Economics Weekly Quizes Answer Key

ECONOMICS WEEKLY QUIZES Week 1 Marginal thinking is best demonstrated by: choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. Also called the opportunity set—a diagram which shows what choices are possible— which of the following is the model that economists use to illustrate the process of individual choice in a situation of scarcity? budget constraint Most real-world choices aren't about getting all of one thing or another; instead, most choices involve _________________, which includes comparing the benefits and costs of choosing a little more or a little less of a good. marginal analysis Forgetting about the money that's irretrievably gone and instead focusing on the marginal costs and benefits of future options, is the lesson of which of the following? sunk costs Scarcity implies that: it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. Which of the following best describes macroeconomics? It is concerned with the expansion and contraction of the overall economy. In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: buyers and sellers. Which of the following are not typically considered macroeconomic topics? the profit-maximizing decisions of an individual manufacturer. In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers? the macroeconomy What is the basic difference between macroeconomics and microeconomics? Microeconomics is concerned with the trees (individual markets) while macroeconomics is concerned with the forest (aggregate markets). ECONOMICS WEEKLY QUIZES Week-2 Question 1 In economics, the demand for a good refers to the amount of the good that people: Selected Answer: Answers: will buy at various prices. would like to have if the good were free. will buy at various prices. need to achieve a minimum standard of living. will buy at alternative income levels. Question 2 When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________. Selected Answer: quantity supplied Answers: demand schedule market price quantity supplied demand curve Question 3 What is the term economists use to refer to the relationship that a higher price leads to a lower quantity demanded? Selected Answer: Answers: law of demand income gap market equilibrium ECONOMICS WEEKLY QUIZES law of demand price model Question 4 The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price. Selected Answer: equilibrium quantity Answers: quantity produced equilibrium quantity demand schedule supply schedule Question 5 If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase. Selected Answer: lower costs of production Answers: higher demand lower costs of production equilibrium a shift in demand Question 6 If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. What is this known ECONOMICS WEEKLY QUIZES as? Selected Answer: excess demand Answers: excess supply excess demand ceteris paribus a price ceiling Question 7 A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________, shown on the horizontal axis. Selected Answer: quantity Answers: demand quantity quantity supplied quantity demanded Question 8 What is enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling? Selected Answer: Price floors ECONOMICS WEEKLY QUIZES Answers: Rent controls Price ceilings Price floors Subsidies Questi 9 on The nature of demand indicates that as the price of a good increases: Selected Answer: Answers: buyers desire to purchase less of it. suppliers wish to sell less of it. more of it is produced. more of it is desired. buyers desire to purchase less of it. Question 10 What is the term for the total number of units that are purchased at that price? Selected Answer: quantity demanded Answers: quantity quantity demanded Week 3 Quiz Question 1 "Constant returns to scale" describes a situation where: Selected Answer: expanding all inputs does not change the average cost of production. Answers: expanding all inputs does not change the average cost of ECONOMICS WEEKLY QUIZES production. a larger-scale firm can produce at a lower cost than a smaller-scale firm. expanding all inputs changes the average cost of production. the quantity of output rises and the average cost of production falls. Question 2 Which of the following are all of the costs of production that increase with the quantity produced? Selected Answer: Answers: Variable costs Fixed costs Variable costs Average costs Average variable costs Question 3 Which term describes a situation where the quantity of output rises, but the average cost of production falls? Selected Answer: economies of scale Answers: diminishing marginal returns marginal cost output economies of scale ECONOMICS WEEKLY QUIZES diseconomies of scale Question 4 In order to determine the average variable cost, the firm's variable costs are divided by _______________________. Selected Answer: the quantity of output Answers: its fixed costs the quantity of output its average costs diminishing marginal costs Question 5 In microeconomics, which of the following is synonymous with economies of scale? Selected Answer: increasing returns to scale Answers: diminishing marginal returns increasing returns to scale decreasing returns to scale constant returns to scale Question 6 If a perfectly competitive firm is a price taker, then which of the following is true? ECONOMICS WEEKLY QUIZES Selected Answer: Pressure from competing firms will force acceptance of the prevailing market