$7
Burgers	100	$2	90	$2.5
Bikes	3	$1000	6	$1100

What is real GDP in 2009, using 2004 as the base year?

a) $3690

b) $7035

c) $6360

d) $3320

15) If the production possibility frontier is graphed as a straight line, what does this mean?

a) Opportunity costs are constant as production shifts from one product to the other.

b) It is easy to efficiently produce output.

c) Nothing, there is no significance of a straight line production possibility frontier.

d) Opportunity costs are increasing as production shifts from one product to the other.

16) If you have both an economics exam and a management exam tomorrow, but find that you have time to fully study for only one of them, what are you facing?

a) A failing grade in both exams

b) A zero opportunity cost

c) A trade‐off

d) An impossible situation

17) Which of the following is a problem inherent in centrally planned economies?

a) Production managers do not satisfy consumer wants but the government's orders.

b) Too much production of low‐cost, high‐quality goods and services.

c) There are no problems, everyone, including consumers are satisfied.

d) None of these describe the problem inherent in a centrally planned economy.

18) Inflation is an increase in the

a) average hourly wage rate.

b) general price level in the economy.

c) the overall level of economic activity.

d) rate of growth of GDP.

19) Total production in the economy is measured as the

a) dollar value of all final goods and services produced in the economy.

b) the total number of services produced in the economy.

c) the total number of goods produced in the economy.

d) the total number of goods and services produced in the economy.

20) An increase in the price of dairy products produced domestically will be reflected in

a) Both the GDP deflator and the consumer price index.

b) Neither the GDP deflator nor the consumer price index.

c) The GDP deflator but not in the consumer price index.

d) The consumer price index but not in the GDP deflator.

21) The reason that opportunity cost arises is that

a) money has proven to be an inefficient means of facilitating exchange in a market.

b) sometimes there are no alternative decisions that can be made.

c) resources are limited at any point in time. d) people have unlimited wants.

21) You have an absolute advantage whenever you

a) are better educated than someone else.

b) can produce something at a lower opportunity cost than others.

c) can produce more of something than others with the same resources.

d) prefer to do one particular activity.

22) Which of the following is an example of a worker experiencing cyclical unemployment?

a) A Freightliner employee who was sacked because of a recession.

b) A worker who quits his job because he does not get along with his boss

c) A worker that changes jobs to move closer to her family.

d) An assembly line worker who loses his job because of automation.

23) A company named Home Depot sells new and used doors to contractors who build new homes. Home Depot also sells new and used doors to home‐owners. Which of the following would be counted in GDP?

a) The sale of a used door to a home‐owner

b) The sale of a used door to for construction for installation into a new home.

c) The sale of a new door to for construction for installation into a new home.

d) The sale of a new door to home‐owner.

24) If you buy shares, the dollar value is

a) not included in GDP.

b) included in GDP under consumer expenditure.

c) included in GDP as a business expense.

d) included in GDP under-investment.

25) During the 1930s, Australia and other industrialised countries experienced the Great Depression with a large number of workers and factories unemployed.Which of the following points on a production possibility frontier model would represent this experience?

a) A point on the frontier

b) A point inside the frontier

c) An increase in the opportunity cost of the substitution between capital and labour

d) A point outside the frontier

26) How is the decision about what goods and services will be produced made in a market economy?

a) The government decides on what will be produced.

b) Producing firms decide to produce only what the firms' owners say must be produced.

c) By consumers, firms, and government choosing which goods and services to buy.

d) What will be produced is determined by what society needs the most.

27) In the country of Shem, the CPI is calculated using a market basket consisting of 5 apples, 4 loaves of bread, 3 robes and 2 gallons of gasoline. The per‐unit prices of these goods have been as follows: Using 2002 as the base year, what was the inflation rate between 2003 and 2004?

a) 28.5 percent

b) 34.2 percent

c) 47 percent

d) It is impossible to determine without knowing the base year.

28) Given the following information, calculate the unemployment rate: Full‐time employed = 80 Part‐time employed = 25 Unemployed = 15 Discouraged workers = 5 Members of underground economy = 6 Consumer Price Index = 110

a) 18.8 per cent.

b) 12.5 per cent.

c) 16.7 per cent.

d) 25 per cent.

