Question 1

Exhibit 2-13 Production possibilities curve  
-In Exhibit 2-13, which of the following is not true regarding point H? Point H:

Accepted Answer

A)  cannot be achieved by this economy today. 
B)  could be achieved today if the economy only achieved full employment. 
C)  could be achieved in the future by an enlargement of the economy's resource base. 
D)  could be achieved in the future by an advancement in technology. 
E)  could be achieved in the future by growth in the economy. 
A)  cannot be achieved by this economy today. 
B)  could be achieved today if the economy only achieved full employment. 
C)  could be achieved in the future by an enlargement of the economy's resource base. 
D)  could be achieved in the future by an advancement in technology. 
E)  could be achieved in the future by growth in the economy.

Question 2

A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than:

Accepted Answer

A)  $12.50 per pound. 
B)  $20 per pound. 
C)  $80 per pound. 
D)  $100 per pound. 
A)  $12.50 per pound. 
B)  $20 per pound. 
C)  $80 per pound. 
D)  $100 per pound.

Question 3

Unemployment or underemployment of labor might explain why an economy would be operating inside its production possibilities curve (PPC).

Accepted Answer

A) True 
 B)False

Question 4

Efficient production means producing:

Accepted Answer

A)  less than feasible output for a given amount of resources. 
B)  more than feasible output for a given amount of resources. 
C)  the maximum feasible output for a given amount of resources. 
D)  no more than what is needed. 
E)  in excess of what is needed. 
A)  less than feasible output for a given amount of resources. 
B)  more than feasible output for a given amount of resources. 
C)  the maximum feasible output for a given amount of resources. 
D)  no more than what is needed. 
E)  in excess of what is needed.

Question 5

The various combinations of goods and services that can be produced, when an economy uses its available resources and technology efficiently, is called:

Accepted Answer

A)  scarcity. 
B)  opportunity cost. 
C)  unlimited production. 
D)  capital accumulation. 
E)  production possibilities. 
A)  scarcity. 
B)  opportunity cost. 
C)  unlimited production. 
D)  capital accumulation. 
E)  production possibilities.

Question 6

Using a production possibilities curve, an economy that produces an output combination less than the maximum possible is depicted by a point located:

Accepted Answer

A)  at the top corner of the curve. 
B)  near the middle of the curve. 
C)  at the bottom corner of the curve. 
D)  outside the curve. 
E)  inside the curve. 
A)  at the top corner of the curve. 
B)  near the middle of the curve. 
C)  at the bottom corner of the curve. 
D)  outside the curve. 
E)  inside the curve.

Question 7

Three basic decisions must be made by all economies. What are they?

Accepted Answer

A)  How much will be produced, when it will be produced, and how much it will cost. 
B)  What the price of each good will be, who will produce each good, and who will consume each good. 
C)  What will be produced, how goods will be produced, and for whom goods will be produced. 
D)  How the opportunity cost principle will be applied, if and how the law of comparative advantage will be utilized, and whether the production possibilities constraint will apply. 
A)  How much will be produced, when it will be produced, and how much it will cost. 
B)  What the price of each good will be, who will produce each good, and who will consume each good. 
C)  What will be produced, how goods will be produced, and for whom goods will be produced. 
D)  How the opportunity cost principle will be applied, if and how the law of comparative advantage will be utilized, and whether the production possibilities constraint will apply.

Question 8

​ Which of the following best describes the three fundamental economic questions?

Accepted Answer

A)  What to produce, when to produce, and where to produce. 
B)  ​What time to produce, what place to produce, and how to produce. 
C)  ​What to produce, when to produce, and for whom to produce.​ 
D)  ​What to produce, how to produce, and for whom to produce. 
A)  What to produce, when to produce, and where to produce. 
B)  ​What time to produce, what place to produce, and how to produce. 
C)  ​What to produce, when to produce, and for whom to produce.​ 
D)  ​What to produce, how to produce, and for whom to produce.

Question 9

Opportunity cost is the:

Accepted Answer

A)  cost incurred when one fails to take advantage of an opportunity. 
B)  price paid for goods and services. 
C)  cost of the best option forgone as a result of choosing an alternative option. 
D)  undesirable aspects of an option. 
A)  cost incurred when one fails to take advantage of an opportunity. 
B)  price paid for goods and services. 
C)  cost of the best option forgone as a result of choosing an alternative option. 
D)  undesirable aspects of an option.

Question 10

Which fundamental economic question requires society to choose the technological and resource mix used to produce goods?

Accepted Answer

A)  The What to Produce question. 
B)  The Why to Produce question. 
C)  The How to Produce question. 
D)  The For Whom to Produce question. 
A)  The What to Produce question. 
B)  The Why to Produce question. 
C)  The How to Produce question. 
D)  The For Whom to Produce question.

Question 11

Of factors which affect any economy's production potential, the best two listed below are:

Accepted Answer

A)  resources and technology. 
B)  prices and outputs. 
C)  wages and prices. 
D)  taxes and prices. 
E)  resources and prices. 
A)  resources and technology. 
B)  prices and outputs. 
C)  wages and prices. 
D)  taxes and prices. 
E)  resources and prices.

