Question 1

When an economist points out that you and millions of other people are interdependent,he or she is referring to the fact that we all
A) rely upon the government to provide us with the basic necessities of life.
B) rely upon one another for the goods and services we consume.
C) have similar tastes and abilities.
D) are concerned about one another's well-being.

Accepted Answer

When an economist points out that we are interdependent, it means that we rely on each other for the goods and services we consume. This is because no one person or group can produce all of the goods and services they need, and therefore must rely on others to provide them. This interdependence is the basis for trade and specialization, which allows us to become more efficient and productive as a society.

Question 2

The most obvious benefit of specialization and trade is that they allow us to
A) work more hours per week than we otherwise would be able to work.
B) consume more goods than we otherwise would be able to consume.
C) spend more money on goods that are beneficial to society,and less money on goods that are harmful to society.
D) consume more goods by forcing people in other countries to consume fewer goods.

Accepted Answer

Specialization allows individuals and businesses to focus on producing goods and services in which they have a comparative advantage, leading to increased efficiency and productivity. By trading with others who specialize in different goods and services, we can consume a wider variety of products than we would be able to produce ourselves. This leads to increased overall consumption and a higher standard of living.

Question 3

Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate.
 
-Refer to Table 3-1.Which of the following combinations of wheat and beef could Andia produce in one 8-hour day?
A) 6 bushels of wheat and 35 pounds of beef
B) 9 bushels of wheat and 25 pounds of beef
C) 15 bushels of wheat and 20 pounds of beef
D) 24 bushels of wheat and 40 pounds of beef

Accepted Answer

B

Question 4

Which of the following is not a reason people choose to depend on others for goods and services?
A) to improve their lives
B) to allow them to enjoy a greater variety of goods and services
C) to consume more of each good without working any more hours
D) to allow people to produce outside their production possibilities frontiers

Accepted Answer

Depending on others for goods and services does not typically allow people to produce outside their production possibilities frontiers. This is because relying on trade and specialization allows individuals and countries to produce more efficiently and focus on their areas of comparative advantage, but it does not change the limits of their production possibilities. Therefore, choice D is not a reason people choose to depend on others for goods and services.

Question 5

When can two countries gain from trading two goods?
A) when the first country can only produce the first good and the second country can only produce the second good
B) when the first country can produce both goods,but can only produce the second good at great cost,and the second country can produce both goods,but can only produce the first good at great cost
C) when the first country is better at producing both goods and the second country is worse at producing both goods
D) Two countries could gain from trading two goods under all of the above conditions.

Accepted Answer

Two countries can gain from trading two goods under all of the above conditions. Trade allows countries to specialize in the production of the goods they can produce most efficiently and to import goods they can produce less effectively or at greater cost. Therefore, countries can benefit from trade regardless of whether they have an absolute or comparative advantage in the production of the goods.

Question 6

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
A) she faces no trade-off between writing term papers and completing homework assignments.
B) she can switch between writing term papers and completing homework assignments at a constant rate.
C) the rate at which she can switch between homework assignments and term papers depends on the number of homework assignments she is completing and on the number of term papers she is writing.
D) she is required by her professors to spend half of her time on term papers and the other half of her time on homework assignments.

Accepted Answer

A straight-line production possibilities frontier suggests a constant trade-off between producing two goods. Choice A is incorrect because any production possibilities frontier implies a trade-off. Choice C is not applicable here because it implies a non-constant trade-off. Choice D imposes a fixed allocation of time between the two activities, which does not allow for any trade-off. Therefore, only option B remains as the correct answer.

Question 7

People who provide you with goods and services
A) are acting out of generosity.
B) do so because they get something in return.
C) have chosen not to become interdependent.
D) are required to do so by the government.

Accepted Answer

People who provide goods and services do so because they expect to receive something in return, such as payment or trade. This is the basis of an economic system based on exchange and trade, where individuals specialize in providing certain goods or services in exchange for other goods or services they need. The concept of interdependence also applies here, as individuals and businesses rely on each other to meet their needs and wants through the exchange of goods and services. Generosity is not necessarily the driving factor behind the provision of goods and services, although it can certainly play a role in some situations. The government may require certain individuals or businesses to provide goods and services under certain circumstances, but this is not the case for most situations in a market-based economy.

Question 8

Pocoyo bakes cookies and Pato grows vegetables.In which of the following cases is it impossible for both Pocoyo and Pato to benefit from trade?
A) Pocoyo does not like vegetables and Pato does not like cookies.
B) Pocoyo is better than Pato at baking cookies and Pato is better than Pocoyo at growing vegetables.
C) Pato is better than Pocoyo at baking cookies and at growing vegetables.
D) Both Pocoyo and Pato can benefit from trade in all of the above cases.

