AnswersMO-EconomicsComparative and Absolute Advantage

Comparative and Absolute Advantage — Unit test Answers

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1
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Why is pure competition considered an unsustainable system?

A
Price differentiation is often too minimal to matter.
B
Few barriers exist to entry, meaning that the market inevitably floods.
C
Consumers cannot distinguish between products.
D
Producers cannot make a profit if they keep dropping their prices.
2
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A
elasticity
B
quality
C
time
D
quantity
3

This table shows the production possibility schedule for several major manufacturing companies in the automobile industry. Manufacturing CompanyTruck Parts Car PartsCompany A10 per hr.20 per hr.Company B10 per hr.25 per hr.Company C15 per hr.15 per hr.Company D20 per hr.25 per hr. Which manufacturing company has the comparative advantage for car parts?

A
Company A
B
Company B
C
Company C
D
Company D
4

A clothing store has ordered a new supply of jeans for the fall season and wants to sell off the remaining items from the previous spring. What action would the store owner most likely take?

A
The store owner would most likely raise the price of the spring jeans to encourage producers.
B
The store owner would most likely lower the price of the spring jeans to encourage producers.
C
The store owner would most likely raise the price of the spring jeans to encourage consumers.
D
The store owner would most likely lower the price of the spring jeans to encourage consumers.
5

The chart shows the marginal cost and marginal revenue of producing apple pies.What most likely will happen if the pie maker bakes a seventh pie?

Question illustration
A
The marginal cost will most likely decrease to $1.00
B
The marginal cost will most likely increase to $2.00
C
The marginal revenue will most likely decrease to $8.00.
D
The marginal revenue will most likely increase to $12.00.
6

What does elasticity measure in economics?

A
how the amount of a good changes when the producer hires more employees
B
how the amount of a good changes when the producer uses new materials
C
how the amount of a good changes when its price goes up or down
D
how the amount of a good changes when its distribution expands
7

Motherboards, Inc., manufactures computer parts. The company’s total revenue is

A
the money the company earns after paying all of its production costs.
B
the total wages the company pays workers in its factories and stores.
C
the amount of money the company earns from selling an individual part.
D
the amount the company receives from the sale of all of its computer parts.
8

In which way do producers try to differentiate themselves in monopolistic competition?

A
price
B
advertising
C
product features
D
image
9

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A
increases
B
decreases
C
stays the same
10

Which is likely to occur if there is a price increase for a good which exhibits elastic demand?

A
People might buy a more expensive substitute good.
B
People might buy a less expensive complementary good.
C
People might buy a less expensive substitute good.
D
People might buy a more expensive complementary good.
11

A chart that shows the connection between consumer demand and price is a

A
market schedule.
B
market curve.
C
demand curve.
D
demand schedule.
12

A possible result of disequilibrium is

A
excess demand.
B
lower demand.
C
fixed prices.
D
stable availability.
13

Which best describes the relationship between consumers and producers?

A
They usually ignore each other.
B
They interact with each other.
C
They agree on prices.
D
They dislike each other.
14

Why are utilities, such as electricity and water, examples of natural monopolies?

A
The cost of production restricts competition in the market.
B
There are limited natural resources to meet demand.
C
Consumers only trust known companies to provide these essentials.
D
There is no need for alternative options.
15

The chart shows the marginal cost and marginal revenue of producing apple pies. What most likely will happen if the pie maker continues to make additional pies?

Question illustration
A
The marginal costs will continue to rise, increasing the total cost, while the marginal revenue remains the same, decreasing the profit earned for each pie.
B
The marginal costs will continue to fall, decreasing the total cost, while the marginal revenue remains the same, increasing the profit earned for each pie.
C
The marginal costs will continue to rise, increasing the total cost, while the marginal revenue remains the same, increasing the profit earned for each pie.
D
The marginal costs will continue to fall, decreasing the total cost, while the marginal revenue remains the same, decreasing the profit earned for each pie.

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