Mahelet Fikru Microeconomics Test 1 (scantron)

Suppose that in Slovakia, one unit of labor can produce either 20 tons of wheat or 40 tons of soy while in Poland, one unit of labor can produce either 40 tons of wheat or 20 tons of soy. If each country has two units of labor, which of the following consumption combinations can be attained only with trade?
A. Slovakia consumes 80 tons of soy.
B. Poland consumes 80 tons of wheat.
C. Poland consumes 40 tons of wheat and 20 tons of soy.
D. Slovakia consumes 30 tons of both soy and wheat.

The fact that a society's production possibilities curve is "bowed out" or concave to the origin demonstrates the law of:
A. increasing marginal opportunity cost
B. constant opportunity cost
C. constant sunk cost
D. decreasing marginal opportunity cost

John can clean the house in three hours and do the laundry in four. Jane can clean the house in two hours or do the laundry in two. Can they benefit by specialization and trade?
A. Neither can benefit because John has nothing to offer. Jane can both clean and do the laundry faster.
B. Both can benefit because John has a comparative advantage in laundry.
C. John could benefit from an exchange but Jane cannot because she is better at both.
D. Both can benefit because John has a comparative advantage in cleaning.

Suppose New Zealand uses 1 unit of labor to produce a kiwi and two units of labor to produce an apple. Suppose Australia uses two units of labor to produce a kiwi and one unit of labor to produce an apple. In this case, New Zealand:
A. has a comparative advantage in producing apples
B. has a comparative advantage in producing kiwis
C. has an absolute advantage in producing both goods
D. has a comparative advantage in producing both goods

Which of the following is an example of a macroeconomic topic?
A. Wages of shrimp boats captains in Louisiana
B. How the world price of oil influences the US price of gas because of free trade
C. How the unemployment and inflation rates are related in a country
D. The effect of a frost on the Florida orange crop

A student who has paid non-refundable tuition of about $45 a lecture estimates the marginal benefit of each lecture to be $60. What additional information would she need to make a rational decision to attend class?
A. nothing since the marginal benefit of each lecture is greater than the per lecture average tuitio cost, so he/she should always go to class
B. the value of the professor's time
C. the value of her time that he/she could spend doing something else
D. the average per lecture tuition for other classes

In the early 19th century the Erie Canal provided the first low-cost way of moving grain and merchandise between the east coast to the Midwest. Grain flowed east and manufactured goods flowed west. Thinking about the direction of the flow of goods and your knowledge of trade theories, what does this information suggest it happened?
A. The price of grain fell in Ohio and rose in New York.
B. The prices of goods remained the same since they were already equal.
C. The price of grain fell in both Ohio and New York.
D. The price of grain rose in Ohio and fell in New York.

Chuck offers $70,000 for a house. The seller turns down the offer but says he will sell the house for $72,000. However, Chuck refuses to pay the higher price. If Chuck was following the economic decision rule, the marginal benefit of the house to:
A. Chuck must be greater than $72,000.
B. the seller must be lesser than $72,000.
C. the seller must be less than $70,000.
D. Chuck must be less than $72,000.

Suppose that in Colombia, one unit of labor can produce 4 tons of papayas or 2 tons of bananas while in Brazil, one unit of labor can produce either 4 tons of papayas or 4 tons of bananas. Given this information, which of the following statements is true?
A. Brazil has an absolute advantage in producing both papayas and bananas.
B. Columbia has a comparative advantage in producing both papayas and bananas.
C. Columbia has a comparative advantage in producing papayas, but not bananas.
D. These countries cannot gain from trading.
E. Brazil has a comparative advantage in producing papayas, but not bananas.

Use the production possibilities tables given for questions 10 & 11.
Given the production possibility tables for First and Second Bakeries presented, we know that the opportunity cost of producing cookies:
A. is higher at Second Bakery
B. is higher at First Bakery
C. is the same at both bakeries
D. cannot be computed without

Use the production possibilities tables given for questions 10 & 11.
We can also determine that:
A. First Bakery has a comparative advantage in the production of both goods.
B. First Bakery has a comparative advantage in the production of pies.
C. Second Bakery has a comparative advantage in the production of pies.
D. Second bakery has the absolute advantage in producing both goods.

