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UNIT oNE REVIEW

7. As Atlantis produces more potatoes, what is true about 12. Comparative advantage explains which of the following?
the opportunity cost of producing potatoes? a. a country’s ability to produce more of a particular
a. It stays the same. good or service
b. It continually increases. b. when production is considered efficient
c. It continually decreases. c. why the production possibilities curve is bowed
d. It increases and then decreases. outward
e. It decreases and then increases. d. the source of gains from trade
8. Which of the following combinations of output is e. why the production possibilities curve shifts
efficient? outward
Pounds of potatoes Pounds of fish 13. If there is no specialization of resources in the
a. 1,000 0 production of milk and cream, the production
b. 600 600 possibilities curve for an economy that produces these
c. 400 500 two goods is
d. 300 400 a. bowed out and downward-sloping.
e. 0 0 b. straight and downward-sloping.
c. bowed in and downward-sloping.
Refer to the following information for Questions 9–10. d. horizontal.
In the ancient country of Roma, only two goods — spaghetti e. vertical.
and meatballs — are produced. There are two tribes in 14. Suppose that in a day Nobu can make three placemats
Roma, the Tivoli and the Frivoli. By themselves, in a given or one gallon of maple syrup, and Pauline can make two
month, the Tivoli can produce 30 pounds of spaghetti and placemats or two gallons of maple syrup. Which of the
no meatballs, 50 pounds of meatballs and no spaghetti, or following terms of trade would be mutually beneficial
any combination in between. In the same month, the Frivoli for Nobu and Pauline?
can produce 40 pounds of spaghetti and no meatballs, 30 a. Nobu trades one placemat for ⁄2 gallon of maple
1
pounds of meatballs and no spaghetti, or any combination syrup from Pauline.
in between. b. Pauline trades one placemat for ⁄2 gallon of maple
1
9. Which tribe has a comparative advantage in meatball syrup from Nobu.
and spaghetti production? c. Nobu trades one placemat for two gallons of maple
Meatballs Spaghetti syrup from Pauline.
a. Tivoli Tivoli d. Pauline trades one placemat for two gallons of
b. Frivoli Frivoli maple syrup from Nobu.
c. Tivoli Frivoli e. Nobu trades one placemat for ¼ gallon of maple
d. Frivoli Tivoli syrup from Pauline.
e. Neither both 15. Economic growth is defined as an increase in
a. the output of an economy.
10. In CE 100, the Frivoli discovered a new technique for b. the employment level in an economy.
making meatballs and doubled the quantity of meatballs c. the spending level in an economy.
they could produce each month. After the discovery of d. the quality of life in an economy.
this new technique in Frivoli only, which tribe had an e. the maximum possible output of an economy.
absolute advantage in meatball production, and which
had a comparative advantage in meatball production? 16. Which of the following changes will most likely result
in an increase in the demand for hamburgers in your
Absolute advantage Comparative advantage
a. Tivoli Tivoli hometown?
b. Frivoli Frivoli a. The price of hot dogs decreases.
c. Tivoli Frivoli b. The price of drinks sold at hamburger restaurants
d. Frivoli Tivoli increases.
e. Frivoli both c. Income in your town decreases and hamburgers are
a normal good.
11. Which of the following is a basic source of economic d. The local newspaper publishes a story on health
growth in the production possibilities model? problems caused by red meat.
a. specialization d. trade-offs e. The number of vegetarians in your town decreases
b. efficiency e. improved technology and the population size remains the same.
c. opportunity cost

Macro • Unit 1 Review 59
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