price. Answers: Pressure from competing firms will force acceptance of the prevailing market price. The firm must be a relatively small player compared to its competitors in the overall market. The firm can increase or decrease its output without affecting the overall quantity supplied in the market. Quality differences will be very perceptible and will play a major role in purchasers' decisions. Question 7 Why are some producers forced to sell their products at the prevailing market price? Selected Answer: They have a high degree of similarity to competitorsí products. Answers: Price takers find market analysis to be too costly. They are very small players in the overall market. They have a high degree of similarity to competitorsí products. They can increase output without affecting quality. Question 8 In the ________, the perfectly competitive firm will react to profits by __________________________. Selected Answer: Answers: long run; increasing its production short run; increasing the quality of products ECONOMICS WEEKLY QUIZES long run; tailoring their quality controls short run; reducing its labor inputs long run; increasing its production Question 9 In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________. Selected Answer: Answers: short run; losses are smallest long run; production increases short run; fixed costs can be reduced short run; losses are smallest long run; fixed costs can be eliminated Question 10 Idaho farmers can sell as large a quantity of their potato crop as they wish, if which of the following is true? Selected Answer: Answers: Each farmer willingly accepts the prevailing market price. They set their own price in the short run, but in the long run, the market sets the price. Each farmer willingly accepts the prevailing market price. They set their own price in the long run, but in the short run, the market sets the price. Quality is perceptible and determines the market price. Week 4 Quiz ECONOMICS WEEKLY QUIZES  Question 1 If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, what will the result be? Selected Answer: abnormally high sustained profits Answers: elimination of barriers to entry irregularly high unsustainable profits government deregulation abnormally high sustained profits  Question 2 Which of the following is most likely to be a monopoly? Selected Answer: local electricity distributor Answers: local fast-food restaurant local electricity distributor local bathroom fixtures shop local television broadcaster  Question 3 Which of the following will be least concerning to a firm that has a monopoly over a particular industry? Selected the competitive actions of other business ECONOMICS WEEKLY QUIZES Answer: firms Answers: whether consumers will purchase its product whether consumers will spend on different products the competitive actions of other business firms barriers to entry and competitors' patent protection  Question 4 For a pure monopoly to exist, which statement must be true? Selected Answer: There is a single seller in a particular industry. Answers: There is a single seller in a particular industry. There is only one seller and therefore no industry. There are a few sellers in a given industry. There are limited sellers in a particular industry.  Question 5 ECONOMICS WEEKLY QUIZES In a monopolistic competitive industry, firms can try to differentiate their products by Selected Answer: Answers: all of the above creating optimal perceptions of the product. choosing optimal locations from which the product is sold. enhancing the intangible aspects of the product. all of the above  Question 6 Shopping malls typically lease retail space to many clothing stores. When these retailers compete to sell similar but not completely identical products, they engage in which of the following? Selected Answer: monopolistic competition Answers: a cartel collusion monopolistic competition perfect competition  Question 7 If a monopoly or a monopolistic competitor raises their prices, then: Selected Answer: the decline in quantity demanded will be larger for the monopolistic competitor. Answers: the decline in quantity demanded will be larger for the monopoly. ECONOMICS WEEKLY QUIZES the decline in quantity demanded will be larger for the monopolistic competitor. the quantity demanded for the monopoly product falls to zero. the quantity demanded for the monopolistic competitor falls to zero.  Question 8 Which of the following poses a difficult challenge for U.S. competition policy? Selected Answer: Answers: natural monopoly monopoly monopolistic competition perfect competition natural monopoly  Question 9 The fundamental belief behind the market-oriented US economy is that firms are in the best position to know if their actions will Selected Answer: the right answer is both b and c. Answers: contravene antitrust regulations. lead to attracting more customers. let them produce more efficiently. the right answer is both b and c. ECONOMICS WEEKLY QUIZES  Question 10 What role does the U.S. government play with respect to market competition? Selected Answer: policing anticompetitive behavior and prohibiting contracts that restrict competition Answers: policing anticompetitive behavior and prohibiting contracts that restrict competition preserving competition by regulating price and/or quantity of output intervening in the price and output decision of businesses maintaining abundant government-owned firms to ensure consumer friendly pricing Week 5 Quiz  Question 1 Many economists believe that the trend toward greater wage inequality across the U.S. economy was primarily caused by _____________. Selected Answer: Answers: new technologies the recession new technologies the rise of global markets inflation  Question 2 ECONOMICS WEEKLY QUIZES In contrast to goods and services markets, _____________ are rare in labor markets, because rules that prevent people from earning income are not politically popular. Selected Answer: price ceilings Answers: minimum wages price floors price ceilings living wage laws  Question 3 The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied. Selected Answer: price Answers: price deman d supply quantit y  Question 4 ECONOMICS WEEKLY QUIZES How do apple growers react to the news of medical research findings that suggest that eating apples leads to greater health benefits than were previously known? Selected Answer: They increase the quantity of apples supplied. Answers: They increase the supply of apples. They increase the quantity of apples supplied. They decrease the supply of apples. They decrease the quantity of apples supplied.  Question 5 Improvements in the productivity of labor will tend to: Selected Answer: Answers: increase wages. decrease wages. decrease the supply of labor. increase wages. increase the supply of labor.  Question 6 Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine: Selected Answer: Answers: both the equilibrium price and quantity will rise. the equilibrium price will fall and the equilibrium quantity will ECONOMICS WEEKLY QUIZES fall. both the equilibrium price and quantity will rise. the equilibrium price will rise and the equilibrium quantity will decrease. the equilibrium price will rise, while the change to equilibrium quantity is indeterminate.  Question 7 Whenever there is a shortage at a particular price, the quantity sold at that price will equal: Selected Answer: the quantity supplied at that price. Answers: the quantity demanded at that price. the quantity supplied minus the quantity demanded. the quantity supplied at that price. (quantity demanded plus quantity supplied)/2.  Question 8 A straightforward example of a _______________, often used for simplicity, is the interest rate. Selected Answer: Answers: rate of return price ceiling financial investment rate of return ECONOMICS WEEKLY QUIZES price floor  Question 9 Since Baltimore passed the first _______________ in 1994, several dozen cities enacted similar laws in the late 1990s and into the 2000s. Selected Answer: living wage law Answers: living wage law price ceiling price floor minimum wage  Question 10 Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge. Selected Answer: Answers: usury laws price ceiling laws usury laws price floor laws minimum interest rate  Question 1 Which of the following does GDP not directly include? Selected The value of intermediate goods sold during a period ECONOMICS WEEKLY QUIZES Answer: Answers: The value of goods produced domestically and sold abroad The value of intermediate goods sold during a period The value of services rendered during a period The value of final goods and services produced, but not sold, during a period  Question 2 Which of the following is included in Investment (I)? Selected Answer: the amount spent on new factories and machinery Answers: the amount spent on new factories and machinery the amount spent on stocks and bonds the amount spent on consumer goods that last more than a year the amount spent on purchases of art  Question 3 For most high-income countries of the world, GDP _________________ over time. Selected Answer: has risen gradually Answers: has proven to be stable has risen ECONOMICS WEEKLY QUIZES gradually has declined slightly has sharply risen  Question 4 Consumption is the purchase of goods and services by: Selected Answer: household s. Answers: household s. government. business firms. foreign buyers.  Question 5 Which of the following statements is true? Selected Answer: The expansions and contractions of real-world business cycles last varying lengths of time and often differ in magnitude. Answers: A depression is a mild and relatively brief recession. The expansions and contractions of real-world business cycles last varying lengths of time and often differ in magnitude. The timing of business fluctuations is regular and therefore easily predictable. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low. ECONOMICS WEEKLY QUIZES  Question 6 Which of the following is included in GDP calculations? Selected Answer: Answers: the university tuition paid to enroll in a course sales revenue received from a garage sale cash income received by a self-employed landscaper that is not reported to the IRS a $100 bill received on your graduation the university tuition paid to enroll in a course  Question 7 Which is now the largest single component of the supply side of GDP, representing over half of GDP? Selected Answer: Answers: Services Durable goods Services Nondurable goods Structures  Question 8 Which of the following is included in the calculated Gross Domestic Product? Selected Answer: A local ice cream shop sells $17,000 worth of cones and sundaes on July 1. Answers: Farmer Charlie sells his second tractor to his son. Nancy buys a love seat and chair for $85 at the yard sale on the corner. ECONOMICS WEEKLY QUIZES A local ice cream shop sells $17,000 worth of cones and sundaes on July 1. Mr. King buys a used snow blower from his neighbor, Mrs. Queen.  