Accepted Answer

If Pocoyo does not like vegetables and Pato does not like cookies, then there is no trade that can benefit both of them since they have different preferences.

Question 9

An economy's production possibilities frontier is also its consumption possibilities frontier
A) under all circumstances.
B) under no circumstances.
C) when the economy is self-sufficient.
D) when the rate of tradeoff between the two goods being produced is constant.

Accepted Answer

The answer of An economy's production possibilities frontier is also...

Question 10

A production possibilities frontier is a straight line when
A) the more resources the economy uses to produce one good,the fewer resources it has available to produce the other good.
B) an economy is interdependent and engaged in trade instead of self-sufficient.
C) the rate of tradeoff between the two goods being produced is constant.
D) the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

Accepted Answer

A straight line production possibilities frontier implies a constant rate of tradeoff between the production of two goods, meaning the opportunity cost of producing one good remains constant no matter how much of that good is produced.

Question 11

Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate.
 
-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
A) 10.5 bushels of wheat and 16.5 pounds of beef.
B) 21 bushels of wheat and 33 pounds of beef.
C) 35 bushels of wheat and 22 pounds of beef.
D) 42 bushels of wheat and 66 pounds of beef.

Accepted Answer

Each person has 360 minutes available, so they can each spend 180 minutes on producing wheat and 180 minutes on producing beef. Andia can produce 3 bushels of wheat and 6 pounds of beef in 60 minutes of work, and Zardia can produce 2 bushels of wheat and 5 pounds of beef in 60 minutes of work. 
Therefore, in 180 minutes of work, Andia can produce 3 x 3 = 9 bushels of wheat and 6 x 3 = 18 pounds of beef, and Zardia can produce 2 x 3 = 6 bushels of wheat and 5 x 3 = 15 pounds of beef. 
In total, they can produce 9 + 6 = 15 bushels of wheat and 18 + 15 = 33 pounds of beef. Therefore, the answer is B, 21 bushels of wheat and 33 pounds of beef.

Question 12

The production possibilities frontier illustrates
A) the combinations of output that an economy should produce.
B) the combinations of output that an economy should consume.
C) the combinations of output that an economy can produce.
D) All of the above are correct.

Accepted Answer

The production possibilities frontier (PPF) represents the combinations of two goods that an economy can produce given its available resources and technology. It shows the maximum quantity of one good that can be produced for any given quantity produced of the other. Therefore, options A and B are incorrect as the PPF does not suggest what an economy "should" produce or consume, but rather what is possible given its current constraints.

Question 13

A certain cowboy spends 10 hours per day mending fences and herding cattle.For the cowboy,a graph that shows his various possible mixes of output (fences mended per day and cattle herded per day)is called his
A) line of tastes.
B) trade-off curve.
C) production possibilities frontier.
D) consumption possibilities frontier.

Accepted Answer

The production possibilities frontier graphically shows the various possible combinations of output that an individual or economy can produce given a fixed set of resources, technology, and inputs. In this case, the cowboy's output is measured in terms of fences mended and cattle herded per day. The graph shows the trade-off between the two outputs, as the cowboy has a limited amount of time and resources to devote to each task.

Question 14

Regan grows flowers and makes ceramic vases.Jayson also grows flowers and makes ceramic vases,but Regan is better at producing both goods.In this case,trade could
A) benefit both Jayson and Regan.
B) benefit Jayson,but not Regan.
C) benefit Regan,but not Jayson.
D) benefit neither Jayson nor Regan.

Accepted Answer

Trade could benefit both Jayson and Regan as they can specialize in producing the goods they are better at and then trade with each other. Regan can focus on growing flowers and making ceramic vases, while Jayson can focus on either growing flowers or making ceramic vases, whichever he is better at. By trading, they can both obtain more of both goods than they would be able to produce on their own, making them better off than if they each tried to produce everything themselves.

Question 15

Consider two individuals - Marquis and Serena - each of whom would like to wear sweaters and eat tasty food.The gains from trade between Marquis and Serena are most obvious in which of the following cases?
A) Marquis is very good at knitting sweaters and at cooking tasty food,but Serena's skills in both of these activities are very poor.
B) Marquis and Serena both are very good at cooking tasty food,but neither has the necessary skills to knit a sweater.
C) Marquis's cooking and knitting skills are very poor,and Serena's cooking and knitting skills are also very poor.
D) Marquis's skills are such that he can produce only sweaters,and Serena's skills are such that she can produce only tasty food.

Accepted Answer

The answer of Consider two individuals - Marquis and Serena...

