Econ 20A Midterm 1 Study Guide Key .pdf

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Department
Economics
Course
ECON 20A
Professor
Reza Fazeli
Semester
Winter

Description
First Midterm Study Dr. Reza Fazeli Econ.20A Part I. Multiple Choice Questions: Please answer all of the following questions (Each 1.6 points) 1. The phenomenon of scarcity stems from the fact that a. most economies’ production methods are not very good. b. in most economies, wealthy people consume disproportionate quantities of goods and services. c. governments restrict production of too many goods and services. d. resources are limited. 2. Approximately what percentage of the world's economies experience scarcity? a. 10% b. 40% c. 85% d. 100% 3. The adage, "There is no such thing as a free lunch," is used to illustrate the principle that a. goods are scarce. b. income must be earned. c. households face many decisions. d. people face tradeoffs. 4. Efficiency a. and equality both refer to how much a society can produce with its resources. b. and equality both refer to how fairly the benefits from using resources are distributed between members of a society. c. refers to how evenly the benefits from using resources are distributed between members of society. Equality refers to how much a society can produce with its resources d. refers to how much a society can produce with its resources. Equality refers to how evenly the benefits from using resources are distributed among members of society. 5. Which of the following phrases best captures the notion of efficiency? a. absolute fairness b. equal distribution c. minimum waste d. equitable outcome 6. Government policies designed to equalize the distribution of economic well-being include (i) the welfare system (ii) unemployment insurance (iii) progressive income tax a. (i) only 1     b. (ii) only c. (i) and (ii) only d. (i), (ii), and (iii) 7. The opportunity cost of an item is a. the number of hours needed to earn money to buy the item. b. what you give up to get that item. c. usually less than the dollar value of the item. d. the dollar value of the item. 8. When computing the opportunity cost of attending a concert you should include a. the price you pay for the ticket and the value of your time. b. the price you pay for the ticket, but not the value of your time. c. the value of your time, but not the price you pay for the ticket. d. neither the price of the ticket nor the value of your time. 9. Ellie decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is a. the value of the knowledge she would have received had she attended class. b. the $24 she could have earned if she had worked at her job for those two hours. c. the value of her nap less the value of attending class. d. nothing, since she valued sleep more than attendance at class. 10. For which of the following individuals would the opportunity cost of going to college be highest? a. a promising young mathematician who will command a high salary once she earns her college degree b. a student with average grades who has never held a job c. a student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball d. a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree 11. Maureen’s college raises the cost of room and board per semester. This increase raises Maureen’s opportunity cost of attending college a. even if the amount she would have to pay for room and board if she didn’t attend college rose by the same amount. An increase in opportunity cost reduces Maureen’s incentive to attend college. b. only if the amount she would have to pay for room and board if she didn’t attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Maureen’s incentive to attend college. c. even if the amount she would have to pay for room and board if she didn’t attend college rose by the same amount. An increase in opportunity cost increases Maureen’s incentive to attend college. d. only if the amount she would have to pay for room and board if she didn’t attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost increases Maureen’s incentive to attend college. 12. Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot. a. The cost of the parking permit is not part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 2     b. Only half of the cost of the parking permit is part of the opportunity cost of attending college. c. The cost of the parking permit is not part of the opportunity cost of attending college under any circumstances. d. The cost of the parking permit is part of the opportunity cost of attending college if you would not have to pay for parking otherwise. 13. A rational decision maker takes an action only if the a. marginal benefit is greater than the marginal cost. b. marginal benefit is less than the marginal cost. c. average benefit is greater than the average cost. d. marginal benefit is greater than both the average cost and the marginal cost. 14. A marginal change is a a. change that involves little, if anything, that is important. b. large, significant adjustment. c. change for the worse, and so it is usually a short-term change. d. small, incremental adjustment. 