Microeconomics CLEP Test Study Guide
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It is possible for an economy to increase its production of both goods if the economy:
A. moves along its production possibilities frontier and the frontier is bowed outward
B. moves along its production possibilities frontier and the frontier is bowed inward
C. moves in either direction along its production possibilities frontier is a straight line
D. moves from a situation of inefficient production to a situation of efficient production -
ANS-D
Which of the following is true if a country produces a combination of two goods inside its
production possibilities curve?
A. The country can increase the production of one good only by decreasing the
production of the other good
B. The country is producing the efficient combination using all its available resources
C. The country can produce more of both goods with its existing resources
D. The country cannot increase the production of either good
E. The country must be importing more of both g - ANS-C
A production possibilities curve can be used to show which of the following?
A. Absence of trade-offs in the production of goods
B. The limits on production due to scarcity of resources
C. The amount of investment spending necessary to reach full employment
D. The labor force participation rate - ANS-B
What are the two choices economic agents have to satisfy their wants and needs> -
ANS-ECONOMIC SELF SUFFICIENCY: they can be economically self sufficient, which
tells us that the economic agent produces all of the goods and services that they need
and want to consume
SPECIALIZATION AND TRADE:They can specialize and trade with other economic
agents; Here an economic agent produces one good in which they have a comparative
advantage and then in the production of that good, they trade it with others that they
need and want from other economic agents
gains from trade - ANS-people can get more of what they want through trade than they
could if they tried to be self-sufficient
It is possible for economic agents to have an absolute advantage in the production both
goods, but not possible to have a comparative advantage in the production of both
goods - ANS-true
, comparative advantage - ANS-the ability to produce a good at a lower opportunity cost
than another producer
absolute advantage - ANS-the ability to produce a good using fewer inputs than another
producer
The comparative advantage is going to be assigned to the economic agent that has the
lowest opportunity cost in producing that good. - ANS-True
How do we determine the opportunity cost of production? - ANS-how much of good A
do we give up to make one more unit of good B?
If a seamstress can bake 8 loaves in 8 hours or sew 4 sweaters in 8 hours, what is her
opportunity cost to sew one sweater? 2 loaves of bread
Suppose that a worker in Tunsia can grow either 40 bushels of corn or 10 bushels of
oats per year and a worker in Orlando can produce either 20 bushels of corn or 5
bushels of oats per year. There are 20 workers in Tunsia and 20 workers in Orlando.
Which of the following statements is true?
A. Both countries can gain from trade with the other
B. Neither country could gain from trade with each other because Tunsia has an
absolute advantage in both goods
C. Neither country could gain from trade wi - ANS-c
Suppose Jan and Tom want to trade sweaters for potatoes. Both have the resources to
produce each of the goods. Under which scenarios can they gain from the trade?
A. Jan can produce 5 sweaters or 10 potatoes in one hour, Tom can produce 2
sweaters or 4 potatoes in one hour
B. Jan can produce 6 sweaters or 12 potatoes in one hour, Tom can produce 12
sweaters of 6 potatoes in one hour
C. Jan can produce 4 sweaters or 8 potatoes in one hour, Tom can produce 3 sweaters
or 9 potatoes in one hour - ANS-b and c
Economic system - ANS-a system of production, resource allocation, exchange, and
distribution of goods and services in a society or a given geographic area.
Why are property rights an important component of economic systems? - ANS-they
determine who owns a resource and who determines the allocation of that resource;
determines the ownership of a good or service and the distribution of that good or
service.
Property rights determine:
1. the right to use the good
2. the right to earn income from the good
3. the right to transfer the good to another person
4. the right to enforce property rights
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It is possible for an economy to increase its production of both goods if the economy:
A. moves along its production possibilities frontier and the frontier is bowed outward
B. moves along its production possibilities frontier and the frontier is bowed inward
C. moves in either direction along its production possibilities frontier is a straight line
D. moves from a situation of inefficient production to a situation of efficient production -
ANS-D
Which of the following is true if a country produces a combination of two goods inside its
production possibilities curve?
A. The country can increase the production of one good only by decreasing the
production of the other good
B. The country is producing the efficient combination using all its available resources
C. The country can produce more of both goods with its existing resources
D. The country cannot increase the production of either good
E. The country must be importing more of both g - ANS-C
A production possibilities curve can be used to show which of the following?
A. Absence of trade-offs in the production of goods
B. The limits on production due to scarcity of resources
C. The amount of investment spending necessary to reach full employment
D. The labor force participation rate - ANS-B
What are the two choices economic agents have to satisfy their wants and needs> -
ANS-ECONOMIC SELF SUFFICIENCY: they can be economically self sufficient, which
tells us that the economic agent produces all of the goods and services that they need
and want to consume
SPECIALIZATION AND TRADE:They can specialize and trade with other economic
agents; Here an economic agent produces one good in which they have a comparative
advantage and then in the production of that good, they trade it with others that they
need and want from other economic agents
gains from trade - ANS-people can get more of what they want through trade than they
could if they tried to be self-sufficient
It is possible for economic agents to have an absolute advantage in the production both
goods, but not possible to have a comparative advantage in the production of both
goods - ANS-true
, comparative advantage - ANS-the ability to produce a good at a lower opportunity cost
than another producer
absolute advantage - ANS-the ability to produce a good using fewer inputs than another
producer
The comparative advantage is going to be assigned to the economic agent that has the
lowest opportunity cost in producing that good. - ANS-True
How do we determine the opportunity cost of production? - ANS-how much of good A
do we give up to make one more unit of good B?
If a seamstress can bake 8 loaves in 8 hours or sew 4 sweaters in 8 hours, what is her
opportunity cost to sew one sweater? 2 loaves of bread
Suppose that a worker in Tunsia can grow either 40 bushels of corn or 10 bushels of
oats per year and a worker in Orlando can produce either 20 bushels of corn or 5
bushels of oats per year. There are 20 workers in Tunsia and 20 workers in Orlando.
Which of the following statements is true?
A. Both countries can gain from trade with the other
B. Neither country could gain from trade with each other because Tunsia has an
absolute advantage in both goods
C. Neither country could gain from trade wi - ANS-c
Suppose Jan and Tom want to trade sweaters for potatoes. Both have the resources to
produce each of the goods. Under which scenarios can they gain from the trade?
A. Jan can produce 5 sweaters or 10 potatoes in one hour, Tom can produce 2
sweaters or 4 potatoes in one hour
B. Jan can produce 6 sweaters or 12 potatoes in one hour, Tom can produce 12
sweaters of 6 potatoes in one hour
C. Jan can produce 4 sweaters or 8 potatoes in one hour, Tom can produce 3 sweaters
or 9 potatoes in one hour - ANS-b and c
Economic system - ANS-a system of production, resource allocation, exchange, and
distribution of goods and services in a society or a given geographic area.
Why are property rights an important component of economic systems? - ANS-they
determine who owns a resource and who determines the allocation of that resource;
determines the ownership of a good or service and the distribution of that good or
service.
Property rights determine:
1. the right to use the good
2. the right to earn income from the good
3. the right to transfer the good to another person
4. the right to enforce property rights