29) If the quantity of resources available is fixed, as more of a good is produced, the opportunity cost of producing it increases. The most probable reason for this is that

a) as more of a good is produced, the quality of technology available to produce additional units declines.

b) the price of the inputs used to produce the good will rise.

c) consumers are unwilling to pay higher prices to cover the increases in production costs.

d) resources are not equally well‐suited to producing all goods.

30) Which of the following is a normative statement?

a) The current high price of petrol is the result of strong worldwide demand.

b) The price of petrol is too high.

c) Larger vehicles always use more fuel per kilometre than smaller vehicles

d) The supply of petrol has not been able to meet the demand for petrol.

31) Transfer payments are not included in GDP because

a) they do not generate income.

b) their market value is difficult to measure.

c) they are not purchases of goods or services.

d) their value is included in government expenditure.

32) The opportunity cost of going to your economics class

a) depends on the cost of your transport getting to class.

b) is equal to the highest value of alternative use of the time.

c) is zero because there is no admission charged if you are enrolled in the class.

d) depends on the salary of the lecturer.

33) Establishing employment agencies that speeds up the process of matching unemployed workers with unfilled jobs are an attempt to lower

a) cyclical unemployment.

b) seasonal unemployment.

c) structural unemployment.

d) frictional unemployment.

34) Suppose that money GDP for 2009 was $15 000 billion and the price index was 150 and in 2010 money GDP was $17 050 billion with a price index of 155. What is the rate of economic growth?

a) 5%

b) 10%

c) 2%

d) 1%

35) An individual has a comparative advantage in activity whenever she

a) also has an absolute advantage in that activity.

b) can perform the activity at a lower opportunity cost than another person can.

c) can do everything better than everyone else can.

d) can do the activity in less time than anyone else.

36) GDP is not a perfect measure of wellbeing because

a) GDP is adjusted for increases in drug addiction.

b) GDP is not adjusted for the effects of pollution.

c) GDP is adjusted for changes in crime.

d) the value of leisure is included in GDP.

37) What does an entrepreneur do in a market economy?

a) Organise the factors of production in a working unit.

b) Stand to lose the personal funds provided.

c) Develop the vision for the firm and ensure funding for the firm.

d) An entrepreneur does all of these things.

38) An example of a transfer payment is

a) the purchase of a new government office block.

b) a teacher's pay is transferred electronically from the government to the teacher.

c) interest repayments on a loan.

d) an unemployment benefit.

39) Which of the following is a microeconomics question?

a) What will be the level of total production in the national economy?

b) How much income will be saved and how much will be spent on consumer goods?

c) What factors determine the price of computers in the market?

d) Why is the rate of unemployment rising?

40) The measure of production that values production using current prices is called

a) value-added GDP.

b) nominal GDP.

c) black economy GDP.

d) real GDP.

41) Which of the following causes the official measure of the unemployment rate to understate the true extent of joblessness?

a) People who collect unemployment benefits report themselves to be searching for a job.

b) Discouraged workers are counted as unemployed.

c) Discouraged workers are not counted as unemployed.

d) Many full-time workers really want to be part-time workers.

42) A production possibility frontier will shift inwards if

a) inefficiency in production processes arise.

b) there is an increase in the rate of unemployment.

c) productive resources are destroyed due to war.

d) all of these options are correct.

43) Structural unemployment would increase when

a) discouraged workers drop out of the workforce.

b) the economy enters a recession.

c) the number of individuals who quit their job to find another increase.

d) workers are replaced by machines and the workers do not have the skills to perform new jobs.

44) The 2005 CPI was 196 and the 1982 CPI was 96.5. If your parents put aside $1,000 for you in 1982, how much would you have needed in 2005 in order to buy what you could have bought with the $1,000 in 1982?

a) $1,834.20

b) $2,031.09

c) $2,308.89

d) None of the above is correct.

45) What is an economic model?

turquoisedeer68

ECON 1B03 Study Guide - Final Guide: Opportunity Cost, Comparative Advantage, Tiger Woods

ECON 1B03 Full Course Notes

Document Summary

Get access

Related Documents

ECON 1B03 Lecture Notes - Lecture 3: Opportunity Cost, Absolute Advantage, Comparative Advantage

ECON 1B03 Lecture Notes - Lecture 3: Absolute Advantage, Comparative Advantage, Opportunity Cost

ECON 1B03 Study Guide - Midterm Guide: Aaron Rodgers, Pencil, Chocolate Cake

Related Questions