15. People are willing to pay more for a diamond than for a bottle of water because a. the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. b. producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. c. the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. c. water prices are held artificially low by governments, since water is necessary for life. 16. A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand? a. Yes, because cutting hair is profitable. b. No, because he may not be able to sell more services. c. the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. d. It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients. 17. Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $5800. Bill discovers that he needs to do an additional $2400 of work to make the car worth $5800 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do? a. He should keep the car since it wouldn’t be rational to spend $6400 restoring a car and then sell it for only $5800. b. He should complete the additional work and sell the car for $5800. c. It does not matter which action he takes since the outcome will be the same either way. d. He should sell the car now for $3800. 18. Mark is refinishing an antique china cabinet and has already spent $180 on the restoration. He expects to be able to sell the cabinet for $360. Mark discovers that he needs to do an additional $200 of work to make the cabinet worth $360 to potential 3     buyers. He could also sell the cabinet now, without completing the additional work, for $100. What should he do? a. He should sell the cabinet now for $100. b. He should keep the cabinet since it wouldn’t be rational to spend $380 restoring a cabinet and then sell it for only $360. c. It does not matter which action he takes since the outcome will be the same either way. d. He should complete the additional work and sell the cabinet for $360. 19. Bridget drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda a. can be thought of as the total benefit Bridget enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas. b. determines Bridget’s willingness to pay for the third soda. c. is likely different from the marginal benefit provided to Bridget by the second soda. d. All of the above are correct. 20. Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay a. more than $40, as the average benefit will exceed the marginal cost. b. more than $40, as the marginal benefit will exceed the marginal cost. c. more than $80, as the average benefit will exceed the marginal cost. . more than $80, as the marginal benefit will exceed the marginal cost. 21. A bagel shop sells fresh baked bagels from 5 a.m. until 7 p.m. every day. The shop does not sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has 8 dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive? a. Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen. b. Lower the price of the remaining bagels, but under no circumstances should the price fall below $1.00 per dozen. d. Throw the bagels away and produce 8 fewer dozen bagels tomorrow. d. Starting tomorrow, lower the price on all bagels so they will all be sold earlier in the day. 22. You go to the movieplex where movies ordinarily cost $10. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new re- lease with your friend, what is your opportunity cost? a. the amount you value the first movie + $10 b. the amount you value the first movie + $3 c. $3 d. $10 23. U.S. laws requiring that drivers wear seat belts have resulted in 4     a. a reduction in both driver deaths and pedestrian deaths. b. fewer accidents and fewer deaths per accident. c. fewer driver deaths, fewer accidents and fewer pedestrian deaths. d. little change in the number of driver deaths, but more accidents and more pedestrian deaths. 24. Suppose the state of Massachusetts passes a law that increases the tax on alcoholic beverages. As a result, resi-dents in Massachusetts start purchasing their alcohol in surrounding states. Which of the following principles does this best illustrate? a. Rational people think at the margin b. People respond to incentives c. Trade can make everyone better off d. Markets are usually a good way to organize economic activity 25. According to a recent study of Chilean bus drivers, drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour. This result is an example of which prin-ciple of economics? a. People respond to incentives. b. People face tradeoffs. c. The cost of something is what you give up to get it. d. Rational people think at the margin. 