NCSU Econ 201 Practice Test 1
Questions and Answers
Which of the following best describes the principle of comparative advantage?
Select one:
A. To produce more of one good, people have to produce less of another good.
B. Someone has the ability to produce the same good for the lowest opportunity cost.
C. Some people can produce the same good better than other producers can.
D. Someone has the ability to produce the same good using fewer inputs than another
producer. - answer B
The opportunity cost of a choice is:
Select one:
A. the opportunity of using the money to buy something else cheaper.
B. the money that a buyer has to pay for an item.
C. the value of the next best opportunity foregone.
D. the money cost that a person does not have to pay when doing something. - answer
C
Utilizing comparative advantage can best be exemplified as:
Select one:
A. the CEO of Microsoft programming his own computer.
B. a world-renowned chef hiring someone to cook meals for his family.
C. the president of your university teaching a class again.
D. your lawyer word-processing her own legal briefs. - answer B
Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each
batch of cookies and each loaf of bread than Jorge does. Specialization and trade
between them can benefit:
Select one:
A. neither Maria nor Jorge.
B. Maria, but not Jorge.
C. both Maria and Jorge.
D. Jorge, but not Maria. - answer C
Only a very small portion of people who use microwaves know how they work. This is
an example of:
Select one:
A. a production possibility frontier.
B. division of knowledge.
C. opportunity cost.
D. absolute advantage. - answer B
, Mark values his drum set at $800 and Ella values her guitar at $1,000. Suppose that
Mark trades his drum set for Ella's guitar.
Select one:
A. This trade makes Mark better off by $200.
B. This trade decreases total value by moving the guitar and drum away from people
who placed a high value on them.
C. Mark must value Ella's guitar for at least $800, and Ella must value Mark's drum set
for at least $1,000.
D. This trade makes Ella worse off by $200. - answer C
A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen
doughnuts. So the first dozen is $6 and the second would be $3. A person would buy
the second dozen if their marginal benefit from the second dozen doughnuts is:
Select one:
A. greater than $3
B. less than $3
C. greater than $4.50
D. greater than $6 - answer A
After reading the op-ed on tariffs written by Dr. Grennes, identify which of the following
statements is FALSE?
Select one:
a. U.S. businesses which use products affected by tariffs are often larger than the
businesses that produce the goods protected by tariffs.
b. The immediate loss to Americans from higher tariffs is higher prices for imports AND
domestically produced substitutes.
c. Economic theory tell us trade wars are lose-lose propositions.
d. The current definition of "trade war" is when two countries place tariffs on at least $1
billion worth of imported goods.
e. The WTO handles trade disputes. - answer D
Suppose your teacher finishes class 30 minutes early on the day before an exam. She
indicates that you may leave, or you may stay on for an optional study period that will
last for the remaining 30 minutes of the scheduled class time. You should:
Select one:
A. only choose to stay if the benefits gained from the extra study session exceed the
cost of another 30 minutes in class.
B. only choose to stay for the study session if you do not plan to study on your own for
the exam.
C. always choose to stay for the study period, since you have already paid for the class
time.
D. only choose to stay if you like the instructor, since the value obtained is higher than if
you disliked the instructor. - answer A
If the price of swimming pools decreases, we would expect the demand for:
Questions and Answers
Which of the following best describes the principle of comparative advantage?
Select one:
A. To produce more of one good, people have to produce less of another good.
B. Someone has the ability to produce the same good for the lowest opportunity cost.
C. Some people can produce the same good better than other producers can.
D. Someone has the ability to produce the same good using fewer inputs than another
producer. - answer B
The opportunity cost of a choice is:
Select one:
A. the opportunity of using the money to buy something else cheaper.
B. the money that a buyer has to pay for an item.
C. the value of the next best opportunity foregone.
D. the money cost that a person does not have to pay when doing something. - answer
C
Utilizing comparative advantage can best be exemplified as:
Select one:
A. the CEO of Microsoft programming his own computer.
B. a world-renowned chef hiring someone to cook meals for his family.
C. the president of your university teaching a class again.
D. your lawyer word-processing her own legal briefs. - answer B
Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each
batch of cookies and each loaf of bread than Jorge does. Specialization and trade
between them can benefit:
Select one:
A. neither Maria nor Jorge.
B. Maria, but not Jorge.
C. both Maria and Jorge.
D. Jorge, but not Maria. - answer C
Only a very small portion of people who use microwaves know how they work. This is
an example of:
Select one:
A. a production possibility frontier.
B. division of knowledge.
C. opportunity cost.
D. absolute advantage. - answer B
, Mark values his drum set at $800 and Ella values her guitar at $1,000. Suppose that
Mark trades his drum set for Ella's guitar.
Select one:
A. This trade makes Mark better off by $200.
B. This trade decreases total value by moving the guitar and drum away from people
who placed a high value on them.
C. Mark must value Ella's guitar for at least $800, and Ella must value Mark's drum set
for at least $1,000.
D. This trade makes Ella worse off by $200. - answer C
A grocery store is running a "buy-one-get-another-at-one-half-off" promotion on a dozen
doughnuts. So the first dozen is $6 and the second would be $3. A person would buy
the second dozen if their marginal benefit from the second dozen doughnuts is:
Select one:
A. greater than $3
B. less than $3
C. greater than $4.50
D. greater than $6 - answer A
After reading the op-ed on tariffs written by Dr. Grennes, identify which of the following
statements is FALSE?
Select one:
a. U.S. businesses which use products affected by tariffs are often larger than the
businesses that produce the goods protected by tariffs.
b. The immediate loss to Americans from higher tariffs is higher prices for imports AND
domestically produced substitutes.
c. Economic theory tell us trade wars are lose-lose propositions.
d. The current definition of "trade war" is when two countries place tariffs on at least $1
billion worth of imported goods.
e. The WTO handles trade disputes. - answer D
Suppose your teacher finishes class 30 minutes early on the day before an exam. She
indicates that you may leave, or you may stay on for an optional study period that will
last for the remaining 30 minutes of the scheduled class time. You should:
Select one:
A. only choose to stay if the benefits gained from the extra study session exceed the
cost of another 30 minutes in class.
B. only choose to stay for the study session if you do not plan to study on your own for
the exam.
C. always choose to stay for the study period, since you have already paid for the class
time.
D. only choose to stay if you like the instructor, since the value obtained is higher than if
you disliked the instructor. - answer A
If the price of swimming pools decreases, we would expect the demand for:
