Question 1

An increase in the production of capital goods

Accepted Answer

A)  must increase the current production of consumer goods. 
B)  must decrease the future production of consumer goods. 
C)  shifts the production possibilities frontier inward in the future. 
D)  shifts the production possibilities frontier outward in the future. 
A)  must increase the current production of consumer goods. 
B)  must decrease the future production of consumer goods. 
C)  shifts the production possibilities frontier inward in the future. 
D)  shifts the production possibilities frontier outward in the future.

Question 2

The production possibilities frontier separates ________.

Accepted Answer

A)  the goods and services that people want from those that they do not want 
B)  the types of goods that can be attained from those that can't be attained 
C)  the quantities of goods and services that can be produced from those that cannot be produced 
D)  the combinations of goods that people value and those that they don't 
A)  the goods and services that people want from those that they do not want 
B)  the types of goods that can be attained from those that can't be attained 
C)  the quantities of goods and services that can be produced from those that cannot be produced 
D)  the combinations of goods that people value and those that they don't

Question 3

-In the above figure, which of the following is TRUE regarding the movements from point A to B and from point C to D? I. The movement from point A to B shows that the economy has chosen to produce 100 more jets.
II) The movement from point C to D shows that the economy has chosen to produce 100 more jets.
III) The movement from point A to B and from point C to D have the same opportunity cost.

Accepted Answer

A)  I and II 
B)  I and III 
C)  II and III 
D)  I, II and III 
A)  I and II 
B)  I and III 
C)  II and III 
D)  I, II and III

Question 4

The principle of decreasing marginal benefit implies that the

Accepted Answer

A)  additional benefit from obtaining one more of a good or service decreases as more is consumed. 
B)  additional benefit from obtaining one more of a good or service increases as more is consumed. 
C)  total benefit from obtaining more of a good or service decreases as more is consumed. 
D)  total benefit from obtaining more of a good or service remains the same as more is consumed. 
A)  additional benefit from obtaining one more of a good or service decreases as more is consumed. 
B)  additional benefit from obtaining one more of a good or service increases as more is consumed. 
C)  total benefit from obtaining more of a good or service decreases as more is consumed. 
D)  total benefit from obtaining more of a good or service remains the same as more is consumed.

Question 5

Marginal cost is the opportunity cost

Accepted Answer

A)  that your activity imposes on someone else. 
B)  that arises from producing one more unit of a good or service. 
C)  of a good or service that exceeds its benefit. 
D)  of a good or service divided by the number of units produced. 
A)  that your activity imposes on someone else. 
B)  that arises from producing one more unit of a good or service. 
C)  of a good or service that exceeds its benefit. 
D)  of a good or service divided by the number of units produced.

Question 6

-Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour.

Accepted Answer

A)  Brenda has an absolute advantage in the production of X and Y. 
B)  Agnes has a comparative advantage in the production of Y. 
C)  Brenda has a comparative advantage in the production of X. 
D)  Brenda cannot gain from trade. 
A)  Brenda has an absolute advantage in the production of X and Y. 
B)  Agnes has a comparative advantage in the production of Y. 
C)  Brenda has a comparative advantage in the production of X. 
D)  Brenda cannot gain from trade.

Question 7

Marginal cost

Accepted Answer

A)  increases as more is produced. 
B)  remains constant as more is produced. 
C)  decreases as more is produced. 
D)  decreases as marginal benefits decrease. 
A)  increases as more is produced. 
B)  remains constant as more is produced. 
C)  decreases as more is produced. 
D)  decreases as marginal benefits decrease.

Question 8

What is comparative advantage? Give an example.

Accepted Answer

Comparative advantage is the ability of

Question 9

When producing at a production efficient point, ________.

Accepted Answer

A)  our choice of the goods can be either on or within the production possibilities frontier 
B)  we can satisfy our all wants 
C)  the opportunity cost of another good is zero 
D)  we face a tradeoff and incur an opportunity cost 
A)  our choice of the goods can be either on or within the production possibilities frontier 
B)  we can satisfy our all wants 
C)  the opportunity cost of another good is zero 
D)  we face a tradeoff and incur an opportunity cost

Question 10

When a nation is producing the allocatively efficient quantity of a product, the marginal benefit of producing the good equals the marginal cost of producing that good.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is TRUE regarding marginal benefit? I. The marginal benefit curve shows the benefit firms receive by producing another unit of a good.
II) Marginal benefit increases as more of a good is consumed.

Accepted Answer

A)  I and II 
B)  I only 
C)  II only 
D)  neither I nor II 
A)  I and II 
B)  I only 
C)  II only 
D)  neither I nor II

Question 12

As long as technology increases, economic growth is free.

Accepted Answer

A) True 
 B)False

Question 13

-The term "market" refers to

Accepted Answer

A)  physical structures only. 
B)  locations where buyers and sellers physically meet. 
C)  any arrangement that enables buyers and sellers to get information and trade with one another. 
D)  trading arrangements that have been approved by the government. 
A)  physical structures only. 
B)  locations where buyers and sellers physically meet. 
C)  any arrangement that enables buyers and sellers to get information and trade with one another. 
D)  trading arrangements that have been approved by the government.

