Economics 101
Spring 2002
Section 5 – Alley
Quiz #2
1.
James Cook and Fletcher Christian live on an island. The following table represents their output in a day of work.
Cook
Christian
Pineapple
7
5
Beetles
21
20
Which of the following statements is true. a.
Christian has an absolute advantage in both products and a comparative advantage in catching beetles. b.
Cook has an absolute advantage in both products and a comparative advantage in catching beetles. c.
Christian has an absolute advantage in both products and a comparative advantage in picking pineapple. d.
Christian has an absolute disadvantage in both products and a comparative advantage in catching beetles. e.
Cook has a comparative advantage in picking pineapple and a comparative advantage in catching beetles.
2.
For the following supply and demand curves, find the equilibrium price and quantity.
D = 36 – 2P S = 3P – 9 a.
P = 10, Q = 16 b.
P = 9, Q = 18 c.
P = 10, Q = 11 d.
P = 12, Q = 15 e.
P = 9, Q = 10
Consider the diagrams on the following page for questions 3 and 4. In all situations, the initial situation in
S
0 and D
0
.
3.
Consider panel A. Which of the following stories is consistent with the diagram? a.
A rise in income for a normal good. b.
The price of an input used by the firm supplying this good falls. c.
There is a labor strike by the employees of the firm supplying this good. d.
There is a labor strike by the employees of the firm purchasing this good. e.
The price of a substitute good for the consumers of this product rises.
4.
Consider panel B. Which of the following stories is consistent with the diagram? a.
The price of a substitute good for the consumers of this product rises while the technology used for making this product becomes more efficient. b.
The price of a complementary good for the consumers of this product rises while the cost of an input used by the firms producing this product falls. c.
The price of a substitute good for the consumers of this product rises while firms who produce this product expect the price to fall in the near future. d.
The government announces that consuming this product causes an increase in smelly undesirable perspiration while the cost of producing this product rises. e.
The price of a complementary good for the consumers of this product falls while the cost of an input used by the firms producing this product rises.

A
P
B
P
S
0
S
1
S
0
P
0
D
1
D
0
D
0
D
1
Q
0
Q
Use the following data to answer questions 5 and 6.
Cost per unit data
VCR Computer
U.S.
Germany
$200
DM 500
$1200
DM 2,500
5.
What is the opportunity cost of producing one more computer in the United States? a.
$200 b.
6 VCRs c.
1 computer d.
1/6 VCR
e. 6 computers
6.
Which of the following is true? a.
Germany has a comparative advantage in producing computers. b.
The U.S. has an absolute advantage in producing both goods and a comparative advantage in computers. c.
The U. S. has a comparative advantage in both computers and VCRs. d.
The U. S. has a comparative advantage in producing computers. e.
The U. S. has an absolute advantage in producing both goods and a comparative advantage in VCRs.
Use the graph on the following page to answer questions 7, 8, and 9.
7.
Which point is inefficient? a.
A b.
B c.
C d.
D e.
E
Q

8.
When the firm is producing between 0 and 2 shirts, what is the opportunity cost of one more blouse? a.
3 shirts b.
2 shirts c.
1 shirt d.
½ shirt e.
about $3.50
9.
When the firm is producing between 14 and 22 blouses, what is the opportunity cost of one more shirt? a.
1 blouse b.
2 blouses c.
4 blouses d.
½ blouse e.
¼ blouse
26
24
22
20
18
16
14
12
10
8
6
4
2
0
D
A
E
C
B
0 0.5
1 1.5
2 2.5
3 3.5
4 4.5
5 5.5
6 6.5
Shirts
10.
Can two countries that have different opportunity costs benefit from specialization and trade? a.
Yes, as long as each country specializes in the task in which they have an absolute advantage. b.
Yes, as long as each country specializes in the task in which they have a comparative advantage. c.
Yes, but only if one of the two countries does not have an absolute advantage in all goods being produced. d.
No, specialization and trade is bad.

1) d
2) b
3) d
4) e
5) b
6) a
7) d
8) c
9) c
10) b