26. Which of the following statements about trade is false? a. Trade increases competition. b. With trade, one country wins and one country loses. c. Bulgaria can benefit, potentially, from trade with any other country. d. Trade allows people to buy a greater variety of goods and services at lower cost. 27. Kevin is the CEO of a large firm and a homeowner who pays a landscaper to maintain his lawn rather than do it himself. Kevin has determined that he can earn more in the hour it would take him to work on his lawn than he must pay his landscaper. This scenario is an example of which principle of economics? a. Markets are usually a good way to organize economic activity. b. Governments can sometimes improve market outcomes. c. Prices rise when the government prints too much money. d. Trade can make everyone better off. 28. Suppose that a country that has a high average wage level agrees to trade with a country that has a low average wage level. Which country can benefit? a. only the one with a low level of output per person. b. only the one with a high level of output per person. c. neither d. both 29. When the France trades with Russia, a. only Russia benefits since France can produce all goods at a higher level of quality than Russia. b. both countries are likely made better off. c. only France benefits since Russia’s low wages guarantee profitable firms in Russia regardless of trade. d. neither country will benefit since France is more efficient than Russia at producing all goods. 5     30. The basic principles of economics suggest that government should become involved in markets when those markets fail to produce efficient or fair outcomes. 31. Communist countries worked under the premise that central planners were in the best position to determine the allocation of scarce resources in the economy. 32. The term "invisible hand" was coined by Adam Smith. 33. The invisible hand refers to how the decisions of households and firms lead to desirable market outcomes. 34. The invisible hand refers to how the decisions of households and firms lead to desirable market outcomes. 35. Which of the following statements does not apply to a market economy? a. Firms decide whom to hire and what to produce. b. Government policies are the primary forces that guide the decisions of firms and households. c. The “invisible hand” usually maximizes the well-being of society as a whole. d. Households decide which firms to work for and what to buy with their incomes. 36. A friend of yours asks you why market prices are better than government-determined prices. Because you under-stand economic principles, you say that market-determined prices are better because they generally reflect both the value of a good to society and the cost of making it. 37. When the government prevents prices from adjusting naturally to supply and demand, it adversely affects the allocation of resources. 38. Public policies may be able to improve either economic efficiency or equality. 39. The term market failure refers to a situation in which the market on its own fails to allocate resources efficiently. 40. Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of a market failure caused by an externality. 41. Which of these activities will most likely impose an external cost? a. Betty plants flowers in her garden. b. Bridget drives her car after having too much alcohol to drink. c. Bonnie gets a flu vaccine. d. Becky buys a new flat screen television. 42. In 2008, the average American earned about $47,000 while the average Nigerian earned about $1,400. Which of the following statements is likely? a. The average American purchases more televisions than the average Nigerian. b. The average American has better nutrition and healthcare than the average Nigerian. c. The average American has a longer life expectancy than the average Nigerian. d. All of the above are correct. 43. The income of a typical worker in a country is most closely linked to which of the following? a. population 6     b. market power c. government policies d. productivity 44. According to a recent study of Chilean bus drivers, drivers who are paid by the number of passengers they transport have higher productivity than drivers who are paid by the hour. If Chilean bus drivers are paid by the number of passengers they transport and Colombian bus drivers are paid by the hour, we can conclude that a. Colombian bus drivers likely have a higher standard of living than Chilean bus drivers. b. Chilean and Colombian bus drivers likely have the same standard of living. c. Chilean bus drivers likely have a higher standard of living than Colombian bus drivers. d. Chilean and Colombian bus drivers likely have a higher standard of living than US bus drivers. The increase in living standards of American workers over the past century is primarily due to improvements in productivity. 45. President Gerald Ford referred to inflation as public enemy number one. 46. Suppose that the Federal Reserve Bank announces that it will be making a change to a key interest rate to increase the money supply. This is likely because the Federal Reserve Bank is worried about unemployment. 