Download Economics 13 Test 1 Page 1 Irvine Valley College Test 1 Economics

IVC
Irvine Valley College
Test 1
Economics 13, Global Economics
Mark McNeil
1.
The ability of a nation to reduce an additional unit of a good or service at a lower opportunity cost
than another nation is referred to as:
a. marginal cost.
d. redistributive advantage.
b. marginal revenue.
e. comparative advantage.
c. absolute advantage.
2.
The ratio of foreign exchange turnover to world exports of goods has increased from 12 to 1 in 199
to 45 to 1 in 2001. this implies that:
a. there is excessive foreign exchange trading today.
b. the primary purpose of foreign exchange trading is to pay for exports.
c. the primary purpose of foreign exchange trading is to support foreign direct investment.
d. foreign exchange trading has become less important today.
e. speculators have gone nuts!
3.
After you graduate from college you vow never to eat Top Ramen again and instead decide to eat
healthy foods. For you, Top Ramen is ________ and healthy foods are a _________.
a. an inferior good; a normal good
b. a Giffen good; a complementary good
c. a normal good; an inferior good
d. a substitute good; a complementary good
e. normal good; superior good.
4.
New findings indicate that egg consumption reduces bad cholesterol. The immediate result will be
which one of the following?
a. An increase in the supply of eggs.
b. A decrease in the supply of eggs.
c. An increase in the demand for eggs.
d. A decrease in the demand for eggs.
e. A movement along the demand curve for eggs, resulting in a higher price of eggs.
5.
In the market for roasted peanuts, if the government subsidizes the production of roasted peanuts, the:
a. supply curve will shift left.
d. the demand curve will shift left.
b. supply curve will shift right.
e. demand curve will shift right.
c. quantity supplied (only) will change.
6.
Assume that steel is an input in the production of razor blades and steel prices drop. As a result of
this event, we could reasonably expect:
a. a surplus of razor blades.
b. an increase in demand for razor blades.
c. the demand curve for razor blades shifted to the left.
d. an increase in the supply of razor blades.
e. Fidel to shave.
7.
Assume that demand and supply for a good have both increased. At the new equilibrium, we
would expect:
a. an increase in equilibrium price and an increase in equilibrium quantity.
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b. an increase in equilibrium price but the change in equilibrium quantity would be
indeterminate.
c. an increase in equilibrium quantity but the change in equilibrium price would be
indeterminate.
d. a decrease in equilibrium price and a decrease in equilibrium quantity.
e. no change in either equilibrium price or quantity.
8.
In the global market, if a country has excess quantity demanded, this would be the equivalent of its:
a. imports
d. inflation rate.
b. exports.
e. balance of trade.
c. trade deficit.
9.
Falling market equilibrium prices will have the effect of _______ consumer surplus and ________
producer surplus.
a. increases; increases
d. decreases; decreases
b. increases; decreases
e. does not change; does not change
c. decreases; increases
10. A country can produce 500,000 machine parts per week and produce 200,000 board feet of lumber.
If the country could also produce 600,000 machine parts and 175, 000 board feet of lumber per
week, then the:
a. firm should specialize and produce only machine parts.
b. average opportunity cost of 1 machine part is 4 board feet of lumber.
c. average opportunity cost of 1 machine part is 25,000 board feet of lumber.
d. average opportunity cost of 1 machine part is 0.25 board feet of lumber.
e. none of the above.
11. Generally speaking, as a country transfers more and more resources to the production of one good or
service, the:
a. absolute advantage of producing that good or service declines.
b. production possibilities curve shifts outward.
c. comparative advantage of producing that good or service rises.
d. opportunity cost of producing that good or service rises.
e. total cost of producing that good or service falls.
12. If there is no international trade then a nation’s consumption possibilities curve is ________ its
production possibilities curve.
a. the same as
d. flatter than
b. less than
e. steeper than
c. greater than
13. ________ is more useful in explaining modern international trading patterns than ________.
a. Relative advantage; comparative advantage
b. Absolute advantage; comparative advantage.
c. Comparative advantage; absolute advantage
d. Absolute advantage; relative advantage
e. Total cost; opportunity cost
14. Improvements in technology will generally:
a. increase opportunity costs.
b. shift the production possibilities curve outward.
c. shift the consumption possibilities curve inward.
d. reduce international trade.
e. have an indeterminate effect on the production possibilities curve.
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15. The term autarky means that:
a. no international trade takes place between two countries.
b. two countries initially have the same factor proportions.
c. one country has an absolute advantage in capital and labor over the other country.
d. free trade will increase the welfare of both countries.
e. free trade will not result in gains for either country.
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16. Country E currently has a higher wage rate and a lower rental rate on capital compared to Country
F. Neither country trades with the other. If the countries begin to trade with each other, it is likely
that:
a. wages will fall in Country E and rise in Country F.
b. rental rates on capital will rise in Country E and fall in Country F.
c. both wages and rental rates will fall in Country E and rise in Country F.
d. both wages and rental rates will rise in Country E and rise in Country F.
e. Both a and b will occur.
17. The Heckscher-Ohlin theorem indicates that a nation will export goods and services that use
relatively __________ the nation’s relatively ___________ factor.
a. more of; scarce
b. less intensively; abundant
c. less intensively; expensive
d. intensively scarce
e. intensively abundant
18. A relatively labor abundant nation will have a ________ than a relatively capital abundant nation.
a. higher capital to labor endowment ratio
b. a lower capital to labor endowment ratio
c. higher labor intensity ratio
d. lower labor intensity ratio
e. lower production possibilities curve
19. Assume that machinery is capital intensive and food production is labor intensive. Country A
(Albania) is capital abundant and its Neighbor, Country B (Bolivia), is labor intensive. What will
happen as they begin to trade with each other for the first time?
a. Albania will reduce its production of machinery and Bolivia will increase its production of
food.
b. Albania will reduce its production of machinery and Bolivia will reduce its production of food.
c. Albania will increase its production of machinery and Bolivia will increase its production of
food.
d. Albania will increase its production of machinery and Bolivia will reduce its production of
food.
e. Albania and Bolivia will keep their production levels of each good the same.
20. A country has two industries: the production of steel and wool. Steel is capital intensive, wool
production is labor intensive. Technological progress occurs in both industries, but saves on capital.
As a result, the country’s PPF will:
a. increase proportionately.
b. decrease proportionately.
c. increase and skew towards steel production.
d. increase and skew towards woo production.
e. not change.
21. In two countries, food is the more labor intensive product and machinery is the more capital
intensive. The country that has a greater abundance of capital will have a:
a. production possibilities curve skewed toward food.
b. greater production possibilities curve.
c. straight line production possibilities curve.
d. production possibilities curve skewed toward capital.
e. lower production possibilities curve.