ECO 102
Fall 2013 Semester
Quiz 2
Instructions: Read each question carefully. Select the best answer and record it on the
answer sheet and on this page. Turn in only the answer sheet.
A country produces chickens and eggs, and its currency is called the krone. Eggs are
used up in the production of chickens. In order for the production of eggs to rise, the
egg industry must purchase more chickens. (Assume that a chicken may survive for
several years if it is busy producing eggs. Assume that each chicken produced uses up
one egg.)
In 2012, the industries report the following:
Egg Industry
1000 eggs produced, sold for 1 krone each.
100 new chickens purchased at 5 krone each.
Chicken Industry
300 chickens produced and sold at 5 krone each.
400 eggs purchased (300 were used to make chickens, the extra 100 are added to
inventory).
1.
Based on the information above, the value-added of the chicken industry in
2012 was:
a.
b.
c.
d.
e.
1500 krone.
1100 krone.
1200 krone.
1000 krone.
none of the above.
2.
Based on the information above, the value of output of final goods in the egg
industry in 2012 was:
a.
b.
c.
d.
e.
1000 krone.
700 krone.
100 krone.
300 krone.
600 krone.
3.
The expenditure approach to measuring GDP adds up all the different
categories of purchases of output. These categories are:
a.
b.
c.
d.
e.
Consumption, Investment, Government Expenditure, and Net Exports.
Savings and Investment.
Death and Taxes.
Wages, Rents, Interest, and Profits.
Land, Labor, and Capital.
4.
If a country produces at a point that is inside its production possibilities
frontier, then its production is:
a.
b.
c.
d.
e.
safe.
inefficient.
impossible.
cautious.
unattainable.
5.
The slope of the Production Possibilities Frontier shows how much of one
good A we would have to give up to increase production of good B by one unit. As we
continue to increase production of good B, there is an increase in the amount of good
A we give up to get one unit of B (the opportunity cost rises). This happens because:
(i)
(ii)
(iii)
a.
b.
c.
d.
e.
as production of B rises, we must increase the amount of labor devoted to
producing B. As we transfer more and more labor to B, we transfer labor
that is increasingly skilled at A and less skilled at B.
as production of B rises, we must increase the amount of land and natural
resources used to produce B. We start with the resources best-suited to
produce B, but we increasingly use resources that are better-suited to
producing A as we produce more and more B.
as production of B rises, the amount of tools, buildings, and equipment we
use to help produce B rises. We start with the equipment that is best-suited
to producing B, but eventually must use tools, buildings, and equipment
that is relatively better at producing A.
only (i) is true.
only (ii) is true.
only (iii) is true.
only (i) and (ii) are true.
none of the above.
6.
America has land and farmers that are very good at producing soybeans.
Americans like to drive well-built cars like Toyotas. Japanese are very good at
building Toyotas. Japanese like to put lots of soy sauce (made from soybeans) on their
food. If the least expensive way for Americans to obtain a well-built car is to fill a
ship with soybeans, send it to Japan, and wait for it to come back full of Toyotas –
what is the least expensive way for the Japanese to obtain soy sauce?
a.
Try growing soybeans in the car factory.
b.
Tear down the car factory so the land can be used for soybeans.
c.
Fill a ship with Toyotas, send it to the USA, and wait for it to come back full
of soy sauce.
d.
It depends on whether there is enough land in Japan to grow the amount of
soybeans needed by Japanese.
e.
Send Japanese farmers to the USA to learn their techniques for growing
soybeans.
7. Bonus extra credit question:
The film clip shown by Prof. Bozoki in his lecture, “The Elitist-Populist Pendulum:
Post-Communist Experiences” compared the recent political developments in Eastern
Europe to events in:
a.
b.
c.
d.
e.
Canada.
China.
South Africa.
India.
What film clip?