Question

M. Roth-Spring 2019 BCOR 111 Practice for Quiz 1 I. Multiple Choice "Answer any 4 of the following 5 questions. (2 points each) 1. The water- diamond paradox is an illustration of the basic economic principle of .. a. "Night Watchman" government b. Opportunity cost c. Thinking at the margin 2. PPF's slope downward due to a. Specialization b.Scarcity c. Comparative advantage 3. How would the invention of the cotton gin affect a cloth and food PPF for 1800's U.S.A.? a. It would change the slope b. It would shift uniformly outward c. It would become less bowed (i.e. flatter) 3. If two countries have the same opportunity cost of rice for beans a. There are no gains to trade b. The CPF's will lie inside the PPF's c. The gains from trade will be smaller than otherwise 4. Terms of trade. a. Must evenly divide the gains from trade b. Can be anything, because value is subjective. C. Must lie between traders' opportunity costs Il. In a sentence or two, explain why each of the statements is false. 4 points each) *Choose any 2 of the following 3. 1. 2. 3. A country's wealth mostly depends on natural resources A model should be as complex as possible to be as true to reality as possible There are no gains from trade where one country is better at producing all goods than another

Answer 1

1.Thinking at the margin

2. B. Scarcity

To produce more of one good, the production of second good has to be sacrificed due to scarcity of resources.

3. It would shift uniformly outward.

3.there are no gains to trade.

4.b can be anything because value is subjective

It is a subjective matter of a country.