ECO 340 FINAL EXAM QUESTIONS WITH VERIFIED
ANSWERS
Opportunity cost is:
a. the value of the best alternative forgone in making any choice.
b. the benefit derived from a product.
c. about half of the monetary cost of a product.
d. the dollar payment for a product. - Answers - a. the value of the best alternative
forgone in making any choice.
An economy is said to have a comparative advantage if it:
a. has the lowest cost of producing a particular good, compared with other economies.
b. can produce fewer of all goods than another economy.
c. can produce more of all goods than another economy.
d. has the highest cost of producing a particular good, compared with other economies.
- Answers - a. has the lowest cost of producing a particular good, compared with other
economies.
As long as people have different _____, everyone has a comparative advantage in
something.
a. benefits
b. direct costs
c. opportunity costs
d. utility - Answers - c. opportunity costs
Because of trade, a country may:
a. avoid opportunity costs.
b. consume inside its production possibility frontier.
c. find its production possibility frontier shifting outward.
d. consume outside its production possibility frontier. - Answers - d. consume outside its
production possibility frontier.
Gains from trade arise because of:
a. individual choice.
b. marginal analysis.
c. specialization in consumption.
d. specialization in production. - Answers - d. specialization in production.
An economy is said to have a comparative advantage in the production of a good if it
can produce that good:
a. at a higher opportunity cost than another economy.
b. outside its production possibilities curve.
,c. with more resources than another economy.
d. at a lower opportunity cost than another economy. - Answers - d. at a lower
opportunity cost than another economy.
If the opportunity cost of manufacturing machinery is lower in the United States than in
Britain and the opportunity cost of manufacturing sweaters is higher in the United States
than in Britain, then the United States will:
a. export both sweaters and machinery to Britain.
b. export sweaters to Britain and import machinery from Britain.
c. import both sweaters and machinery from Britain.
d. import sweaters from Britain and export machinery to Britain. - Answers - d. import
sweaters from Britain and export machinery to Britain.
If the opportunity cost of manufacturing machinery is higher in the United States than in
Britain and the opportunity cost of manufacturing sweaters is lower in the United States
than in Britain, then the United States will:
a. import both sweaters and machinery from Britain.
b. export sweaters to Britain and import machinery from Britain.
c. import sweaters from Britain and export machinery to Britain.
d. export both sweaters and machinery to Britain. - Answers - b. export sweaters to
Britain and import machinery from Britain.
Trade can be beneficial to an economy because:
a. it prevents specialization in activities in which countries have a comparative
advantage.
b. it eliminates unemployment.
c. it results in a more efficient use of the combined resources of some of the trading
countries, even though it reduces efficiency in others.
d. more goods and services can be obtained at lower opportunity cost. - Answers - d.
more goods and services can be obtained at lower opportunity cost.
Which statement is true?
a. Very talented people may have a comparative advantage in everything they do.
b. Very untalented people have a comparative advantage in something they do.
c. Very talented people may have a low opportunity cost in most things they do.
d. Very untalented people may have a high opportunity cost in most things they do. -
Answers - b. Very untalented people have a comparative advantage in something they
do.
Consumer surplus for an individual buyer is equal to the:
a. consumer's willingness to pay for the good minus the price paid for the good.
b. consumer's willingness to pay for the good minus the marginal cost of producing the
good.
c. price of the good minus the marginal cost of producing the good.
, d. marginal cost of the good minus the consumer's willingness to pay for the good. -
Answers - a. consumer's willingness to pay for the good minus the price paid for the
good.
Vonda and Aleiyah are shopping together at the mall for new jeans. Vonda is willing to
pay $90 and Aleiyah is willing to pay $50 for a pair of jeans. If the price of jeans is $59,
how much total consumer surplus is achieved in this market?
a. $31
b. $0
c. $9
d. $40 - Answers - a. $31
Producer surplus for an individual seller is equal to the:
a. price received for selling the good minus the cost of producing the good.
b. cost of the good minus the willingness to pay for the good.
c. willingness to pay for the good minus the price received for selling the good.
d. cost of the good minus the price received for selling the good. - Answers - a. price
received for selling the good minus the cost of producing the good.
The total producer surplus in the Wisconsin milk market is the:
a. sum of the individual producer surpluses in this market.
b. sum of all prices paid multiplied by the number of gallons of milk sold.
c. total revenue of the milk producers in Wisconsin.
d. total cost of selling milk in Wisconsin. - Answers - a. sum of the individual producer
surpluses in this market.
Mountain River Adventures offers whitewater rafting trips down the Colorado River. It
costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third,
and $160 for the fourth. If the market price fora raft trip was $120 but has now increased
to $150, the gain in producer surplus is equal to:
a. $20.
b. $80.
c. $90.
d. $70. - Answers - d. $70.
A tax of 20 cents per unit of imported cheese would be an example of:
a. Compound tariff
b. Effective tariff
c. Ad valorem tariff
d. Specific tariff - Answers - d. Specific tariff
Which type of tariff is not used by the American government?
a. Import tariff
b. Export tariff
c. Specific tariff
d. Ad valorem tariff - Answers - b. Export tariff
ANSWERS
Opportunity cost is:
a. the value of the best alternative forgone in making any choice.
b. the benefit derived from a product.
c. about half of the monetary cost of a product.
d. the dollar payment for a product. - Answers - a. the value of the best alternative
forgone in making any choice.
