QUESTIONS FOR SECTION I

1. Crusoe is stranded on a desert island. The following represents the ma-ximum combinations of fish and coconuts he can produce with his limited resources:

Fish

Coconuts

0 10

The opportunity cost of the first, second, third, and fourth fish is: (a) 1,2,3,4 coconuts (b) 10,9,7,4 coconuts (c) 9,7,4 and 0 coconuts (d) 10,8,5 and 1 coconuts (e) none of these.

2. \\ 1 of the follov\ing will not cause the producdon possibihty fronder to shift? (a) an explosion destroying a chemical plant (b) an increase in the working populadon (c) the introduction of "optical fiber" technology (d) a land reclamadon program (e) a reducdon in unemployment.

3. The producdon possibility fronder is generally drawn concave to the origin because: (a) resources are scarce (b) some factors of producdon are superior in the producdon of some goods, but are less well suited to the producdon of other goods (c) economies of scale are important (d) the ability of goods to satisfy human vrants diminishes as production increases (e) none of the above.

4. A Hnear (straight line) producnon possibihty fronder indicates that: (a) opportunity costs decrease as producdon of a good increases (b) opportunity costs increase as production of a good increases (c) opportunity costs are everjwhere constant (d) it makes litde difference to society which goods get produced (e) technological advance is equal in all industries.

5. A man is faced with nvo possibilides. Either he can work overtime for three hours and earn thirt) dollars or he can go to the ball game, paymg five dollars for admission and tyio dollars on and drinks. The opportunit) cost of attending the ball game is: (a) indeterminate (b) $37 (c) S35 (d) $30 (e) dependent on the result of the game.

6. A producdon possibility frontier between food and clothing is downward sloping because: (a) resovirces are scarce (b) it is always impossible to increase producdon of both food and clodiing (c) an economys food "requirements must be satisfied before clothing

can be produced (d) an increase in food production! would reduce unemployment (e) our material wantsi are unlimited.

7. Which of the following would cause the pro-] ducdon possibility fronder between food and clothing \ to shift outward? (a) an increase in unemployment! (b) a decrease in unemployment (c) an increase in! the labor force (d) an increase in the demand for] food (e) greater clothing imports from the Orient.

8. Robinson Crusoe and Friday are marooned on] a desert island. Crusoe takes two hours to catch a fishj and twentyfour hours to catch a quail. Friday canl accomplish those tasks in one hour and six hoursj respectively. Which of the following courses of acuonj on Fridays part would result in a gain fori both? (a) offer to exchange one quail for eleven! fish (b) offer to exchange one quail for thirteen! fish (c) offer to exchange twelve fish for onej quail (d) offer to exchange six fish for one quail (e)j leave Robinson to his own devices.

9. \\ 1 of the following is not generally consic ered to be a factor of production? (a) land (b) cap ital (c) labor (d) specialization (e) entrepreneur

-ship.

10. Holland is a country with few natural resource except for good harbors, yet it has long had a hig standard of living compared to other countries. Whic of the following is inconsistent with this statement

(a) this year, Holland devoted very few economic resources to the production of capital goods, prefeij ring instead to consume about everything it prodi

(b) in the past, Holland was willing to forego con sumption in order to consume more in the futc

(c) the productivit) of labor in Holland is higij

(d) Holland tends to specialize in trade and maritim activities (e) none of the above.

11. Which of the following does not involve ecc nomic opportunity cost? (a) keeping money in a banV depo.sit (b) climbing a mountain for pleasure (c) receiv- ing an education (d) employing machinery, specificl to f>eanut production, which was previously idlcj

(e) getting a haircut.

The following data show the maximum aitiainable pre ducdon of corn arid wheat in Kansas and Nebraska For purposes of answering the next six questions.

change

tsi assume that the production possibili """"linear (straight lines).

lities curves are

State

Kansas Nebraska

All Corn

600 tons 1200 tons

V\eat

300 tons 400 tons

12. The data indicate: (a) Kansas has an absolute advantage in corn but not wheat (b) Kansas has an absolute advantage in wheat but not com (c) Nebraska has an absolute advantage in both wheat and corn (d) Kansas has a comparadve disadvantage in both goods (e) neither state has an absolute advantage in f .both goods.

. The opportunity cost of corn in Kansas is: ?(a) 1/2 wheat per unit of corn (b) 300 wheat (c) 600 Pwheat (d) indeterminate from the information gi\en "(e) increasing as more and more of each good is produced.

J4. The opportunity costs of corn and wheat in f}j,;Nebraska are respectively: (a) 1/3 wheat per unit of 1 j/corn and 3 com per imit of wheal (b) 1200 tons of corn I.iand 400 tons of wheat (c) 400 tons of corn and 1200 4ons of wheat (d) constant (e) both (a) and (d).

iT5. According to the theory of comparative ad\an-fe: (a) Kansas should trade corn to Nebraska in exchange for wheat (b) Kansas should trade wheat to iNebraska in exchange for com (c) Kansas has a comparative advantage in wheat (d) Kansas has a com-iparative advantage in corn (e) both (b) and (c).

n:il6. Kansas and Nebraska would both be made bet-l Jtter off if Nebraska offers Kansas: (a) 2 tons of corn in I exchange for one of wheat (b) 3 tons of corn for 1 of wheat (c) 25 tons of corn for 10 of wheat (d) 3 tons • of wheat for 1 of corn (e) all ofthese.

