NAIMMCQ: Macroeconomics

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 4 televisions per year. Each nation has 100 workers. Also suppose that each country completely specializes in producing the good for which it has a comparative advantage. If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, then each country's maximum consumption of new radios and televisions per year will be

a. 100 radios, 300 televisions in Radioland and 300 radios, 100 televisions in Teeveeland.
b. 300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in Teeveeland.
c. 200 radios, 100 televisions in Radioland and 100 radios, 200 televisions in Teeveeland.
d. 300 radios, 100 televisions in Radioland and 100 radios, 400 televisions in Teeveeland.

Answer: B

Economists generally support

a. trade restrictions.
b. government management of trade.
c. export subsidies.
d. free international trade.

Answer: D

A good that is produce abroad and sold domestically is called

a. a quota.
b. a tariff.
c. an import.
d. an export.

Answer: C

When a country has a comparative advantage in producing a certain good,

a. the country should import that good.
b. the country should produce just enough of that good for its own consumption.
c. the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good.
d. None of the above are correct.

Answer: D

Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if

a. Canada requires fewer resources than the U.S. tor produce a bushel of wheat.
b. the opportunity cost of producing a bushel of wheat is lower for Canada than it is for the U.S.
c. the opportunity cost of producing a bushel of wheat is lower for the U.S. than it is for Canada.
d. the U.S. has an absolute advantage over Canada in producing computer software.

Answer: B

Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the production of linen. If these two countries decide to trade,

a. Belarus should export linen to Russia.
b. Russia should export linen to Belarus.
c. trading linen would provide no net advantage to either country.
d. Without additional information about opportunity costs, this question cannot be answered.

Answer: A

If Korea is capable of producing either shoes or soccer balls or some combination of those two products, then

a. Korea should specialize in the product in which it has an absolute advantage.
b. it would be impossible for Korea to have an absolute advantage over another country in both products.
c. it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods.
d. Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.

Answer: D

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 table is

a. 1/5 chair for Mike and 1/3 chair for Sandy.
b. 5 chairs for make and 3 chairs for Sandy.
c. 1/3 chair for Mike and 1/5 chair for Sandy.
d. 3 chairs for Mike and 5 chairs for Sandy.

Answer: B

If Shawn can produce more donuts in one day than Sue can produce in one day, then

a. Shawn has a comparative advantage in the production of donuts.
b. sue has a comparative advantage in the production of donuts.
c. Shawn has an absolute advantage in the production of donuts.
d. Shawn should produce donuts and Sue should spend her time on a different activity.

Answer: C

Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is

a. 0.36 bushels of corn.
b. 2.4 bushels of corn.
c. 2.8 bushels of corn.
d. 70 bushels of corn.

Answer: C

The difference between production possibilities frontiers that are bowed out and those that are straight lines is that

a. bowed-out production possibilities frontiers apply to economies that face tradeoffs, whereas straight-line production possibilities frontiers apply to economies that do not face tradeoffs.
b. bowed-out production possibilities frontiers apply to economies in which resources are not specialized, whereas straight-line production possibilities frontiers apply to economies in which resources are specialized.
c. bowed-out production possibilities frontiers illustrate increasing opportunity cost, whereas straight-line production possibilities frontiers illustrate constant opportunity cost.
d. straight-line production possibilities frontiers illustrate real-world conditions, whereas bowed-out production possibilities frontiers illustrate more simplistic assumptions.

Answer: C

Without trade,

a. a country is better off because it will have to learn to be self-sufficient without trade.
b. a country's production possibilities frontier is also its consumption possibilities frontier.
c. a country can still benefit from international specialization.
d. interdependence is more extensive than it would be with trade.

Answer: B

Consider a shoemaker and a vegetable farmer. Potentially, trade could benefit both individuals if

a. the shoemaker can produce only shoes and the vegetable farmer can produce only vegetables.
b. the shoemaker is capable of growing vegetables, but he is not very good at it.
c. the vegetable farmer is better at growing vegetables and better at making shoes than the shoemaker.
d. All of the above are correct.

Answer: D

Economists regard events from the past as

a. irrelevant, since history is unlikely to repeat itself.
b. of limited interest, since those events seldom provide any useful economic data.
c. interesting but not particularly valuable, since those events cannot be used to evaluate present-day economic theories.
d. interesting and valuable, because those events are capable of helping us to understand the past, the present, and the future.

Answer: D

When a relevant variable that is not named on either axis changes,

a. there will be a movement along the curve.
b. the curve will rotate clockwise about the original point.
c. the curve will be unaffected since only the variables on the axis affect the curve.
d. the curve will shift.

Answer: D

When two variables have a negative correlation,

a. they tend to move in opposite directions.
b. they tend to move in the same direction.
c. one variable will move while the other remains constant.
d. the movement of the two variables in unpredictable.

Answer: A

The slope of a line is calculated by the

a. change in the value of x divided by the change in the value of y.
b. change the value of y divided by the change in the value of x.
c. horizontal distance divided by the vertical distance.
d. value of y divided by value of x.

Answer: B

The slope of a straight line is calculated by

a. rise divided by run.
b. run divided by rise.
c. rise minus run.
d. rise plus run.

Answer: A

You know an economist has crossed the line from scientist to policy adviser when he or she

a. claims that the problem at hand is widely misunderstood by non-economists.
b. talks about the evidence.
c. makes normative statements.
d. makes positive statements.

Answer: C

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

a. If the price of a product decreases, people's willingness to buy that product will increase.
b. Reducing tax rates on the wealthy would benefit the nation.
c. If the national saving rate were to increase, so would the rate of economic growth.
d. All of the above are correct.

Answer: B