IE Chap 2 (2)

Where will a nation that gains from trade find its consumption point located?

• inside its production possibilities frontier

• along its production possibilities frontier

• outside its production possibilities frontier

• at the center of its production possibilities frontier

When a nation is in autarky (a no-trade state) and maximizes its living standard, its consumption and production points are:

• along its production possibilities frontier.

• above its production possibilities frontier.

• beneath production possibilities frontier.

• along, above, or beneath its production possibilities frontier.

Assume the MPLc = 2 cars and the MPLb = 5 boats. There are 150 workers in this hypothetical economy; the slope of the PPF for this economy is:

• 20/500.

• 200/50.

• 2/5.

• 1/5.

Because the marginal product of labor measures the quantity of labor required to produce a unit of a good, the slope of the PPF can also be expressed as:

• the ratio of abundance of labor to capital.

• consumer utility.

• the opportunity cost (in units of labor) to obtain an additional unit of good 1 in terms of what we give up of good 2.

• the ratio of the marginal products of labor to the marginal product of capital.

Under the condition of no trade, which combination gives the nation the most utility?

• A

• B

• C

• D

Under the condition of no trade, which combination of the following is not attainable?

• A

• B

• C

• D

Assume a hypothetical economy where cloth and wheat can be produced. What is the opportunity cost of producing wheat in this economy?

• the amount of cloth that must be given up to produce one more unit of wheat

• the amount of money received by selling wheat

• the number of workers it takes to produce all the wheat

• More information is needed to answer the question.

Among the indifference curves for an economy, to achieve higher utility:

• you must move to the indifference curve farthest away from the origin.

• you must move to the indifference curve closest to the origin.

• it does not matter; you are indifferent.

• one must always close the borders.

If the opportunity cost is constant (the PPF is a straight line), then a country will:

• partially specialize in the production of its exported product.

• completely specialize in the production of its exported product.

• not benefit from importing goods from another country.

• benefit by raising trade barriers.

Moving to a lower indifference curve means that a country is:

• better off.

• worse off.

• indifferent.

• lowering production.