QUIZ 1 MATERIALS ANSWERS TO MULTIPLE CHOICE QUESTIONS APPEAR AT THE END OF THIS SAMPLE QUIZ. NO ANSWERS ARE PROVIDED FOR THE PROBLEMS PART A 1. For Italy, the opportunity cost incurred when 6 cheeses are produced is 8 watches. For Switzerland, the opp ortunity cost incurred when 10 cheeses are produced is 50 watches. Which country has a comparative advantage in the pr oduction of cheese? A. Switzerland B. Italy C. Both have the comparative advantage in the production of cheese. D. Neither have the comparative advantage in the production of cheese. 2. Having an absolute advantage A. means specializing in the production of only one good. B. means having higher opportunity costs than the trading partner. C. means being able to produce more of a product with same amount of resources than another producer. D. means having lower opportunity costs than the trading partner. 3. Justin decides to spend an additional hour working overtime rather than playing football with his friends. He earns $6 an hour for his hour’s work. His opportunity cost is A. the $6 he ear ns B. the enjoyment he would have received playing f ootball with his friends C. the $6 minus the enjoyment he would have received from playing football with his friends D. nothing since he would have received less than $6 worth of enjoyment from playing football 4. When a production possibilities frontier is bowed outward, as more of one good is produced, its opportunity cost A. increases B. decreases C. remains constant D. cannot be predicted 5. For a society, a good is not scar ce if A. all members of society can have all they wa nt of it B. at least one individual in society can obtain all he or she wants of the good C. firms are producing at full capacity D. those who have enough income can buy all they want of the good 6. Which of the following is true of households in the circular flow model? A. They own the factors of production. B. They choose the quantity of goods and services to buy. C. They interact in the factor markets and the goods market. D. All of the above are true.7. Comparative advantage is found by A. comparing relative opportunity costs B. calculating the total cost of production C. comparing the productivity of one to that of another D. none of the above is correct 8. A point that lies outside the production possibility frontier A. is possible to attain if unemployment decreases B. will never be attained C. shows that no tradeoff is involved D. is not attainable with the nati on’s current resources and technology 9. Which of the following increases the quantit y supplied of compact discs but does NOT increase the supply of compact discs? A. a decrease in the price of a compact disc B. an increase in the price of a compact disc C. a decrease in the number of suppliers of compact discs D. an incr ease in the price of resources used to produce compact discs 10. A production p ossibilities frontier will be linear a nd not bowed out if A. unemployment is zero B. resources are not allocated efficiently C. no tradeoffs exist D. the tradeoff between the two goods is always at a constant rate 11. An increase in the number of fastfood resta urants A. raises the price of fastfood mea ls. B. increases the demand for fa stfood meals. C. increases the supply of fast food meals. D. increases the demand f or substitutes for fastfood meals. 12. A movement along the supply curve as the price of the product changes is called a A. change in quantity supplied B. change in supply C. demand shift D. substitution effect 13. If a decrease in income increases the demand for a good, then the good is a A. normal good B. inferior good C. luxury good D. substitute good 14. Which of the following is NOT illustrated by the production possibilities frontier? A. efficiency B. opportunity costs C. equity D. tradeoffs15. Ceteris paribus is a Latin phrase that literally means A. “other things being equal” B. “because of this” C. “to respond slowly to a change in price” D. “There’s no such thing as a free lunch.” PART B 1. The principle of increasing opportunity cost is consistent with a production possibilities frontier that is A. a straightline B. bowedinward C. upward sloping D. bowedoutward 2. On a production possibilities graph, production is inefficient if A. the production point is inside the frontier B. the production point is outside the frontier C. the production point is on the frontier D. the production point is on or inside the frontier 3. A person has a comparative advantage in an activity whenever she A. can do the activity in less ti me than anyone else B. has an absolute advantage in the activity C. can perform the activity at a lower opportunity cost than can another person D. can do everything better than anyone else 4. A category 5 hurricane hits Louisiana and causes widespread destruction to the state’s sugarcane crop. The devastation causes the A. supply curve for sugar to shift to the left, causing the price of sugar to fall B. supply curve for sugar to shift to the left, causing the price of sugar to rise C. supply curve for sugar to shift to the right, causing the price of sugar to rise D. supply curve for sugar to shift to the right, causing the price of sugar to fall 5. The part of economics that is limited to making statements about facts and the relationships among them is A. positive economics B. normative economics C. macroeconomics D. microeconomics 6. Suppose that in one week Mickey can produce 10 pairs of shoes or 5 bookshelves while Donald can produce 15 pairs of shoes or 7 bookshelves. Then Mickey has a(n) ____________ advantage in produ cing _________________. A. absolute; bookshelves B. comparative; shoes C. absolute; shoes D. comparative; bookshelves7. Which of the following would change the quantity supplied for a good or service? A. a change in the technology used to produce the good or service B. a change in the price of inputs used to produce the good or service C. a change in expectations about the price of the good or service D. a change in the price of the good or service 8. Which of the following will NOT cause a shift of the demand curve? A. A change in income B. A change in the price of a substitute C. A change in the price of an input D. A change in the price of a complement 9. The most significant