Question 1

If an economy is producing inside the production possibilities curve,then

Accepted Answer

A) There is full employment of resources. 
B) It is operating efficiently. 
C) It can produce more of one good without giving up some of another good. 
D) There are not enough resources available to produce more output. 
A) There is full employment of resources. 
B) It is operating efficiently. 
C) It can produce more of one good without giving up some of another good. 
D) There are not enough resources available to produce more output.

Question 2

Which of the following events would allow the production possibilities curve to shift outward?

Accepted Answer

A) The economy's capital stock declines. 
B) More teenagers enter the labor force. 
C) Technology is lost. 
D) People begin to retire at earlier ages. 
A) The economy's capital stock declines. 
B) More teenagers enter the labor force. 
C) Technology is lost. 
D) People begin to retire at earlier ages.

Question 3

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S.capacity,ceteris paribus. Table 1.1
Production Possibilities for Bombers
$$\begin{array} { | l | c | c | r | r | } 
\hline \text { Combination } & \begin{array} { c } 
\text { Number of B- } \
1 \text { Bombers }
\end{array} & \begin{array} { c } 
\text { Opportunity cost } \
\text { (Foregone } \
\text { Stealth) }
\end{array} & \begin{array} { c } 
\text { Number of } \
\text { Stealth Bombers }
\end{array} & \begin{array} { c } 
\text { Opportunity cost } \
\text { (Foregone B-1) }
\end{array} \
\hline \mathrm { S} & 0 & \text { NA } & 10 & \
\hline \mathrm { T } & 1 & & 9 & \
\hline \mathrm { U } & 2 & & 7 & \
\hline \mathrm { V } & 3 & & 4 & \text { NA } \
\hline
\end{array}$$ On the basis of Table 1.1,what is the opportunity cost of producing at point S rather than point T?

Accepted Answer

A) 1 Stealth bomber. 
B) 1 B-1 bomber. 
C) 10 Stealth bombers. 
D) 0.9 Stealth bombers. 
A) 1 Stealth bomber. 
B) 1 B-1 bomber. 
C) 10 Stealth bombers. 
D) 0.9 Stealth bombers.

Question 4

Choose the letter of the curve in Figure 1.2 that best represents a production possibilities curve for two goods that obey the law of increasing opportunity costs:

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 5

The invisible hand refers to

Accepted Answer

A) Intervention in the economy by the government bureaucrats we do not see and over whom we have no control. 
B) Undiscovered natural resources. 
C) The allocation of resources by market forces. 
D) The person who has the responsibility to coordinate all the markets in a market economy. 
A) Intervention in the economy by the government bureaucrats we do not see and over whom we have no control. 
B) Undiscovered natural resources. 
C) The allocation of resources by market forces. 
D) The person who has the responsibility to coordinate all the markets in a market economy.

Question 6

The slope of a production possibilities curve is positive.

Accepted Answer

A) True 
 B)False

Question 7

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S.capacity,ceteris paribus. Table 1.1
Production Possibilities for Bombers
$$\begin{array} { | l | c | c | c | c | } 
\hline \text { Combination } & \begin{array} { c } 
\text { Number of B- } \
1 \text { Bombers }
\end{array} & \begin{array} { c } 
\text { Opportunity } \
\text { cost(Foregone } \
\text { Stealth) }
\end{array} & \begin{array} { c } 
\text { Number of } \
\text { Stealth Bombers }
\end{array} & \begin{array} { c } 
\text { Opportunity cost } \
\text { (Foregone B-1) }
\end{array} \
\hline \mathrm { S } & 0 & \text { NA } & 10 & \
\hline \mathrm { T } & 1 & & 9 & \
\hline \mathrm { U } & 2 & & 7 & \
\hline \mathrm { V } & 3 & & 4 & \text { NA } \
\hline
\end{array}$$ The highest opportunity cost in Table 1.1 for B-1 bombers in terms of Stealth bombers is

Accepted Answer

A) 1 Stealth bomber per B-1 bomber. 
B) 3 Stealth bombers per B-1 bomber. 
C) 2 Stealth bombers per B-1 bomber. 
D) 0.5 Stealth bomber per B-1 bomber. 
A) 1 Stealth bomber per B-1 bomber. 
B) 3 Stealth bombers per B-1 bomber. 
C) 2 Stealth bombers per B-1 bomber. 
D) 0.5 Stealth bomber per B-1 bomber.