Question 16

Consider two individuals - Howard and Mai - each of whom would like to wear sweaters and eat tasty food.The gains from trade between Howard and Mai are least obvious in which of the following cases?
A) Howard is very good at knitting sweaters and at cooking tasty food,but Mai's skills in both of these activities are very poor.
B) Howard is very good at knitting sweaters and at cooking tasty food; Mai is very good at knitting sweaters,but she knows nothing about cooking tasty food.
C) Howard's skills in knitting sweaters are fairly good,but his skills in cooking tasty food are fairly bad; Mai's skills in knitting sweaters are fairly bad,but her skills in cooking tasty food are fairly good.
D) Howard's skills are such that he can produce only sweaters,and Mai's skills are such that she can produce only tasty food.

Accepted Answer

In all the other scenarios, there is some level of comparative advantage that can be exploited through trade. However, in scenario D, there is no chance for gains from trade as each person can only produce one of the desired goods.

Question 17

Suppose there are only two people in the world.Each person's production possibilities frontier also represents his or her consumption possibilities when
A) neither person faces trade-offs.
B) the frontiers are straight lines.
C) the frontiers are bowed out.
D) they choose not to trade with one another.

Accepted Answer

The answer of Suppose there are only two people in...

Question 18

A production possibilities frontier is bowed outward when
A) the more resources the economy uses to produce one good,the fewer resources it has available to produce the other good.
B) an economy is self-sufficient instead of interdependent and engaged in trade.
C) the rate of tradeoff between the two goods being produced is constant.
D) the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

Accepted Answer

The production possibilities frontier (PPF) is bowed outward when the opportunity cost of producing one good increases as more of it is produced, which means the rate of trade-off between the two goods depends on the quantities being produced. This reflects increasing opportunity costs.

Question 19

Ben bakes bread and Shawna knits sweaters.Ben and Shawna both like to eat bread and wear sweaters.In which of the following cases is it impossible for both Ben and Shawna to benefit from trade?
A) Ben cannot knit sweaters and Shawna cannot bake bread.
B) Ben is better than Shawna at baking bread and Shawna is better than Ben at knitting sweaters.
C) Ben is better than Shawna at baking bread and at knitting sweaters.
D) Both Ben and Shawna can benefit from trade in all of the above cases.

Accepted Answer

The answer of Ben bakes bread and Shawna knits sweaters.Ben...

Question 20

For a self-sufficient producer,the production possibilities frontier
A) is the same as the consumption possibilities frontier.
B) is greater than the consumption possibilities frontier.
C) is less than the consumption possibilities frontier.
D) is always a straight line.

Accepted Answer

For a self-sufficient producer, the production possibilities frontier (PPF) and consumption possibilities frontier (CPF) coincide as all the goods produced are used for self-consumption. Hence, the PPF is the same as the CPF. Therefore, option A is the correct answer.

Quiz 3: Interdependence and the Gains From Trade

When an economist points out that you and millions of other people are interdependent,he or she is referring to the fact that we all

The most obvious benefit of specialization and trade is that they allow us to

Table 3-1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-1.Which of the following combinations of wheat and beef could Andia produce in one 8-hour day?

Which of the following is not a reason people choose to depend on others for goods and services?

When can two countries gain from trading two goods?

People who provide you with goods and services

Pocoyo bakes cookies and Pato grows vegetables.In which of the following cases is it impossible for both Pocoyo and Pato to benefit from trade?

An economy's production possibilities frontier is also its consumption possibilities frontier

A production possibilities frontier is a straight line when

Table 3-1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. -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

The production possibilities frontier illustrates

A certain cowboy spends 10 hours per day mending fences and herding cattle.For the cowboy,a graph that shows his various possible mixes of output (fences mended per day and cattle herded per day) is called his

Regan grows flowers and makes ceramic vases.Jayson also grows flowers and makes ceramic vases,but Regan is better at producing both goods.In this case,trade could

Consider two individuals - Marquis and Serena - each of whom would like to wear sweaters and eat tasty food.The gains from trade between Marquis and Serena are most obvious in which of the following cases?

Consider two individuals - Howard and Mai - each of whom would like to wear sweaters and eat tasty food.The gains from trade between Howard and Mai are least obvious in which of the following cases?

Suppose there are only two people in the world.Each person's production possibilities frontier also represents his or her consumption possibilities when

A production possibilities frontier is bowed outward when

Ben bakes bread and Shawna knits sweaters.Ben and Shawna both like to eat bread and wear sweaters.In which of the following cases is it impossible for both Ben and Shawna to benefit from trade?

For a self-sufficient producer,the production possibilities frontier