Ch2Q - ECO 105: Principles of Economic Theory Chapter 2...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ECO 105: Principles of Economic Theory Chapter 2 Sample Multiple-Choice Questions 1. What is the “principle of comparative advantage”? a) One’s comparative advantage in production tends to increase the more one produces. b) A country should specialize in the production of a good if the good's opportunity cost is lower than in the other country. c) Countries benefit from self-sufficiency since they do not have to rely on foreign producers. d) People do what is most beneficial for themselves. 2. Assume that with its current stock of resources and level of technology, the United States can produce either 50 million tons of wheat or 2 million bottles of vodka (assume also that opportunity costs are constant). What is the opportunity cost of producing each bottle of vodka? a) 25 tons of wheat. b) 100 tons of wheat. c) 0.4 tons of wheat. d) 52 tons of wheat. 3. In order for two countries to gain from exchange: a) one country must produce more of one good and less of the other good than the other country. b) both countries must have goods they don’t need. c) the opportunity costs of production must differ between the two countries. d) each country must specialize in producing the good they want the most. 4. For trade to be mutually beneficial, what must the relationship be between the terms of trade and each country’s opportunity cost ratios? a) They must be equal. b) The terms must be greater than the opportunity cost ratios. c) The terms must be less than the opportunity cost ratios. d) The terms must lie between the opportunity cost ratios. 5. Specialization in production can result in increased efficiency, but also entails certain disadvantages including: a) the boredom associated with many specialized jobs. b) a decrease in the interdependence of individuals in the economy. c) a reduction in the amount of surplus outputs. d) an increased reliance on the barter system. 6. Which of the following statements is correct? a) If their opportunity costs of production are the same, specialization and trade will enable two individuals to produce a combination of goods that lies beyond their respective PPFs. b) If their opportunity costs of production are different, specialization and trade will enable two individuals to consume a combination of goods that lies beyond their respective PPFs. c) If their opportunity costs of production are the same, specialization and trade will enable two individuals to
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/16/2008 for the course HIST 101 taught by Professor Wormer during the Spring '08 term at Wake Forest.

Page1 / 4

Ch2Q - ECO 105: Principles of Economic Theory Chapter 2...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online