Question 9 Which is the best description GDP? Selected Answer: Answers: the value of all final goods and services produced domestically the sum of all currency and coins in circulation the value of all final goods and services produced by a government the value of all final goods and services produced anywhere in the world by a nation's firms the value of all final goods and services produced domestically  Question 10 On the demand side of GDP, consumption by _____________ is the largest component of GDP, accounting for about two-thirds of the GDP in any year. Selected Answer: househol ds Answers: services businesses househol ds What is a pricing mechanisms? ECONOMICS WEEKLY QUIZES Selected Answer: B. Pricing mechanisms spell out the cost for a specific kind of pollution in a specific area at a specific time. Correct! Pricing mechanisms spell out the cost for a specific kind of pollution in a specific area at a specific time.  Question 1 The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________. Selected Answer: Answers: business cycle natural rate of unemployment business cycle supply curve labor supply  Question 2 A college student who is enrolled in school full time and not seeking employment is considered: Selected Answer: out of the labor force. Answers: out of the labor force. unemployable, and not counted in official statistics. employed in leisure. ECONOMICS WEEKLY QUIZES underemployed.  Question 3 The type of unemployment that occurs because of a recession is called: Selected Answer: cyclical unemployment. Answers: cyclical unemployment. the natural rate of unemployment. seasonal unemployment. frictional unemployment.  Question 4 The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied. Selected Answer: Answers: equilibrium wage efficiency wage equilibrium wage sticky wage natural rate of unemployment  Question 5 Frictional unemployment occurs when: Selected Answer: a worker decides to quit one job to seek a different job. ECONOMICS WEEKLY QUIZES Answers: there is friction between an employer and employee. a worker decides to quit one job to seek a different job. a large corporation transfers a worker to another city. college students go back to school at the end of the summer.  Question 6 The situation where the buying power of money in terms of goods and services increases is called: Selected Answer: deflation. Answers: deflation. inflation. stationary pricing. hyperinflation.  Question 7 What name is given to the index based on the prices of exported or imported merchandise? Selected Answer: International Price Index Answers: U.S. Producer Trade Index International Trade Index ECONOMICS WEEKLY QUIZES International Price Index U.S. Producer Price Index  Question 8 Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods? Selected Answer: Producer Price Index Answers: Producer Price Index Consumer Price Index Employment Cost Index Processing Price Index  Question 9 The most commonly cited measure of inflation in the United States is: Selected Answer: the Consumer Price Index (CPI). Answers: the Consumer Price Index (CPI). the Deflationary Price Index (DPI) the Cumulative Price Index (CPI) the Inflationary Price Index ECONOMICS WEEKLY QUIZES (IPI)  Question 10 The effects of inflation are seen in: Selected Answer: goods, services, wages, and income levels Answers: goods and services only wages and income levels only services and wages only goods, services, wages, and income levels  Question 1 During a recession, if a government uses an expansionary fiscal policy to increase GDP, the: Selected Answer: aggregate supply curve will shift to the left. Answers: aggregate supply curve will shift to the right. aggregate supply curve will shift to the left. aggregate demand curve will shift to the left. aggregate demand curve will shift to the right.  Question 2 _____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation. ECONOMICS WEEKLY QUIZES Selected Answer: Answers: Automatic stabilizers Standardized employment budgets Discretionary fiscal policies Automatic stabilizers Budget expenditures  Question 3 A(n) __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes. Selected Answer: progressive tax Answers: proportional tax regressive tax progressive tax excise tax  Question 4 When inflation begins to climb to unacceptable levels in the economy, the government should: Selected use contractionary fiscal policy to shift aggregate demand ECONOMICS WEEKLY QUIZES Answer: to the left. Answers: use contractionary fiscal policy to shift aggregate demand to the right. use contractionary fiscal policy to shift aggregate demand to the left. use expansionary fiscal policy to shift aggregate demand to the right. use expansionary fiscal policy to shift aggregate demand to the left.  