Question 8

The fact that there are too few resources to satisfy all our wants is attributed to

Accepted Answer

A) Scarcity. 
B) Greed. 
C) Shortages. 
D) Lack of money. 
A) Scarcity. 
B) Greed. 
C) Shortages. 
D) Lack of money.

Question 9

Critics of government regulation argue that government interference in the marketplace stifles the "animal spirits" of entrepreneurship.

Accepted Answer

A) True 
 B)False

Question 10

The Latin phrase ceteris paribus refers to holding other variables constant.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a basic decision that all nations must confront?

Accepted Answer

A) Should we have economic growth? 
B) How should we produce goods and services? 
C) For whom should goods and services be produced? 
D) What goods and services should we produce? 
A) Should we have economic growth? 
B) How should we produce goods and services? 
C) For whom should goods and services be produced? 
D) What goods and services should we produce?

Question 12

Table 1.1 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S.capacity,ceteris paribus. Table 1.1
Production Possibilities for Bombers
$$\begin{array} { | l | c | c | r | r | } 
\hline \text { Combination } & \begin{array} { c } 
\text { Number of B- } \
1 \text { Bombers }
\end{array} & \begin{array} { c } 
\text { Opportunity cost } \
\text { (Foregone } \
\text { Stealth) }
\end{array} & \begin{array} { c } 
\text { Number of } \
\text { Stealth Bombers }
\end{array} & \begin{array} { c } 
\text { Opportunity cost } \
\text { (Foregone B-1) }
\end{array} \
\hline \mathrm { S} & 0 & \text { NA } & 10 & \
\hline \mathrm { T } & 1 & & 9 & \
\hline \mathrm { U } & 2 & & 7 & \
\hline \mathrm { V } & 3 & & 4 & \text { NA } \
\hline
\end{array}$$ On the basis Table 1.1,what is the opportunity cost of producing at point V rather than point U?

Accepted Answer

A) 3 B-1 bombers. 
B) 1 B-1 bomber. 
C) 4 Stealth bombers. 
D) 3 Stealth bombers. 
A) 3 B-1 bombers. 
B) 1 B-1 bomber. 
C) 4 Stealth bombers. 
D) 3 Stealth bombers.

Question 13

In Figure 1.9,as you move up the curve from point J toward point M,the slope

Accepted Answer

A) Increases. 
B) Remains constant. 
C) Decreases. 
D) Becomes negative. 
A) Increases. 
B) Remains constant. 
C) Decreases. 
D) Becomes negative.

Question 14

Refer to Figure 1.7.The benefit of producing at point G rather than point D is

Accepted Answer

A) OA units of food. 
B) KL units of clothing. 
C) AB units of food. 
D) OL units of clothing. 
A) OA units of food. 
B) KL units of clothing. 
C) AB units of food. 
D) OL units of clothing.

Question 15

Table 1.3 shows the hypothetical trade-off between different combinations of brushes and combs that might be produced in a year with the limited capacity for Country X,ceteris paribus. Table 1.3
Production Possibilities for Brushes and Combs
$$\begin{array} { | l | c | c | r | r | } 
\hline \text { Combination } & \begin{array} { c } 
\text { Number of } \
\text { combs }
\end{array} & \begin{array} { c } 
\text { Opportunity } \
\text { Cost(Foregone } \
\text { brushes) }
\end{array} & \begin{array} { c } 
\text { Number of } \
\text { brushes }
\end{array} & \begin{array} { c } 
\text { Opportunity Cost } \
\text { (Foregone combs) }
\end{array} \
\hline \mathrm { J } & 4 & &0 & \text { NA } \
\hline \mathrm { K } & 3 & & 10 & \
\hline \mathrm { L } & 2 & & 17 & \
\hline  \mathrm {M} & 1 & & 21 & \
\hline \mathrm { N } & 0 & \text { NA } & 23 & \
\hline
\end{array}$$ On the basis of Table 1.3,the law of increasing opportunity costs applies to

Accepted Answer

A) Both brushes and combs. 
B) Combs but not brushes. 
C) Brushes but not combs. 
D) Neither brushes nor combs. 
A) Both brushes and combs. 
B) Combs but not brushes. 
C) Brushes but not combs. 
D) Neither brushes nor combs.

