1. Economists generally believe that a country should specialize in the production of a good or service if:

a. the production possibility frontier is larger than that of any other country.
b. the production possibility frontier is smaller than that of any other country.
c. the country can produce the product using fewer resources than any other country.
d. the country can produce the product while forgoing fewer alternative products than any other county.

2. If Brazil gives up 3 automobiles for each ton of coffee it produces, while Peru gives up 7 automobiles for each ton of coffee it produce:

a. Brazil has a comparative advantage in automobile production and should specialize in coffee.
b. Brazil has a comparative advantage in coffee production and should specialize in the production of automobiles.
c. Brazil has a comparative advantage in coffee production and should specialize in coffee production.
d. Brazil has a comparative advantage in automobile production and should specialize in automobile production.

3. When a nation experiences economic growth:

a. its production possibility frontier shifts outward.

b. its production possibility frontier shifts inward.

c. it has been able to reach full employment.

d. it has moved to a more consumer-oriented position on its production possibility frontier.

4. Which of the following is not a factor of production?
a. labor
b. machines and buildings
c. land
d. money

5. The circular-flow diagram illustrates households __goods and services and ___factors of production.

a. buy; sell
b. buy; buy
c. own; buy
d. own; sell

6. Which of the following is a normative statement?

a. International trade leads to expanded consumption opportunities.
b. Higher expenditures on health care will reduce infant mortality rates.
c. We would all be better off if we could reduce our dependence on oil imports.
d. Increased defense spending will lead to higher budget deficits .