Question 1

Economic growth ________ overcome scarcity because ________.

Accepted Answer

A) does;with economic growth the PPF rotates outward and eventually becomes a horizontal line 
B) does;we will eventually reach the point where we have too much 
C) does not;we can produce more goods and services but it is still impossible to satisfy all our wants 
D) does not;economic growth requires capital accumulation and technological change 
E) does;with economic growth the PPF rotates outward and eventually becomes a vertical line 
A) does;with economic growth the PPF rotates outward and eventually becomes a horizontal line 
B) does;we will eventually reach the point where we have too much 
C) does not;we can produce more goods and services but it is still impossible to satisfy all our wants 
D) does not;economic growth requires capital accumulation and technological change 
E) does;with economic growth the PPF rotates outward and eventually becomes a vertical line

Question 2

In Portugal,the opportunity cost of a bale of wool is 3 bottles of wine.In England,the opportunity cost of 1 bottle of wine is 3 bales of wool.Given this information,

Accepted Answer

A) England has an absolute advantage in wine production. 
B) Portugal has an absolute advantage in wool production. 
C) Portugal has a comparative advantage in wine production. 
D) Portugal has a comparative advantage in wool production. 
E) no trade will occur. 
A) England has an absolute advantage in wine production. 
B) Portugal has an absolute advantage in wool production. 
C) Portugal has a comparative advantage in wine production. 
D) Portugal has a comparative advantage in wool production. 
E) no trade will occur.

Question 3

A production possibilities frontier is negatively sloped because

Accepted Answer

A) more goods are purchased as price falls. 
B) of opportunity cost. 
C) some resources are unused. 
D) there is not enough capital in the economy. 
E) of increasing consumption. 
A) more goods are purchased as price falls. 
B) of opportunity cost. 
C) some resources are unused. 
D) there is not enough capital in the economy. 
E) of increasing consumption.

Question 4

Markets
I.enable buyers and sellers to get information
II.are defined by economists as geographical locations where trade occurs.
III.have evolved because they facilitate trade.
Which of the above statements are correct?

Accepted Answer

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

Question 5

The main functions of markets include

Accepted Answer

A) promoting the social interest, but not the self-interest. 
B) selling goods but not factors of production. 
C) enabling buyers and sellers to get information about each other. 
D) establishing a physical location for business transactions. 
E) promoting the self-interest but not the social interest. 
A) promoting the social interest, but not the self-interest. 
B) selling goods but not factors of production. 
C) enabling buyers and sellers to get information about each other. 
D) establishing a physical location for business transactions. 
E) promoting the self-interest but not the social interest.

Question 6

Use the table below to answer the following questions.
Table 2.1.1
The following table gives points on the production possibilities frontier for goods X and Y.
  
-Refer to Table 2.1.1.What does point C mean?

Accepted Answer

A) If 8 units of X are produced, then at least 28 units of Y can be produced. 
B) If 8 units of X are produced, then at most 28 units of Y can be produced. 
C) If 28 units of Y are produced, then more than 8 units of X can be produced. 
D) If 8 units of X are produced, then only 36 units of Y can be produced. 
E) There is unemployment at this point. 
A) If 8 units of X are produced, then at least 28 units of Y can be produced. 
B) If 8 units of X are produced, then at most 28 units of Y can be produced. 
C) If 28 units of Y are produced, then more than 8 units of X can be produced. 
D) If 8 units of X are produced, then only 36 units of Y can be produced. 
E) There is unemployment at this point.

Question 7

With allocative efficiency,for each good produced,

Accepted Answer

A) marginal benefit equals marginal cost. 
B) marginal benefit is at its maximum. 
C) marginal benefit exceeds marginal cost by as much as possible. 
D) marginal cost exceeds marginal benefit by as much as possible. 
E) marginal cost is at its minimum. 
A) marginal benefit equals marginal cost. 
B) marginal benefit is at its maximum. 
C) marginal benefit exceeds marginal cost by as much as possible. 
D) marginal cost exceeds marginal benefit by as much as possible. 
E) marginal cost is at its minimum.

Question 8

Use the figure below to answer the following questions.
   
Figure 2.3.1
-Refer to the production possibilities frontier in Figure 2.3.1.The production possibilities frontier will shift rightward most rapidly if current production is at

Accepted Answer

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

Question 9

Consider the following household.In 5 hours,Bob can cook 5 meals or clean 6 rooms.In 5 hours,Mary can cook 30 meals or clean 10 rooms.Select the best statement.

