Multiple Choice – Section 00: Introduction
1.Peoplewhoprovideyouwithgoodsandservices
a.areactingoutofgenerosity.
b.dosobecausetheygetsomethinginreturn.
c.havechosennottobecomeinterdependent.
d.arerequiredtodosobythegovernment.
2.Whenaneconomistpointsoutthatyouandmillionsofotherpeopleareinterdependent,heorsheisreferringtothefactthatweall
a.relyuponthegovernmenttoprovideuswiththebasicnecessitiesoflife.
b.relyupononeanotherforthegoodsandservicesweconsume.
c.havesimilartastesandabilities.
d.areconcernedaboutoneanother’swellbeing.
Multiple Choice – Section 01: A Parable for the Modern Economy
1.Whichofthefollowingisnotareasonpeoplechoosetodependonothersforgoodsandservices?
a.toimprovetheirlives
b.toallowthemtoenjoyagreatervarietyofgoodsandservices
c.toconsumemoreofeachgoodwithoutworkinganymorehours
d.toallowpeopletoproduceoutsidetheirproductionpossibilitiesfrontiers
2.Whencantwocountriesgainfromtradingtwogoods?
a.whenthefirstcountrycanonlyproducethefirstgoodandthesecondcountrycanonlyproducethesecondgood
b.whenthefirstcountrycanproducebothgoods,butcanonlyproducethesecondgoodatgreatcost,andthesecondcountrycanproducebothgoods,butcanonlyproducethefirstgoodatgreatcost
c.whenthefirstcountryisbetteratproducingbothgoodsandthesecondcountryisworseatproducingbothgoods
d.Twocountriescouldgainfromtradingtwogoodsunderalloftheaboveconditions.
3.Tomproducesbaseballglovesandbaseballbats.Stevealsoproducesbaseballglovesandbaseballbats,butTomisbetteratproducingbothgoods.Inthiscase,tradecould
a.benefitbothSteveandTom.
b.benefitSteve,butnotTom.
c.benefitTom,butnotSteve.
d.benefitneitherStevenorTom.
4.OliviabakescakesandAndrewgrowscorn.OliviaandAndrewbothliketoeatcakeandeatcorn.InwhichofthefollowingcasesisitimpossibleforbothOliviaandAndrewtobenefitfromtrade?
a.OliviacannotgrowcornandAndrewcannotbakecakes.
b.OliviaisbetterthanAndrewatbakingcakesandAndrewisbetterthanOliviaatgrowingcorn.
c.OliviaisbetterthanAndrewatbakingcakesandatgrowingcorn.
d.BothOliviaandAndrewcanbenefitfromtradeinalloftheabovecases.
5.AbbybakesbrowniesandLiamgrowsflowers.InwhichofthefollowingcasesisitimpossibleforbothAbbyandLiamtobenefitfromtrade?
a.AbbydoesnotlikeflowersandLiamdoesnotlikebrownies.
b.AbbyisbetterthanLiamatbakingbrowniesandLiamisbetterthanAbbyatgrowingflowers.
c.LiamisbetterthanAbbyatbakingbrowniesandatgrowingflowers.
d.BothAbbyandLiamcanbenefitfromtradeinalloftheabovecases.
6.Theproductionpossibilitiesfrontierillustrates
a.thecombinationsofoutputthataneconomyshouldproduce.
b.thecombinationsofoutputthataneconomyshouldconsume.
c.thecombinationsofoutputthataneconomycanproduce.
d.Alloftheabovearecorrect.
7.Aneconomy’sproductionpossibilitiesfrontierisalsoitsconsumptionpossibilitiesfrontier
a.underallcircumstances.
b.undernocircumstances.
c.whentheeconomyisself-sufficient.
d.whentherateoftradeoffbetweenthetwogoodsbeingproducedisconstant.
8.Aproductionpossibilitiesfrontierisbowedoutwardwhen
a.themoreresourcestheeconomyusestoproduceonegood,thefewerresourcesithasavailabletoproducetheothergood.
b.aneconomyisself-sufficientinsteadofinterdependentandengagedintrade.
c.therateoftradeoffbetweenthetwogoodsbeingproducedisconstant.
d.therateoftradeoffbetweenthetwogoodsbeingproduceddependsonhowmuchofeachgoodisbeingproduced.
9.Aproductionpossibilitiesfrontierisastraightlinewhen
a.themoreresourcestheeconomyusestoproduceonegood,thefewerresourcesithasavailabletoproducetheothergood.
b.aneconomyisinterdependentandengagedintradeinsteadofself-sufficient.
c.therateoftradeoffbetweenthetwogoodsbeingproducedisconstant.
d.therateoftradeoffbetweenthetwogoodsbeingproduceddependsonhowmuchofeachgoodisbeingproduced.
10.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.Marquisisverygoodatknittingsweatersandatcookingtastyfood,butSerena’sskillsinbothoftheseactivitiesareverypoor.
b.MarquisandSerenabothareverygoodatcookingtastyfood,butneitherhasthenecessaryskillstoknitasweater.
c.Marquis’scookingandknittingskillsareverypoor,andSerena’scookingandknittingskillsarealsoverypoor.
d.Marquis’sskillsaresuchthathecanproduceonlysweaters,andSerena’sskillsaresuchthatshecanproduceonlytastyfood.
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