Question 1

Which of the following best describes the purpose of an economic model?

Accepted Answer

A model is a simplified representation of a real situation that is used to better understand real-life situations.

Question 2

Suppose an economy can produce either 100 units of good X or 200 units of good Y in a week. What is the opportunity cost of producing one unit of good X?

Accepted Answer

$$2$$ units of good Y$

Question 3

If an economy is operating at a point inside its production possibilities frontier (PPF), which of the following is true?

Accepted Answer

The economy is inefficient in production.

Question 4

Which of the following statements is an example of a normative economic statement?

Accepted Answer

Society should take measures to end gun violence.

Question 5

If a country specializes according to its comparative advantage and then trades with other nations, what is the likely outcome?

Accepted Answer

It can consume at a higher level than the domestic production possibilities frontier.

Question 6

Which of the following best illustrates the concept of increasing opportunity cost?

Accepted Answer

The more small jets an economy produces, the more costly it is to produce another small jet in terms of forgone Dreamliners.

Question 7

Suppose Australia can harvest 10 bushels of apples in 2 hours and 10 bushels of tomatoes in 4 hours. Brazil can harvest 10 bushels of apples in 4 hours and 10 bushels of tomatoes in 5 hours. Which country has a comparative advantage in producing tomatoes?

Accepted Answer

Brazil

Question 8

Which of the following is NOT a factor of production?

Accepted Answer

Money

Question 9

In the circular-flow diagram, which of the following best describes the flow of goods and services?

Accepted Answer

Firms sell goods and services to households in the markets for goods and services.

Question 10

Which of the following statements about absolute and comparative advantage is correct?

Accepted Answer

A country should specialize in the good for which it has the lowest opportunity cost.

Question 11

If the production possibilities frontier (PPF) shifts outward, which of the following is most likely to have caused this change?

Accepted Answer

A technological improvement

Question 12

Suppose Texia can produce either 1,000 units of food or 500 units of clothing, and Urbania can produce either 500 units of food or 200 units of clothing. Who has the absolute advantage in the production of food and clothing?

Accepted Answer

Texia; Texia

Question 13

Which of the following best defines efficiency in allocation?

Accepted Answer

When resources are allocated so that consumers are as well off as possible

Question 14

Which of the following is an example of the 'other things equal' (ceteris paribus) assumption in economic modeling?

Accepted Answer

Assuming that only one variable changes while all others remain constant

Question 15

If a country can produce more of both goods than another country, but has a higher opportunity cost for one of the goods, what should it do according to the theory of comparative advantage?

Accepted Answer

Specialize in the good with the lower opportunity cost and trade for the other good

Question 16

Which of the following is a positive economic statement?

Accepted Answer

More than 60% of women are in the labor market.

Question 17

Suppose a country moves from point A to point B on its PPF, producing 8 more small jets but 6 fewer Dreamliners. What is the opportunity cost of each small jet?

Accepted Answer

$$\frac{6}{8}$$ Dreamliners

Question 18

Which of the following is NOT a reason why economists sometimes disagree?

Accepted Answer

All economists use the exact same models and assumptions

Question 19

In the circular-flow diagram, what do firms purchase in the factor markets?

Accepted Answer

Factors of production

Question 20

Which of the following would most likely cause a movement along the PPF rather than a shift of the PPF?

Accepted Answer

A change in the allocation of resources between two goods

Economic Models: Trade-offs and Trade (Macroeconomics Study Notes)

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