47. During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that the rate of growth of the quantity of money was slower in the United Kingdom than in Turkey. 48. Which of the following is not correct? a. Economists use some familiar words in specialized ways. b. Supply, demand, elasticity, comparative advantage, consumer surplus, and deadweight loss are all terms that are part of the economist’s language. c. The value of the economist’s language lies in its ability to provide you with a new and useful way of thinking about the world in which you live. d. Economics has its own language and its own way of thinking, but few other fields of study do. 49. Which of the following is not correct? a. Economists use some familiar words in specialized ways. b. Economics has its own language and its own way of thinking, but few other fields of study do. c. The value of the economist’s language lies in its ability to provide you with a new and useful way of thinking about the world in which you live. d. Supply, demand, elasticity, comparative advantage, consumer surplus, and deadweight loss are all terms that are part of the economist’s language. 50. In conducting their research, economists often substitute historical events and historical episodes for a. theories and observations. 7     b. laboratory experiments. c. assumptions. d. models. 51. In building economic models, economists often omit a. assumptions. b. theories. c. details. d. equations. 52. A model that shows how dollars flow through markets among households and firms is called the a. production possibilities frontier. b. demand and supply diagram. c. comparative advantage model. d. circular-flow diagram. 53. A model that shows how dollars flow through markets among households and firms is called the demand and supply diagram. 54. In the circular-flow diagram, income payments flow from firms to households, and sales revenue flows from households to firms. Figure 2-1 55. Refer to Figure 2-1. Which arrow represents the flow of goods and services? a. A b. C c. D d. B 56. Refer to Figure 2-1. Which arrow represents the flow of spending by households? a. A b. B c. C d. D 8     57. Refer to Figure 2-1. Which arrow represents the flow of land, labor, and capital? a. A b. B c. D d. C 58. Refer to Figure 2-1. Which arrow represents the flow of income payments? a. A b. D c. B d. C 59. Refer to Figure 2-1. Sonia completes her first week of employment working as a hairdresser at a salon. On Friday of that week, she receives her first paycheck. To which of the arrows does this transaction directly contribute? a. B only b. A and B c. C only d. C and D Figure 2-2 60. Refer to Figure 2-2. Boxes A and B of this circular-flow diagram represent a. households and government. b. the markets for goods and services and the markets for financial assets. c. the markets for goods and the markets for services. d. firms and households. 61. Refer to Figure 2-2. Boxes C and D of this circular-flow diagram represent the markets for goods and services and the markets for factors of production. 62. Refer to Figure 2-2. If Box A of this circular-flow diagram represents firms, then which box represents households? Box B bRefer to Figure 2-2. If households are sellers in the markets represented by Box D of this circular-flow dia-gram, then a. Box D must represent the markets for factors of production. b. Box C must represent the markets for goods and services. c. firms are buyers in the markets represented by Box D. d. All of the above are correct. 9     63. Refer to Figure 2-2. If households are buyers in the markets represented by Box C of this circular-flow diagram, then firms are sellers in the markets represented by Box C. 64. . If the outer loop of this circular-flow diagram represents flows of dollars, then the inner loop includes flows of inputs from households to firms. 65. Refer to Figure 2-2. If the flow of goods and services is part of what is represented by the inner loop of this circular-flow diagram, then the flow of factors of production is also part of what is represented by the inner loop. 66. Refer to Figure 2-2. Devin works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs. Juan owns office buildings and rents his buildings to companies in exchange for rent payments. If Devin’s income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then Juan’s income is represented by a flow of dollars a. from Box A to Box C. b. from Box D to Box B. c. from Box C to Box A. d. from Box B to Box D. 67. Refer to Figure 2-2. Carla regularly buys fruits and vegetables at a grocery store. Roberto regularly pays a lawn-care company to mow his lawn. If the flow of fruits and vegetables from the grocery store to Carla is represented by an arrow from Box C to Box B of this circular-flow diagram, then the money paid by Roberto to the lawn-care company is represented by an arrow from Box B to Box C. 68. When an economy is operating inside its production possibilities frontier, we know that a. there are unused resources or inefficiencies in the economy. b. all of the economy’s resources are fully employed. c. economic growth would have to occur in order for the economy to move to a point on the frontier. d. in order to produce more of one good, the economy would have to give up some of the other good. Table 2-3 Production Possibilities for Libraryland Books Magazines 400 0 300 200 200 350 100 450 0 500 69. Refer to Table 2-3. What is the opportunity cost to Libraryland of increasing the production of books from 200 to 300? 