Question

 

1. The most basic concept upon which the science of economics rests is

a. money.

b. scarcity.

c. markets.

d. prices.

e. free (unregulated) markets.

2. If the supplies of land, labor, and capital were unlimited,

a. scarcity would still be present.

b. the production-possibilities frontier would not change.

c. scarcity would no longer be present.

d. consumer goods would still be rationed.

e. capital goods, but not consumer goods, would still be rationed.

3. People must make choices because

a. most people enjoy shopping.

b. there are many goods available.

c. the law of scarcity prevails.

d. the production-possibilities frontier is upward-sloping.

3. there are unlimited resources available for production.

4. Opportunity cost is best defined as

a. how much money is paid for something.

b. how much money is paid for something, taking inflation into account.

c. the highest valued alternative that is sacrificed in making a choice.

d. all the alternatives that are sacrificed in making a choice.

e. None of the above.

5. During the time when she took this quiz, Susannah could instead have practiced her violin or done her French homework. She thinks that if she hadn't taken the quiz, she would have done her French homework. Her opportunity cost of taking the quiz is the value of:

            a. practicing her violin

            b. doing her French homework

            c. practicing her violin and doing her French homework

            d. the time it took to do the quiz

            e. zero because her quiz was worth more than her French homework

6. Cathy and Katie can both produce beer and pizzas. They face the following production possibilities:

           

Cathy: 10 beers or 10 pizzas                           Katie: 3 beers or 6 pizzas

A. Who has the absolute advantage in producing beer? Who has the absolute advantage in producing pizza?

B. Who has the comparative advantage in producing beer? Who has the comparative advantage in producing pizza? (Show your work!)

C. Who should produce beer? Who should produce pizza?

 

Answer 1

1. The most basic concept upon which the science of economics rests is Scarcity

ANs is a)

2.  If the supplies of land, labor, and capital were unlimited, scarcity would no longer be present.

Ans is C)

3. ANs is c) the law of scarcity prevails.

4. Ans is C) the highest valued alternative that is sacrificed in making a choice.

5. Her opportunity cost of taking the quiz is the value of doing her French homework

Ans is b) doing her French homework

6..

a) Cathy has absolute advantage in both beer and pizza.

It is so because, it can produce both of good more than Katie.

b)

Cathy opportunity cot of producing 10 beer = 10 pizza

It means opportunity cost of producing 1 beer =1 pizza.

Katie's opportunity cost of producing 3 beers=6 pizza

It means opportunity cost of producing 1 beer =6/3 = 2 pizza.

As the opportunity cost of producing beer is lower for Cathy so Cathy has comparative advantage in production of beer while Katie has comparative advantage in production of pizza.

c) Cathy should produce beer and katie should produce pizza.