An economy is said to have a comparative advantage if it:
a. has the lowest cost of producing a particular good, compared with other economies.
b. can produce fewer of all goods than another economy.
c. can produce more of all goods than another economy.
d. has the highest cost of producing a particular good, compared with other economies.
- Answers - a. has the lowest cost of producing a particular good, compared with other
economies.
As long as people have different _____, everyone has a comparative advantage in
something.
a. benefits
b. direct costs
c. opportunity costs
d. utility - Answers - c. opportunity costs
Because of trade, a country may:
a. avoid opportunity costs.
b. consume inside its production possibility frontier.
c. find its production possibility frontier shifting outward.
d. consume outside its production possibility frontier. - Answers - d. consume outside its
production possibility frontier.
Gains from trade arise because of:
a. individual choice.
b. marginal analysis.
c. specialization in consumption.
d. specialization in production. - Answers - d. specialization in production.
An economy is said to have a comparative advantage in the production of a good if it
can produce that good:
a. at a higher opportunity cost than another economy.
b. outside its production possibilities curve.
,c. with more resources than another economy.
d. at a lower opportunity cost than another economy. - Answers - d. at a lower
opportunity cost than another economy.
If the opportunity cost of manufacturing machinery is lower in the United States than in
Britain and the opportunity cost of manufacturing sweaters is higher in the United States
than in Britain, then the United States will:
a. export both sweaters and machinery to Britain.
b. export sweaters to Britain and import machinery from Britain.
c. import both sweaters and machinery from Britain.
d. import sweaters from Britain and export machinery to Britain. - Answers - d. import
sweaters from Britain and export machinery to Britain.
If the opportunity cost of manufacturing machinery is higher in the United States than in
Britain and the opportunity cost of manufacturing sweaters is lower in the United States
than in Britain, then the United States will:
a. import both sweaters and machinery from Britain.
b. export sweaters to Britain and import machinery from Britain.
c. import sweaters from Britain and export machinery to Britain.
d. export both sweaters and machinery to Britain. - Answers - b. export sweaters to
Britain and import machinery from Britain.
Trade can be beneficial to an economy because:
a. it prevents specialization in activities in which countries have a comparative
advantage.
b. it eliminates unemployment.
c. it results in a more efficient use of the combined resources of some of the trading
countries, even though it reduces efficiency in others.
d. more goods and services can be obtained at lower opportunity cost. - Answers - d.
more goods and services can be obtained at lower opportunity cost.
Which statement is true?
a. Very talented people may have a comparative advantage in everything they do.
b. Very untalented people have a comparative advantage in something they do.
c. Very talented people may have a low opportunity cost in most things they do.
d. Very untalented people may have a high opportunity cost in most things they do. -
Answers - b. Very untalented people have a comparative advantage in something they
do.
Consumer surplus for an individual buyer is equal to the:
a. consumer's willingness to pay for the good minus the price paid for the good.
b. consumer's willingness to pay for the good minus the marginal cost of producing the
good.
c. price of the good minus the marginal cost of producing the good.
, d. marginal cost of the good minus the consumer's willingness to pay for the good. -
Answers - a. consumer's willingness to pay for the good minus the price paid for the
good.
Vonda and Aleiyah are shopping together at the mall for new jeans. Vonda is willing to
pay $90 and Aleiyah is willing to pay $50 for a pair of jeans. If the price of jeans is $59,
how much total consumer surplus is achieved in this market?
a. $31
b. $0
c. $9
d. $40 - Answers - a. $31
Producer surplus for an individual seller is equal to the:
a. price received for selling the good minus the cost of producing the good.
b. cost of the good minus the willingness to pay for the good.
c. willingness to pay for the good minus the price received for selling the good.
d. cost of the good minus the price received for selling the good. - Answers - a. price
received for selling the good minus the cost of producing the good.
The total producer surplus in the Wisconsin milk market is the:
a. sum of the individual producer surpluses in this market.
b. sum of all prices paid multiplied by the number of gallons of milk sold.
c. total revenue of the milk producers in Wisconsin.
d. total cost of selling milk in Wisconsin. - Answers - a. sum of the individual producer
surpluses in this market.
Mountain River Adventures offers whitewater rafting trips down the Colorado River. It
costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third,
and $160 for the fourth. If the market price fora raft trip was $120 but has now increased
to $150, the gain in producer surplus is equal to:
a. $20.
b. $80.
c. $90.
d. $70. - Answers - d. $70.
A tax of 20 cents per unit of imported cheese would be an example of:
a. Compound tariff
b. Effective tariff
c. Ad valorem tariff
d. Specific tariff - Answers - d. Specific tariff
Which type of tariff is not used by the American government?
a. Import tariff
b. Export tariff
c. Specific tariff
d. Ad valorem tariff - Answers - b. Export tariff