Question 14

-The figure above shows a nation's production possibilities frontier for apples and oranges.
a) What combination of goods is represented by point A?
b) What combination of goods is represented by point B?
c) Which point represents an unattainable combination of goods?

Accepted Answer

a) 3 million bushels of apples

Question 15

If a society is operating at a point inside its production possibilities frontier, then this society's

Accepted Answer

A)  resources are being inefficiently utilized. 
B)  production possibilities frontier will shift rightward. 
C)  resources are being used in the most efficient manner. 
D)  economy will grow too fast. 
A)  resources are being inefficiently utilized. 
B)  production possibilities frontier will shift rightward. 
C)  resources are being used in the most efficient manner. 
D)  economy will grow too fast.

Question 16

A society that is producing on its production possibilities frontier is

Accepted Answer

A)  not utilizing all of its resources. 
B)  not being technologically efficient. 
C)  producing too much output. 
D)  fully utilizing all of its productive resources. 
A)  not utilizing all of its resources. 
B)  not being technologically efficient. 
C)  producing too much output. 
D)  fully utilizing all of its productive resources.

Question 17

-Sarah and her boyfriend Mike want to save some money to pay for their wedding. So they decided to help people in the neighborhood by cleaning their garages and mowing lawns. Sarah takes 60 minutes to clean a garage and 80 minutes to mow a lawn. Mike takes 80 minutes to clean a garage and 80 minutes to mow a lawn. Sarah and Mike devote 10 hours per week each to these activities and get paid $25 for each garage they clean and $25 for each lawn they mow. Sarah says to Mike: "I have an absolute advantage in cleaning and we are equally productive in mowing. Therefore I should do both cleaning and mowing but you should only mow lawns." Mike disagrees. He thinks Sarah should specialize in cleaning garages and he should specialize in mowing lawns. Help Sarah and Mike to resolve their dispute.
a) Who has an absolute advantage in cleaning garages? In mowing lawns? Explain.
b) Draw Sarah's and Mike's production possibilities frontiers. What are each individual's opportunity costs?
c) Who has a comparative advantage in cleaning garages? In mowing lawns? Explain.
d) Is Sarah right when she says that she should do both cleaning and mowing while Mike should only mow lawns? Or may be Mike is right when he suggests that Sarah specializes in cleaning and he specializes in mowing? Illustrate and substantiate your answer with a numerical example.

Accepted Answer

a) Sarah has an absolute advantage in cl

Question 18

Country A Country B  
-In the table above, country A is producing 4 units of X and 8 units of Y and country B is producing 4 units of X and 6 units of Y. Regarding the production of good X,

Accepted Answer

A)  country A has an absolute advantage. 
B)  country B has an absolute advantage. 
C)  country A has a comparative advantage. 
D)  country B has a comparative advantage. 
A)  country A has an absolute advantage. 
B)  country B has an absolute advantage. 
C)  country A has a comparative advantage. 
D)  country B has a comparative advantage.

Question 19

-In the above figure, at point a what is the opportunity cost of producing one more audio tape?

Accepted Answer

A)  1 video tape per audio tape 
B)  2 video tapes per audio tape 
C)  14 video tapes per audio tape 
D)  There is no opportunity cost. 
A)  1 video tape per audio tape 
B)  2 video tapes per audio tape 
C)  14 video tapes per audio tape 
D)  There is no opportunity cost.

Question 20

A computer software program is most strongly an example of

Accepted Answer

A)  real property. 
B)  fiat property. 
C)  intellectual property. 
D)  vicarious property. 
A)  real property. 
B)  fiat property. 
C)  intellectual property. 
D)  vicarious property.

Exam 2: The Economic Problem

An increase in the production of capital goods

The production possibilities frontier separates ________.

The principle of decreasing marginal benefit implies that the

Marginal cost is the opportunity cost

-Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour.

Marginal cost

What is comparative advantage? Give an example.

When producing at a production efficient point, ________.

When a nation is producing the allocatively efficient quantity of a product, the marginal benefit of producing the good equals the marginal cost of producing that good.

Which of the following is TRUE regarding marginal benefit? I. The marginal benefit curve shows the benefit firms receive by producing another unit of a good. II) Marginal benefit increases as more of a good is consumed.

As long as technology increases, economic growth is free.

-The term "market" refers to

-The figure above shows a nation's production possibilities frontier for apples and oranges. a) What combination of goods is represented by point A? b) What combination of goods is represented by point B? c) Which point represents an unattainable combination of goods?

If a society is operating at a point inside its production possibilities frontier, then this society's

A society that is producing on its production possibilities frontier is

Country A Country B -In the table above, country A is producing 4 units of X and 8 units of Y and country B is producing 4 units of X and 6 units of Y. Regarding the production of good X,

-In the above figure, at point a what is the opportunity cost of producing one more audio tape?

A computer software program is most strongly an example of

What Is Economics

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters