Q: Which equation represents the Production Possibilities Frontier (PPF) for Saudi Arabia?

$$\ Oil + 4 \times Corn = 100 \ $$

Question 1

Which of the following best describes the opportunity cost for Saudi Arabia of producing 1 barrel of oil, based on the provided production possibilities?

Accepted Answer

Saudi Arabia must give up 0.25 bushels of corn to produce 1 barrel of oil.

Question 2

What is the United States' opportunity cost of producing 1 bushel of corn?

Accepted Answer

The United States must give up 0.5 barrels of oil to produce 1 bushel of corn.

Question 3

Who has the absolute advantage in oil production?

Accepted Answer

Saudi Arabia

Question 4

Who has the comparative advantage in corn production?

Accepted Answer

United States

Question 5

If Saudi Arabia specializes completely in oil and the United States specializes completely in corn, what is the maximum total output for both countries combined?

Accepted Answer

100 barrels of oil and 100 bushels of corn

Question 6

Which equation represents the Production Possibilities Frontier (PPF) for Saudi Arabia?

Accepted Answer

$$\ Oil + 4 	imes Corn = 100 \ $$

Question 7

If the price of oil increases in the world market, what is the likely effect on Saudi Arabia's production according to the concept of opportunity cost?

Accepted Answer

Saudi Arabia will produce more oil and less corn.

Question 8

Which of the following statements is an example of a positive economic analysis?

Accepted Answer

The United States produces 50 barrels of oil using 100 hours.

Question 9

If both countries trade based on their comparative advantages, what is the expected outcome?

Accepted Answer

Both countries will consume beyond their individual PPFs.

Question 10

Which of the following best explains why gains from trade occur between Saudi Arabia and the United States?

Accepted Answer

Each country specializes in the good for which it has a comparative advantage.

Question 11

If the United States decides to produce 25 barrels of oil and 50 bushels of corn, what is the opportunity cost of producing 1 additional barrel of oil?

Accepted Answer

2 bushels of corn

Question 12

Which of the following would cause the United States' PPF to shift outward?

Accepted Answer

An increase in worker productivity

Question 13

If Saudi Arabia and the United States both produce at points inside their PPFs, what does this indicate?

Accepted Answer

They are not using all available resources efficiently.

Question 14

Which formula represents the opportunity cost of producing oil in the United States?

Accepted Answer

$$\ Opportunity\ Cost\ of\ Oil = \frac{100\ bushels\ of\ corn}{50\ barrels\ of\ oil} = 2\ bushels\ of\ corn\ per\ barrel\ $$

Question 15

If the United States and Saudi Arabia both specialize according to their comparative advantage, which good will each country produce?

Accepted Answer

Saudi Arabia will produce oil, United States will produce corn.

Question 16

Which of the following is NOT a reason for the existence of comparative advantage?

Accepted Answer

Equal productivity in all goods

Question 17

If Saudi Arabia produces 50 barrels of oil and 12.5 bushels of corn, what is the equation for its PPF?

Accepted Answer

$$\ Oil + 4 	imes Corn = 100 \ $$

Question 18

Which of the following best describes the gains from trade between Saudi Arabia and the United States?

Accepted Answer

Both countries can consume more than they could produce alone.

Question 19

If the United States increases its worker hours from 100 to 200, what will happen to its PPF?

Accepted Answer

The PPF will shift outward, allowing more oil and corn to be produced.

Macroeconomics Exam 1 Review: Key Concepts and Practice Problems

Study Guide - Practice Questions

Study Guide - Flashcards