150 magazines 70. Refer to Table 2-3. Which of the following statements is correct? a. The opportunity cost of an additional 100 books is constant at 50 magazines. b. The opportunity cost of an additional 100 books is constant at 100 magazines. 10     c. Libraryland’s production possibilities frontier is a straight, downward-sloping line. d. The opportunity cost of an additional 100 books increases as more books are produced. Table 2-4 Production Possibilities for Batterland Pancakes Waffles 600 0 450 150 300 250 150 325 0 375 71. Refer to Table 2-4. What is the opportunity cost to Batterland of increasing the production of pancakes from 150 to 300? 75 waffles Figure 2-3 ovens J K L M N pans 72. Refer to Figure 2-3. At which point is this economy producing its maximum possible quantity of pans? N 73. Refer to Figure 2-3. Efficient production is represented by which point(s)? a. J, K, N b. K, M, N c. L, M d. K, N 74. Refer to Figure 2-3. Inefficient production is represented by which point(s)? a. M b J, L c. J, L, M d. K, N 75. Refer to Figure 2-3. Unemployment could cause this economy to produce at which point(s)? a. J, L 11     b. M c. J, L, M d. K, N Figure 2-8 Panel (a) Panel (b) 7 cups of coffee 7 cups of coffee 6.5 6.5 J 6 6 5.5 5.5 5 5 4.5 4.5 4 L 4 K 3.5 3.5 3 3 2.5 2.5 2 N 2 1.5 1.5 1 1 0.5 0.5 M 1 2 3 4 5 6 donuts 1 2 3 4 5 6 donuts 76. Refer to Figure 2-8, Panel (a). Production at point K is. possible but inefficient. 77. Refer to Figure 2-8, Panel (a). Production is possible at points J, K, L, and M, but efficient only at points J, L, and M. 78. Refer to Figure 2-8, Panel (a). The movement from point M to point K could be caused by a. an advance in production technology. b. an improvement in efficiency. c. economic growth. d. unemployment. 79. Refer to Figure 2-8, Panel (a). The opportunity cost of moving from point J to point L is 2 cups of coffee. 80. Refer to Figure 2-8, Panel (a). The opportunity cost of moving from point M to point L is a. 2 donuts. b. 2 donuts and 4 cups of coffee. c. 4 donuts. d. 4 cups of coffee. 81. Refer to Figure 2-8, Panel (a). The opportunity cost of moving from point K to point L is 0 cups of coffee. 82. Refer to Figure 2-8, Panel (a). The opportunity cost of one cup of coffee is highest when the economy produces 12     a. 0 cups of coffee. b. 2 cups of coffee. c. 4 cups of coffee. d. 6 cups of coffee. 83. Refer to Figure 2-8, Panel (a). In order to gain 2 donuts by moving from point L to point M, society must sacrifice 4 cups of coffee. 84. Refer to Figure 2-8, Panel (a) and Panel (b). A shift of the economy’s production possibilities frontier from Panel (a) to Panel (b) could be caused by an improvement in donut production technology. 85. Refer to Figure 2-8, Panel (a) and Panel (b). Which of the following is not a result of the shift of the econ-omy’s production possibilities frontier from Panel (a) to Panel (b)? a. the tradeoff between the production of donuts and coffee changes b. the opportunity cost of a cup of coffee is higher at all levels of coffee production c. production of 4 donuts and 2 cups of coffee becomes possible d. production of 1 donut and 4 cups of coffee becomes efficient Figure 2-10 books B A DVDs 86. Refer to Figure 2-10. Which of the following events would explain the shift of the production possibilities frontier from A to B? a. The economy experienced a technological advance in the production of books. b. The economy’s citizens developed an enhanced taste for books. c. More capital became available in the economy. d. More labor became available in the economy. 87. Refer to Figure 2-10. The shift of the production possibilities frontier from A to B illustrates economic growth. 88. A macroeconomist - as opposed to a microeconomist - would study the effects of borrowing by the federal government. 89. Which of the following is an example of a normative, as opposed to positive, statement? a. If the price of a product decreases, people’s willingness to buy that product will increase. b. If the national saving rate were to increase, so would the rate of economic growth. 13     c. The elimination of trade restrictions would increase an economy’s standard of living. d. Reducing tax rates on the wealthy would benefit the nation. 90. The President receives economic policy advice from economists at each of the following except a. the Council of Economic Advisors. b. the Congressional Budget office. c. the Department of the Treasury. d. the Department of Labor. 