Use the graph given for number 12.
Suppose that the opportunity cost of producing 10 chickens is always 8 turkeys. Given this, the relevant production possibility curve must be:
A. IV
B. I
C. II
D. II

Cassie's Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What is the marginal cost of completing the task?
A. $200
B. $300
C. $1000
D. $1000 plus the value of her time

One of the assumptions we make while drawing the production possibilities curve for a country is that:
A. the same resources can be used to produce either or both of two classes of goods
B. resources cannot be shifted from one type of goods to another
C. there is no scarcity of resources
D. technology is continually changing

In terms of a production possibilities curve, economic growth may be represented by:
A. a curve that remains fixed
B. a rightward shift of the curve
C. an upward movement along the curve
D. a downward movement along the curve
E. a leftward shift of the curve

If it takes you an hour to make a rational decision, and the opportunity cost of that hour is $100, then you will:
A. never make rational decisions because it is costly to do so
B. make rational decisions only if the benefit from doing so is less than $100
C. make rational decisions only if the benefit from doing so exceeds $100
D. always make rational decisions because it is costly to be irrational

Use the graph given for 17.
In the graph above you can find the marginal benefit for a week-end trip for Rodney. If the marginal cost of each weekend trip this year is $299 no matter how many trips Rodney takes, then assuming he is rational, Rodney will take:
A. 1 trip this year
B. 3 trips this year
C. 4 trips this year
D. 2 trips this year
E. no trip this year

On a production possibilities frontier, the ideal combination of output for any society is always:
A. at a point where the trade-offs between goods is equal
B. at a point near the top of the curve
C. impossible to determine from the curve alone
D. at a point near the bottom of the curve

When you produce cars, it is enormously expensive to produce one car, but then the costs per car decrease as more are produced. This is an example of:
A. high sunk cost in the automobile industry
B. increasing marginal opportunity cost
C. constant marginal opportunity cost
D. decreasing total cost

You bought one share of McDonald's stock for $10, one share of Coca-Cola for $15, and one share of Pepto-Bismol for $20. Currently, each stock is priced at $15. Assume there are no tax implications (advantages or disadvantages, you are a rational consumer and that you cannot predict the future price of either stock. Which stock would you sell if you needed $15 today?
A. Pepto-Bismol
B. Coca-Cola
C. You are indifferent between all the alternatives.
D. McDonald's

Your textbook has 365 pages and Chapter 1 has 24 pages (approximately 1/15th of the total). The opportunity cost of reading the first chapter of the textbook:
A. is 1/15th the price of the book plus 1/15th the price of the tuition
B. is about 1/15th of the price you paid for the book
C. is zero since you have already paid for the book
D. has nothing to do with the price you paid for the book

Use the graph given for 22 and 23.
The graph represents the present Rye (in kilograms) and Eggs (in dozens) Production Possibilities Fronteir (PPF) for Romania.
The graph indicates that if Romania uses its resources efficiently, the marginal opportunity cost of producing eggs is __________ as egg production decreases.
A. decreasing
B. not defined
C. constant
D. increasing

Use the graph given for 22 and 23.
The graph represents the present Rye (in kilograms) and Eggs (in dozens) Production Possibilities Frontier (PPF) for Romania.
If you know that presently Romania is producing at point E, which of the following statements is FALSE?
A. Producing at point F is presently unattainable because of technological limitations and scarcity of resources.
B. Presently, you cannot produce more rye in Romania without reducing the production of eggs because resources are scarce.
C. On the production possibilities frontier, all points are efficient.
D. Presently, the opportunity cost of producing 3 more dozen eggs in Romania is zero kilograms of rye.

Which one of the following is LEAST appropriate in relation to the other four?
A. Adam Smith
B. invisible hand
C. "The Wealth of Nations"
D. government regulation and control
E. free markets

Economic decision making involves comparing:
A. total benefit and total cost
B. marginal cost and marginal benefit
C. sunk cost and marginal benefit
D. opportunity cost and sunk cost with total benefit