ECON 101 PRACTICE
EXAM QUESTIONS AND
ANSWERS
In one hour, Sue can produce 50 caps or 10 jackets and Tessa can produce 70 caps or
7 jackets.
Who has a comparative advantage in producing caps? If Sue and Tessa specialize and
trade, who will gain?
Tessa's opportunity cost of producing a cap is ____ jackets.
A. 2
B. 0.5
C. 1
D. 0.2
E. 0.1 - Answer-E.
In one hour, Sue can produce 50 caps or 10 jackets and Tessa can produce 70 caps or
7 jackets.
Who has a comparative advantage in producing caps? If Sue and Tessa specialize and
trade, who will gain?
______ has a comparative advantage in producing caps.
If Sue and Tessa specialize in producing the good in which they have a comparative
advantage, ______.
A.
Sue;
Tessa gains but Sue loses
B.
Sue;
both Sue and Tessa gain
C.
Tessa;
Tessa loses but Sue gains
D.
Tessa;
Sue loses but Tessa gains
E.
Tessa;
,both Sue and Tessa gain - Answer-E.
Gerry and Di are the only people in an isolated village who grow apples and peaches.
Under what conditions does Gerry have a comparative advantage in growing apples?
What happens if Gerry has an absolute advantage in growing apples and peaches?
Gerry has a comparative advantage in growing apples if _______.
A.
Di's opportunity cost of producing apples is greater than
Gerry's opportunity cost of producing apples
B.
Gerry's opportunity cost of producing apples is equal to his opportunity cost of
producing peaches
C.
Gerry can grow more apples than Di can grow
D.
Gerry's marginal benefit from apples is greater than Di's - Answer-A.
Gerry and Di are the only people in an isolated village who grow apples and peaches.
Under what conditions does Gerry have a comparative advantage in growing apples?
What happens if Gerry has an absolute advantage in growing apples and peaches?
If Gerry has an absolute advantage in growing apples and peaches, he will _______.
A.
be more productive than Di
B.
perform all activities at the lowest opportunity cost
C.
be unable to trade with Di
D.
have an equal opportunity cost of growing both goods - Answer-A.
Suppose that the United States and Cuba decide to open up trade.
If each country specializes in the good in which it has a comparative advantage, which
country will gain from that trade? Why?
Question content area bottom
Part 1
If each country specializes in the good in which it has a comparative advantage, ______
will gain from that trade because ______.
A.
neither country; their consumption possibilities will not change
B.
only Cuba; consumption possibilities in Cuba will lie outside its PPF and U.S.
consumption possibilities will not change
C.
,only the United States; consumption possibilities in Cuba will lie outside its PPF and
U.S. consumption possibilities will not change
D.
both countries; consumption possibilities in both Cuba and the United States will lie
outside their PPFs - Answer-D.
Emily owns an ice cream parlor. In an hour she can produce 40 milkshakes or 40 ice
cream sundaes.
Ben also owns an ice cream parlor. In an hour he can produce 20 milkshakes or 10 ice
cream sundaes.
What is Emily's opportunity cost of producing 1 milkshake and what is Ben's opportunity
cost of producing 1 milkshake?
Who has a comparative advantage in producing milkshakes?
Emily's opportunity cost of producing 1 milkshake is _____. Ben's opportunity cost of
producing 1 milkshake is _____.
A.
0.5 ice cream sundae;
1 ice cream sundae
B.
1 ice cream sundae;
0.5 ice cream sundae
C.
1 ice cream sundae;
2 ice cream sundaes
D.
2 ice cream sundaes; 1 ice cream sundae - Answer-B.
Emily owns an ice cream parlor. In an hour she can produce 40 milkshakes or 40 ice
cream sundaes.
Ben also owns an ice cream parlor. In an hour he can produce 20 milkshakes or 10 ice
cream sundaes.
What is Emily's opportunity cost of producing 1 milkshake and what is Ben's opportunity
cost of producing 1 milkshake?
Who has a comparative advantage in producing milkshakes?
_____ has a comparative advantage in the production of milkshakes.
A. Emily
B. Ben - Answer-B.
Each of the following four events occurs (one at a time) in the market for air travel.
A. Airfares tumble, while long-distance bus fares don't change.
B. The price of jet fuel falls.
C. Airlines reduce the number of flights each day.
D. People expect airfares to decrease next summer.
, Only one of the following statements about the market for air travel is correct. Which
one?
A.
Event B increases the demand for air travel.
B.
Events A, B, and C decrease the supply of air travel.
C.
Event A changes neither the supply of nor the demand for air travel.
D.
Event C decreases the demand for air travel and decreases the supply of air travel.
E.
Event D changes neither the supply of nor the demand for air travel. - Answer-C.
Each of the following four events occurs (one at a time) in the market for air travel.
Now in the market for air travel, four additional events occurs one at a time.
E. A mild winter in New York induces more people to vacation at home.
F. With deep snow in the Rockies, people flock to the ski slopes.
G. The price of train travel falls.
H. The price of a pound of air cargo rises.
Which of the following five statements about the market for air travel is correct?
A.
Events E, F, and G decrease the supply of air travel.
B.
Event H increases the supply of air travel.
C.
Event E decreases the supply of air travel.
D.
Event G decreases the demand for air travel.
Your answer is correct.
E.
Event F changes neither the supply of nor the demand for air travel. - Answer-D.
The United States does not allow oranges from Brazil (the world's largest producer of
oranges) to enter the United States.
If Brazilian oranges were sold in the United States, oranges and orange juice would be
cheaper.
Is this statement true or false?
Use the laws of demand and supply to explain your answer. Distinguish between a
change in demand and a change in the quantity demanded and between a change in
supply and a change in the quantity supplied.
If Brazilian oranges are sold in the U.S. market, then the _________ will increase, the
price of oranges _________.
A.
supply of oranges; will fall, and the statement is true
EXAM QUESTIONS AND
ANSWERS
In one hour, Sue can produce 50 caps or 10 jackets and Tessa can produce 70 caps or
7 jackets.
Who has a comparative advantage in producing caps? If Sue and Tessa specialize and
trade, who will gain?
Tessa's opportunity cost of producing a cap is ____ jackets.
A. 2
B. 0.5
C. 1
D. 0.2
E. 0.1 - Answer-E.
In one hour, Sue can produce 50 caps or 10 jackets and Tessa can produce 70 caps or
7 jackets.
Who has a comparative advantage in producing caps? If Sue and Tessa specialize and
trade, who will gain?
______ has a comparative advantage in producing caps.
If Sue and Tessa specialize in producing the good in which they have a comparative
advantage, ______.
A.
Sue;
Tessa gains but Sue loses
B.
Sue;
both Sue and Tessa gain
C.
Tessa;
Tessa loses but Sue gains
D.
Tessa;
Sue loses but Tessa gains
E.
Tessa;
,both Sue and Tessa gain - Answer-E.
Gerry and Di are the only people in an isolated village who grow apples and peaches.
Under what conditions does Gerry have a comparative advantage in growing apples?
What happens if Gerry has an absolute advantage in growing apples and peaches?
Gerry has a comparative advantage in growing apples if _______.
A.
Di's opportunity cost of producing apples is greater than
Gerry's opportunity cost of producing apples
B.
Gerry's opportunity cost of producing apples is equal to his opportunity cost of
producing peaches
C.
Gerry can grow more apples than Di can grow
D.
Gerry's marginal benefit from apples is greater than Di's - Answer-A.
Gerry and Di are the only people in an isolated village who grow apples and peaches.
Under what conditions does Gerry have a comparative advantage in growing apples?
What happens if Gerry has an absolute advantage in growing apples and peaches?
If Gerry has an absolute advantage in growing apples and peaches, he will _______.
A.
be more productive than Di
B.
perform all activities at the lowest opportunity cost
C.
be unable to trade with Di
D.
have an equal opportunity cost of growing both goods - Answer-A.
Suppose that the United States and Cuba decide to open up trade.
If each country specializes in the good in which it has a comparative advantage, which
country will gain from that trade? Why?
Question content area bottom
Part 1
If each country specializes in the good in which it has a comparative advantage, ______
will gain from that trade because ______.
A.
neither country; their consumption possibilities will not change
B.
only Cuba; consumption possibilities in Cuba will lie outside its PPF and U.S.
consumption possibilities will not change
C.
,only the United States; consumption possibilities in Cuba will lie outside its PPF and
U.S. consumption possibilities will not change
D.
both countries; consumption possibilities in both Cuba and the United States will lie
outside their PPFs - Answer-D.
Emily owns an ice cream parlor. In an hour she can produce 40 milkshakes or 40 ice
cream sundaes.
Ben also owns an ice cream parlor. In an hour he can produce 20 milkshakes or 10 ice
cream sundaes.
What is Emily's opportunity cost of producing 1 milkshake and what is Ben's opportunity
cost of producing 1 milkshake?
Who has a comparative advantage in producing milkshakes?
Emily's opportunity cost of producing 1 milkshake is _____. Ben's opportunity cost of
producing 1 milkshake is _____.
A.
0.5 ice cream sundae;
1 ice cream sundae
B.
1 ice cream sundae;
0.5 ice cream sundae
C.
1 ice cream sundae;
2 ice cream sundaes
D.
2 ice cream sundaes; 1 ice cream sundae - Answer-B.
Emily owns an ice cream parlor. In an hour she can produce 40 milkshakes or 40 ice
cream sundaes.
Ben also owns an ice cream parlor. In an hour he can produce 20 milkshakes or 10 ice
cream sundaes.
What is Emily's opportunity cost of producing 1 milkshake and what is Ben's opportunity
cost of producing 1 milkshake?
Who has a comparative advantage in producing milkshakes?
_____ has a comparative advantage in the production of milkshakes.
A. Emily
B. Ben - Answer-B.
Each of the following four events occurs (one at a time) in the market for air travel.
A. Airfares tumble, while long-distance bus fares don't change.
B. The price of jet fuel falls.
C. Airlines reduce the number of flights each day.
D. People expect airfares to decrease next summer.
, Only one of the following statements about the market for air travel is correct. Which
one?
A.
Event B increases the demand for air travel.
B.
Events A, B, and C decrease the supply of air travel.
C.
Event A changes neither the supply of nor the demand for air travel.
D.
Event C decreases the demand for air travel and decreases the supply of air travel.
E.
Event D changes neither the supply of nor the demand for air travel. - Answer-C.
Each of the following four events occurs (one at a time) in the market for air travel.
Now in the market for air travel, four additional events occurs one at a time.
E. A mild winter in New York induces more people to vacation at home.
F. With deep snow in the Rockies, people flock to the ski slopes.
G. The price of train travel falls.
H. The price of a pound of air cargo rises.
Which of the following five statements about the market for air travel is correct?
A.
Events E, F, and G decrease the supply of air travel.
B.
Event H increases the supply of air travel.
C.
Event E decreases the supply of air travel.
D.
Event G decreases the demand for air travel.
Your answer is correct.
E.
Event F changes neither the supply of nor the demand for air travel. - Answer-D.
The United States does not allow oranges from Brazil (the world's largest producer of
oranges) to enter the United States.
If Brazilian oranges were sold in the United States, oranges and orange juice would be
cheaper.
Is this statement true or false?
Use the laws of demand and supply to explain your answer. Distinguish between a
change in demand and a change in the quantity demanded and between a change in
supply and a change in the quantity supplied.
If Brazilian oranges are sold in the U.S. market, then the _________ will increase, the
price of oranges _________.
A.
supply of oranges; will fall, and the statement is true