91. John Maynard Keynes referred to economics as an easy subject, a. at which very few excel. b. but not as easy as philosophy or the pure sciences. c. which very few can enjoy. d. which deals primarily with common sense. 92. As a student, Anne spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Anne’s production possibilities frontier is a straight line if she can switch between writing term papers and completing homework assignments at a constant rate. Table 3-1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. Minutes Needed to Make 1 Bushel of Wheat Pound of Beef Andia 20 12 Zardia 15 10 93. Refer to Table 3-1. Assume that Andia and Zardia each has 360 minutes available. If each person divides his time equally between the production of wheat and beef, then total production is 21 bushels of wheat and 33 pounds of beef. 94. Refer to Table 3-1. Which of the following combinations of wheat and beef could Andia produce in one 8-hour day? 9 bushels of wheat and 25 pounds of beef 95. Refer to Table 3-1. Which of the following combinations of wheat and beef could Zardia not produce in one 10-hour day? 25 bushels of wheat and 25 pounds of beef Table 3-2 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. Labor Hours Needed to Make 1 Cooler Radio 14     Aruba 2 5 Iceland 1 4 96. Refer to Table 3-2. Which of the following represents Aruba's production possibilities frontier when 100 labor hours are available? a. radios c. radios 50 5 40 4 30 3 20 2 1 10 10 20 30 40 50 coolers 1 2 3 4 5 coolers b. radios d. radios 500 5 400 4 3 300 200 2 100 1 100 200 300 400 500 coolers 1 2 3 4 5 coolers 97. Refer to Table 3-2. Assume that Aruba and Iceland each has 80 labor hours available. If each country di-vides its time equally between the production of coolers and radios, then total production is 60 coolers and 18 radios. 98. Refer to Table 3-2. Which of the following combinations of coolers and radios could Aruba produce in one 40-hour week? a. 3 coolers and 7 radios b. 5 coolers and 6 radios c. 11 coolers and 4 radios d. 13 coolers and 3 radios Table 3-5 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. Labor Hours Needed Number of Units to Make 1 Unit of Produced in 40 Hours Cheese Bread Cheese Bread England 1 4 40 10 Spain 4 8 10 5 99. Refer to Table 3-5. Assume that England and Spain each has 40 labor hours available. If 15     each country divides its time equally between the production of cheese and bread, then total production is 25 units of cheese and 7.5 units of bread. 100. Refer to Table 3-5. Which of the following combinations of cheese and bread could Spain produce in 40 hours? 7 units of cheese and 1.5 units of bread. 101.Refer to Table 3-5. Which of the following combinations of cheese and bread could England not produce in 40 hours? a. 5 units of cheese and 9 units of bread. b. 10 units of cheese and 7.5 units of bread. c. 20 units of cheese and 5 units of bread. d. 30 units of cheese and 2.5 units of bread. 102.Refer to Table 3-5. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for Spain. If we were to do this, measuring cheese along the horizontal axis, then the slope of England’s production possibilities frontier would be -0.25 and the slope of Spain’s production possibilities frontier would be -0.5. 103.Refer to Table 3-5. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for Spain. If we were to do this, measuring bread along the horizontal axis, then the slope of England’s production possibilities frontier would be -4 and the slope of Spain’s production possibilities frontier would be -2. 104. Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 table is a. 1/5 chair for Mike and 1/3 chair for Sandy. b. 1/5 chair for Mike and 3 chairs for Sandy. c. 5 chairs for Mike and 1/3 chair for Sandy. d. 5 chairs for Mike and 3 chairs for Sandy. 105.The principle of comparative advantage does not provide answers to certain questions. One of those questions is a. How are the gains from trade shared among the parties to a trade? b. Do specialization and trade benefit more than one party to a trade? c. Is it absolute advantage or comparative advantage that really matters? d. Is it possible for specialization and trade to increase total output of traded goods? 106.Trade can make everybody better off because it allows people to specialize according to comparative advantage. Table 3-4 Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. Labor Hours Needed Pounds Produced to Make 1 Pound of in 24 Hours Meat Potatoes Meat Potatoes Farmer 8 2 3 12 Rancher 3 6 8 4 107.Refer to Table 3-4. The opportunity cost of 1 pound of meat for the farmer is 16     4 pounds of potatoes. 108.Refer to Table 3-4. The opportunity cost of 1 pound of meat for the rancher is 1/2 pound of potatoes. 109.77. Refer to Table 3-4. The oppo
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