Question 16

Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S.capacity,ceteris paribus. Table 1.2
Production Possibilities for Bombers
$$\begin{array} { | l | c | c | c | c | } 
\hline \text { Combination } & \begin{array} { c } 
\text { Number of B- } \
1 \text { Bombers }
\end{array} & \begin{array} { c } 
\text { Opportunity } \
\text { cost(Foregone } \
\text { Stealth) }
\end{array} & \begin{array} { c } 
\text { Number of } \
\text { Stealth Bombers }
\end{array} & \begin{array} { c } 
\text { Opportunity cost } \
\text { (Foregone B-1) }
\end{array} \
\hline \text { A } & 20 & \text { NA } & 195 & \
\hline \text { B } & 35 & & 180 & \
\hline \text { C } & 45 & & 150 &\
\hline \text { D } & 50 & & 100 & \text { NA }  \
\hline
\end{array}$$  The lowest opportunity cost in Table 1.2 for Stealth Bombers is

Accepted Answer

A) 4 B-1 bombers 
B) 3 B-1 bombers 
C) 2 B-1 bombers 
D) 10 B-1 bombers 
A) 4 B-1 bombers 
B) 3 B-1 bombers 
C) 2 B-1 bombers 
D) 10 B-1 bombers

Question 17

If the economy is inside the production possibilities curve,then more output can be produced using existing resources.

Accepted Answer

A) True 
 B)False

Question 18

In Figure 1.9,the slope of the line between points K and L is

Accepted Answer

A) 1.25. 
B) 0.80. 
C) 0.75. 
D) 0.60. 
A) 1.25. 
B) 0.80. 
C) 0.75. 
D) 0.60.

Question 19

The opportunity cost of studying for an economics test is

Accepted Answer

A) Negative because it may improve your grade. 
B) Zero because you knew when you registered for the class that studying would be required. 
C) The money you spent on tuition for the class. 
D) The activity that is the best alternative use of your time. 
A) Negative because it may improve your grade. 
B) Zero because you knew when you registered for the class that studying would be required. 
C) The money you spent on tuition for the class. 
D) The activity that is the best alternative use of your time.

Question 20

The basic factors of production include

Accepted Answer

A) Land,labor,money,and capital. 
B) Land,labor,money,and inputs. 
C) Labor and money. 
D) Land,labor,capital,and entrepreneurship. 
A) Land,labor,money,and capital. 
B) Land,labor,money,and inputs. 
C) Labor and money. 
D) Land,labor,capital,and entrepreneurship.

Exam 1: Economics: the Core Issues

If an economy is producing inside the production possibilities curve,then

Which of the following events would allow the production possibilities curve to shift outward?

Choose the letter of the curve in Figure 1.2 that best represents a production possibilities curve for two goods that obey the law of increasing opportunity costs:

The invisible hand refers to

The slope of a production possibilities curve is positive.

The fact that there are too few resources to satisfy all our wants is attributed to

Critics of government regulation argue that government interference in the marketplace stifles the "animal spirits" of entrepreneurship.

The Latin phrase ceteris paribus refers to holding other variables constant.

Which of the following is not a basic decision that all nations must confront?

In Figure 1.9,as you move up the curve from point J toward point M,the slope

Refer to Figure 1.7.The benefit of producing at point G rather than point D is

If the economy is inside the production possibilities curve,then more output can be produced using existing resources.

In Figure 1.9,the slope of the line between points K and L is

The opportunity cost of studying for an economics test is

The basic factors of production include

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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