17. In the question above, which of tire follo\ving offers on Kansas part (in tons) would fail to make both better off? (a) 10 wheat for 24 corn (b) 1 wheat for 2.8 corn (c) 7.5 corn for 3 wheat (d) 8 corn for 4 wheat (e) 3 wheal for 8 corn.

18. If Joe Gaucho were not attending UCSB, he could take either of two jobs, the first paying $15,000 per year and the second $16,000. Joes parents give him $3000 per year because hes in school and he earns $2000 more in the summer. Joes opportunity cost of attending UCSB per calendar year is: (a) $16,000 (b) $12,000 (c) $10,000 (d) $13,000 (e) none of these.

19. Ifyou bear the costs yourself, which of the following is not part of your opportunity cost of attending UCSB? (a) books (b) tuition (c) haircuts (d) the income gained from ftill-time work (e) moments with the girl or guy you left behind back home.

20. Which of the following would not be expected to shift the production possibilities curve between guns and butter? (a) a flood (b) an increase in gun production and corresponding decrease in butter production (c) a new synthetic hormone for increasing milk production (d) a terrorist attack against a munitions plant (e) a new technique for recovering iron from low-grade ore. -,

21. Which of the following feasible combinations of guns and butler cannot lie on the same production possibilities frontier?

22. Which of the following is not capital? (a) the proceeds of a two million dollar loan (b) equipment for manufacturing shoes (c) a diesel locomotive

(d) a dam (e) a desk in an office.

23. Other things constant, which of the following would definitely cause a downward and leftward shift of an economys prodviction possibilities curve? (a) a decrease in die level of human capital (b) the destruction of physical capital (c) a destructive earthquake (d) an Hicrease in the population and a simultaneous decrease in the stock of physical capital

(e) all but d.

24. Suppose that in the U.S. a person could produce one shirt in one hour of labor while another person could produce one chair in that length of dme. In Canada it takes a person three hours to produce one shirt and another person four hours to produce one chair. Then Canada has (a) a "chair" cost per shirt equal to three fourths (b) an absolute advantage in shirt production (c) a comparadve disadvantage in both chairs and shirts (d) a "chair" cost per shirt equal to 4/3 (e) none of the above.

25. If a new technique is discovered allowing peanuts to be picked with reduced labor in an economy which produces only peanuts and automobiles, then: (a) it is possible to produce more peanuts but not more automobiles than before (b) it is possible to produce more peanuts only by producing fewer automobiles than before (c) it is possible to increase producdon of both automobiles and peanuts (d) more peanuts and automobiles will be produced than before (e) more peanuts but fewer automobiles will be produced than before.

26. If you choose "A", you are precluded from choosing "B". "A" requires $20,000 in out-of-pocket costs and brings in $30,000 in income. "B" requires $1,000 in out-of-pocket costs and brings in $5,000 in income. The cost of choosing "A" is: (a) $5,000

(b) $15,000 (c) $4,000 (d) $24,000 (a) none of the above.

27. In the question above, what is the cost of selecting "B"? (a) $4,000 (b) $5,000 (c) $30,000 (d) $20,000 (e) $11,000.

28. Scarcity implies: (a) competition (b) the evolution of production techniques that can eliminate scarcity (c) rising povertv as time goes on (d) the necessity of making choices (e) a and d.

29. Which of the following are methods for allocating scarce goods? (a) violence (b) prices

(c) bribery (d) first come, first served (e) all of these are allocation methods.

30. Which of the following methods of allocating places in economics sections will eliminate competition? (a) first come, first served (b) selection by lot (c) selection by seniority (d) selection by g.p.a. (e) none of the above.

31. Which of the following feasible guns/bun combinations definitely cannot lie on the same ducdon possibilities curve? (a) G = 80, = 0 (]) = 50, = 30 ( ) G = 40, = 2 5 (d) G = 30, = • (e) G = 20, = 50.

32. Suppose a certain economy can produce on tanks and souffles with tanks on the horizontal and souffles on the vertical. If a technological ac occurs in tank production, but not in souffle prod tion, then we can predict: (a) both intercepts will < inward (b) the vertical intercept will shift inward ; the horizontal will shift outward (c) the vertical ini cept will shift up and the horizontal will shift to •right (d) the verticzd intercept will remain static and the horizontal will shift right (e) neither imerc will shift but the frontier will bulge outivard more.f

33. If good X is on the horizontal axis and gc on the vertical, then the steeper the production : tier: (a) the greater the amount of technical pre (b) the richer the society (c) the poorer the (d) the smaller the amount of resources devote producing X (e) none of the above.

34. Middlemen are: (a) specialists in facilit trade (b) useless intermediaries (c) rarely found developed countries (d) primarily a replacement money (e) people who make it more expensiw trade.

35. If the price of wine is $3 per liter and the ] of cheese is $1 per poimd then the opportunity wine and cheese are respectively: (a) 3 wine cheese (b) 1 cheese and 3 wine (c) 1/3 cheese! 3 wne (d) 1/3 cheese and 1/3 wine (e) 3 ch and 1/3 wine.

36. As part of his campaign against elitism, Zedong required that almost everyone, scier included spend time har\esting crops. Assuming! employment, the effect of this polio" on Chinasl" duction possibilitv curve would be to: (a) shiftj curve inward (b) shift the curve outward (c) the Chinese economy to operate inside the produ<a possibility curve (d) cause the economy to of outside the production possibility curve (e) non the above.

37. In the 1930s Nazi Germany developed a sufficiency plan whereby the countrv strove to rt