Accepted Answer

A) Bob has an absolute advantage in the production of both goods. 
B) Since Mary is better at producing both goods, she should produce both. 
C) Bob has a comparative advantage in cooking. 
D) Mary should specialize in cooking. 
E) none of the above 
A) Bob has an absolute advantage in the production of both goods. 
B) Since Mary is better at producing both goods, she should produce both. 
C) Bob has a comparative advantage in cooking. 
D) Mary should specialize in cooking. 
E) none of the above

Question 10

Opportunity cost of an action is

Accepted Answer

A) the best choice that can be made. 
B) the highest-valued alternative forgone. 
C) the money cost. 
D) the comparative cost. 
E) the absolute cost. 
A) the best choice that can be made. 
B) the highest-valued alternative forgone. 
C) the money cost. 
D) the comparative cost. 
E) the absolute cost.

Question 11

The most anyone is willing to pay for another purse is $30.Currently the price of a purse is $40,and the cost of producing another purse is $50.The marginal benefit from a purse is ________.

Accepted Answer

A) $40 
B) $50 
C) $10 
D) $20 
E) $30 
A) $40 
B) $50 
C) $10 
D) $20 
E) $30

Question 12

A technological improvement is represented by

Accepted Answer

A) an outward shift of the production possibilities frontier. 
B) a movement along the production possibilities frontier. 
C) a point inside the production possibilities frontier. 
D) a point outside the production possibilities frontier. 
E) a movement from a point inside the production possibilities frontier to a point on the production possibilities frontier. 
A) an outward shift of the production possibilities frontier. 
B) a movement along the production possibilities frontier. 
C) a point inside the production possibilities frontier. 
D) a point outside the production possibilities frontier. 
E) a movement from a point inside the production possibilities frontier to a point on the production possibilities frontier.

Question 13

Use the table below to answer the following questions.
Table 2.1.3
Production possibilities for a society that produces only two
goods - hockey sticks and maple leaves.
  
-Refer to Table 2.1.3.In moving from combination C to combination B,the opportunity cost of producing one additional hockey stick is

Accepted Answer

A) 2 maple leaves. 
B) 1/2 maple leaves. 
C) 6 maple leaves. 
D) 1/6 maple leaves. 
E) 3 maple leaves. 
A) 2 maple leaves. 
B) 1/2 maple leaves. 
C) 6 maple leaves. 
D) 1/6 maple leaves. 
E) 3 maple leaves.

Question 14

There are two goods,X and Y.If the opportunity cost of producing good X is lower for Pam than for Gino,then

Accepted Answer

A) Pam has an absolute advantage in the production of X. 
B) Gino has an absolute advantage in the production of Y. 
C) Pam has a comparative advantage in the production of X. 
D) Gino has a comparative advantage in the production of Y. 
E) C and D. 
A) Pam has an absolute advantage in the production of X. 
B) Gino has an absolute advantage in the production of Y. 
C) Pam has a comparative advantage in the production of X. 
D) Gino has a comparative advantage in the production of Y. 
E) C and D.

Question 15

A medical clinic has 10 workers.Each worker can produce a maximum of either 2 units of medical services or 5 units of secretarial services a day.The production possibilities frontier of this firm would show

Accepted Answer

A) increasing opportunity cost. 
B) decreasing opportunity cost. 
C) constant opportunity cost. 
D) zero opportunity cost. 
E) infinite opportunity cost. 
A) increasing opportunity cost. 
B) decreasing opportunity cost. 
C) constant opportunity cost. 
D) zero opportunity cost. 
E) infinite opportunity cost.

Question 16

The production possibilities frontier shifts outward when ________.

Accepted Answer

A) tastes and preferences change 
B) the quantity of money in the economy grows 
C) prices rise 
D) human capital accumulates 
E) the political party in power changes 
A) tastes and preferences change 
B) the quantity of money in the economy grows 
C) prices rise 
D) human capital accumulates 
E) the political party in power changes

Question 17

A marginal benefit curve measures

Accepted Answer

A) comparative advantage. 
B) willingness to pay. 
C) absolute advantage. 
D) opportunity cost. 
E) expenditure. 
A) comparative advantage. 
B) willingness to pay. 
C) absolute advantage. 
D) opportunity cost. 
E) expenditure.