Question 5 A(n) ________________________________ is calculated as a flat percentage of income earned, regardless of level of income. Selected Answer: proportional tax Answers: progressive tax regressive tax proportional tax estate and gift tax  Question 6 When governments are borrowers in financial capital markets, which of the following is least likely to be a possible source of the funds from a ECONOMICS WEEKLY QUIZES macroeconomic point of view? Selected Answer: central bank prints more money Answers: central bank prints more money increase in household savings decrease in borrowing by private firms foreign financial investors  Question 7 From a macroeconomic point of view, which of the following is a source of demand for financial capital? Selected Answer: government borrowing Answers: savings by households and firms foreign financial investment domestic household private savings government borrowing  Question 8 A __________________ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy. Selected Answer: trade surplus Answers: trade ECONOMICS WEEKLY QUIZES surplus trade deficit fiscal deficit twin surplus  Question 9 When the interest rate in an economy decreases, it is most likely as a result of: Selected Answer: an increase in the government budget surplus or a decrease in its budget deficit. Answers: an increase in the government budget surplus or its budget deficit. a decrease in the government budget surplus or its budget deficit. an increase in the government budget surplus or a decrease in its budget deficit. a decrease in the government budget surplus or an increase in its budget deficit.  Question 10 A reduction in government borrowing can: Selected Answer: give private investment an opportunity to expand. Answers: decrease the incentive to invest. increase the interest rate. crowd out private investment in human ECONOMICS WEEKLY QUIZES capital. give private investment an opportunity to expand.  Question 1 A(n) ________________________________ is calculated as a flat percentage of income earned, regardless of level of income. Selected Answer: proportional tax Answers: progressive tax regressive tax proportional tax estate and gift tax  Question 2 When the share of individual income tax collected by the government from people with higher incomes is smaller than the share of tax collected from people with lower incomes, then the tax is ____________________. Selected Answer: regressi ve Answers: optional proportion al ECONOMICS WEEKLY QUIZES progressiv e regressi ve  Question 3 When inflation begins to climb to unacceptable levels in the economy, the government should: Selected Answer: use contractionary fiscal policy to shift aggregate demand to the right. Answers: use contractionary fiscal policy to shift aggregate demand to the right. use contractionary fiscal policy to shift aggregate demand to the left. use expansionary fiscal policy to shift aggregate demand to the right. use expansionary fiscal policy to shift aggregate demand to the left.  Question 4 A(n) __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes. Selected Answer: progressive tax Answers: proportional tax regressive ECONOMICS WEEKLY QUIZES tax progressive tax excise tax  Question 5 During a recession, if a government uses an expansionary fiscal policy to increase GDP, the: Selected Answer: aggregate demand curve will shift to the right. Answers: aggregate supply curve will shift to the right. aggregate supply curve will shift to the left. aggregate demand curve will shift to the left. aggregate demand curve will shift to the right.  Question 6 A ____________________________ is one economic mechanism by which government borrowing can crowd out private investment. Selected Answer: higher interest rate Answers: deficit decrease smaller trade surplus ECONOMICS WEEKLY QUIZES larger trade surplus higher interest rate  Question 7 A reduction in government borrowing can: Selected Answer: give private investment an opportunity to expand. Answers: decrease the incentive to invest. increase the interest rate. crowd out private investment in human capital. give private investment an opportunity to expand.  Question 8 When governments are borrowers in financial capital markets, which of the following is least likely to be a possible source of the funds from a macroeconomic point of view? Selected Answer: central bank prints more money Answers: central bank prints more money increase in household savings decrease in borrowing by private firms foreign financial investors  Question 9 ECONOMICS WEEKLY QUIZES From a macroeconomic point of view, which of the following is a source of demand for financial capital? Selected Answer: government borrowing Answers: savings by households and firms foreign financial investment domestic household private savings government borrowing  Question 10 A __________________ often results in an outflow of financial capital leaving the domestic economy and being invested in the global economy. Selected Answer: trade surplus Answers: trade surplus trade deficit fiscal deficit twin surplus  Question 1 A Central Bank that wants to increase the quantity of money in the ECONOMICS WEEKLY QUIZES economy will: Selected Answer: buy bonds in open market operations. Answers: raise the discount rate. sell bonds in open market operations. reverse quantitative easing. buy bonds in open market operations.  Question 2 Which of the following events would cause interest rates to increase? Selected Answer: Answers: a higher discount rate lower tax rates a higher discount rate lower reserve requirements an open market operation to buy bonds  Question 3 When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following: ECONOMICS WEEKLY QUIZES Selected Answer: a contractionary monetary policy. Answers: a loose monetary policy. a contractionary monetary policy. an expansionary monetary policy. a quantitative easing policy.  Question 4 Regardless of the outcome in the long run, ______________________ always has the effect of stimulating the economy in the short run. Selected Answer: expansionary monetary policy Answers: expansionary monetary policy contractionary monetary policy reverse quantitative easing policy tight monetary policy  Question 5 Which of the following is considered to be a relatively weak tool of monetary policy? Selected Answer: altering the discount rate ECONOMICS WEEKLY QUIZES Answers: quantitative easing altering the discount rate reserve requirements reducing the money supply  Question 6 Which of the following institutions oversees the safety and stability of the U.S. banking system? Selected Answer: Answers: The Federal Reserve Office of the Comptroller of the Currency Federal Financial Institutions Examination Council Federal Open Market Committee The Federal Reserve  Question 7 Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the Central Bank? Selected Answer: reserve requirements Answers: discount requirements deposit ECONOMICS WEEKLY QUIZES requirements reserve requirements monetary requirements  Question 8 Which of the following is a traditional tool used by the Fed during recessions? Selected Answer: open market operations Answers: quantitative easing higher interest rates open market operations coins and paper currency  Question 9 Which of the following institutions determines the quantity of money in the economy as its most important task? Selected Answer: Answers: Central Bank U.S. Department of the Treasury Federal Open Market Committee Central Bank ECONOMICS WEEKLY QUIZES Federal Reserve Board of Governors  Question 10 When the Central Bank decides it will sell bonds using open market operations: Selected Answer: the money supply decreases. Answers: interest rates decrease. the money supply increases. the money supply decreases. the money supply is unaffected.  Question 1 Which term describes circumstances where a country's exports exceed its imports? Selected Answer: trade surplus Answers: trade deficit trade imbalance trade surplus ECONOMICS WEEKLY QUIZES trade balance  Question 2 If exports ______________, then the economy is said to have a trade surplus. Selected Answer: exceed imports Answers: equal imports exceed imports precede imports follow imports  Question 3 Trade surpluses and trade deficits can be __________________ for an economy in certain circumstances. Selected Answer: either a or b Answers: beneficial harmful either a or b neither a or b  Question 4 If exports and imports: Selected are equal, then trade is balanced. ECONOMICS WEEKLY QUIZES Answer: Answers: are imbalanced, then a trade surplus exists. are imbalanced, then a trade deficit exits. are equal, then trade is balanced. are equal, then the economy is unhealthy.  Question 5 If imports ______________, then the economy is said to have a trade deficit. Selected Answer: exceed exports Answers: precede exports follow exports equal exports exceed exports  Question 6 The idea behind comparative advantage reflects the possibility that one party: Selected Answer: may be able to produce something at a lower opportunity cost than another party. Answers: may be able to produce everything relatively more efficiently than another party. may be able to produce something at a lower opportunity cost than another party. ECONOMICS WEEKLY QUIZES may be able to produce something at a lower dollar cost than another party. with an absolute advantage in producing two different may export goods both of those goods to the other party.  Question 7 Colombia produces coffee with less labor and land than any other country; it therefore necessarily has: Selected Answer: an absolute advantage in coffee production. Answers: a comparative advantage in coffee production. both a comparative and absolute advantage in coffee production. an absolute advantage and comparative disadvantage in coffee production. an absolute advantage in coffee production.  Question 8 According to international trade theory, a country should: Selected Answer: import goods in which it has a comparative disadvantage. Answers: import goods in which it has an absolute advantage. import goods in which it has a comparative disadvantage. ECONOMICS WEEKLY QUIZES export goods in which it has an absolute advantage. import goods in which it has an absolute disadvantage.  Question 9 The idea behind comparative advantage reflects the possibility that one party: Selected Answer: may be able to produce something at a lower opportunity cost than another party. Answers: may be able to produce everything relatively more efficiently than another party. may be able to produce something at a lower dollar cost than another party. with an absolute advantage in producing two different may export goods both of those goods to the other party. may be able to produce something at a lower opportunity cost than another party.  Question 10 Which of the following is true? Selected Answer: A nation cannot have a comparative advantage in the production of every good. Answers: A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. A nation can have a comparative advantage in the production of every good, but not an absolute advantage. A nation cannot have an absolute advantage in the production of every good. A nation cannot have a comparative advantage in the production of every good.