Question 18

Consider a country that has two industries.In the north,they grow wild rice,which requires a lot of rainfall.In the south,they grow wheat,which requires just a moderate amount of rainfall (too much rainfall is bad for wheat production).One year,there is a record rainfall.This will result in

Accepted Answer

A) a parallel shift inward of the production possibilities frontier. 
B) a parallel shift outward of the production possibilities frontier. 
C) the production possibilities frontier swiveling, with the wild rice intercept increasing, and the wheat intercept decreasing. 
D) the production possibilities frontier swiveling, with the wild rice intercept decreasing, and the wheat intercept increasing. 
E) none of the above. 
A) a parallel shift inward of the production possibilities frontier. 
B) a parallel shift outward of the production possibilities frontier. 
C) the production possibilities frontier swiveling, with the wild rice intercept increasing, and the wheat intercept decreasing. 
D) the production possibilities frontier swiveling, with the wild rice intercept decreasing, and the wheat intercept increasing. 
E) none of the above.

Question 19

Suppose a hurricane causes extensive devastation,destroying houses,roads,schools and factories.What would be the effect of this hurricane on a production possibilities frontier consisting of consumption goods and capital goods?

Accepted Answer

A) It would shift outward at all points. 
B) It would shift inward at all points. 
C) There would be a movement along the existing production possibilities frontier towards a less capital-intensive point. 
D) There would be a movement along the existing production possibilities frontier towards a more capital-intensive point. 
E) There would be a movement from the existing production possibilities frontier inwards towards a point with unused or misallocated resources. 
A) It would shift outward at all points. 
B) It would shift inward at all points. 
C) There would be a movement along the existing production possibilities frontier towards a less capital-intensive point. 
D) There would be a movement along the existing production possibilities frontier towards a more capital-intensive point. 
E) There would be a movement from the existing production possibilities frontier inwards towards a point with unused or misallocated resources.

Question 20

A person who has an absolute advantage in the production of all goods will

Accepted Answer

A) also have a comparative advantage in the production of all goods. 
B) not be able to gain from specialization and trade. 
C) produce all goods at the lowest opportunity cost. 
D) not have a comparative advantage in the production of any goods. 
E) have a comparative advantage in the production of only some goods and not others. 
A) also have a comparative advantage in the production of all goods. 
B) not be able to gain from specialization and trade. 
C) produce all goods at the lowest opportunity cost. 
D) not have a comparative advantage in the production of any goods. 
E) have a comparative advantage in the production of only some goods and not others.

Exam 2: The Economic Problem

Economic growth ________ overcome scarcity because ________.

In Portugal,the opportunity cost of a bale of wool is 3 bottles of wine.In England,the opportunity cost of 1 bottle of wine is 3 bales of wool.Given this information,

A production possibilities frontier is negatively sloped because

Markets I.enable buyers and sellers to get information II.are defined by economists as geographical locations where trade occurs. III.have evolved because they facilitate trade. Which of the above statements are correct?

The main functions of markets include

Use the table below to answer the following questions. Table 2.1.1 The following table gives points on the production possibilities frontier for goods X and Y. -Refer to Table 2.1.1.What does point C mean?

With allocative efficiency,for each good produced,

Use the figure below to answer the following questions. Figure 2.3.1 -Refer to the production possibilities frontier in Figure 2.3.1.The production possibilities frontier will shift rightward most rapidly if current production is at

Consider the following household.In 5 hours,Bob can cook 5 meals or clean 6 rooms.In 5 hours,Mary can cook 30 meals or clean 10 rooms.Select the best statement.

Opportunity cost of an action is

The most anyone is willing to pay for another purse is $30.Currently the price of a purse is $40,and the cost of producing another purse is $50.The marginal benefit from a purse is ________.

A technological improvement is represented by

There are two goods,X and Y.If the opportunity cost of producing good X is lower for Pam than for Gino,then

A medical clinic has 10 workers.Each worker can produce a maximum of either 2 units of medical services or 5 units of secretarial services a day.The production possibilities frontier of this firm would show

The production possibilities frontier shifts outward when ________.

A marginal benefit curve measures

Consider a country that has two industries.In the north,they grow wild rice,which requires a lot of rainfall.In the south,they grow wheat,which requires just a moderate amount of rainfall (too much rainfall is bad for wheat production).One year,there is a record rainfall.This will result in

Suppose a hurricane causes extensive devastation,destroying houses,roads,schools and factories.What would be the effect of this hurricane on a production possibilities frontier consisting of consumption goods and capital goods?

A person who has an absolute advantage in the production of all goods will

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

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

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Economic growth overcome scarcity because .