Question 12

While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00, Sally notices that she could get a value meal that contains both the cheeseburger and medium drink and also a medium order of fries for $2.75. She thinks to herself, "Is it worth the extra 25 cents to get the medium fries?" To an economist, Sally's decision is an example of:

Accepted Answer

A)  marginal analysis. 
B)  basing decisions on total, rather than marginal, value. 
C)  an unintended consequence. 
D)  the fallacy of composition. 
A)  marginal analysis. 
B)  basing decisions on total, rather than marginal, value. 
C)  an unintended consequence. 
D)  the fallacy of composition.

Question 13

Which of the following would not lead to a shift in an economy's production possibilities curve?

Accepted Answer

A)  Change in technology. 
B)  Change in the number of resources. 
C)  An earthquake. 
D)  Improvement in the education level. 
E)  Change in the composition of current output. 
A)  Change in technology. 
B)  Change in the number of resources. 
C)  An earthquake. 
D)  Improvement in the education level. 
E)  Change in the composition of current output.

Question 14

A nation's current location on its production possibilities curve can determine the future location of that nation's production possibilities curve.

Accepted Answer

A) True 
 B)False

Question 15

In economics terminology, the process of accumulating money is investment.

Accepted Answer

A) True 
 B)False

Question 16

The production possibility curve is bowed outward from the origin because of:

Accepted Answer

A)  the law of increasing opportunity costs. 
B)  the finite nature of the resource base. 
C)  inefficiency. 
D)  improper output mix. 
E)  unemployment. 
A)  the law of increasing opportunity costs. 
B)  the finite nature of the resource base. 
C)  inefficiency. 
D)  improper output mix. 
E)  unemployment.

Question 17

In order for an economy to shift its production possibilities curve rightward, it must:

Accepted Answer

A)  suffer resource unemployment. 
B)  experience an increase in its resources and/or an improvement in its technology. 
C)  use its resources more efficiently than at points along the curve. 
D)  all of these. 
A)  suffer resource unemployment. 
B)  experience an increase in its resources and/or an improvement in its technology. 
C)  use its resources more efficiently than at points along the curve. 
D)  all of these.

Question 18

People in poor countries may have difficulties achieving economic growth because:

Accepted Answer

A)  their production possibilities curves slope upward instead of downward. 
B)  they must cut back on current consumption to increase capital goods. 
C)  they have a solid consumption base already in place. 
D)  their resource bases are fully developed. 
E)  the law of increasing costs makes it hard to produce more goods. 
A)  their production possibilities curves slope upward instead of downward. 
B)  they must cut back on current consumption to increase capital goods. 
C)  they have a solid consumption base already in place. 
D)  their resource bases are fully developed. 
E)  the law of increasing costs makes it hard to produce more goods.

Question 19

Suppose that the alternative uses of an hour of your time in the evening, ranked from best to worst, are (1) study economics, (2i) watch two half-hour TV sitcoms, (3) play pool, and (4) jog around town. You can only choose one activity. What is the opportunity cost of studying economics for one hour, given this information?

Accepted Answer

A)  ​ Jogging around town. 
B)  ​Watching two half-hour TV sitcoms. 
C)  ​Playing pool. 
D)  ​The sum of watching two half-hour TV sitcoms, playing pool, and doing your laundry. 
A)  ​ Jogging around town. 
B)  ​Watching two half-hour TV sitcoms. 
C)  ​Playing pool. 
D)  ​The sum of watching two half-hour TV sitcoms, playing pool, and doing your laundry.

Question 20

A local restaurant offers an "all you can eat" Sunday brunch for $12. Susan eats four servings, but leaves half of a fifth helping uneaten. Why?

Accepted Answer

A)  Her marginal value of a serving of brunch has fallen below $12. 
B)  Her marginal value of a serving has fallen below $2.36 ($12 divided by 5 servings). 
C)  Her marginal value of food has fallen to zero. 
D)  The total value she places on brunch today exactly equals $12. 
A)  Her marginal value of a serving of brunch has fallen below $12. 
B)  Her marginal value of a serving has fallen below $2.36 ($12 divided by 5 servings). 
C)  Her marginal value of food has fallen to zero. 
D)  The total value she places on brunch today exactly equals $12.

Exhibit 2-13 Production possibilities curve -In Exhibit 2-13, which of the following is not true regarding point H? Point H:

A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than:

Unemployment or underemployment of labor might explain why an economy would be operating inside its production possibilities curve (PPC).

Efficient production means producing:

The various combinations of goods and services that can be produced, when an economy uses its available resources and technology efficiently, is called:

Using a production possibilities curve, an economy that produces an output combination less than the maximum possible is depicted by a point located:

Three basic decisions must be made by all economies. What are they?

Which of the following best describes the three fundamental economic questions?

Opportunity cost is the:

Which fundamental economic question requires society to choose the technological and resource mix used to produce goods?

Of factors which affect any economy's production potential, the best two listed below are:

Which of the following would not lead to a shift in an economy's production possibilities curve?

A nation's current location on its production possibilities curve can determine the future location of that nation's production possibilities curve.

In economics terminology, the process of accumulating money is investment.

The production possibility curve is bowed outward from the origin because of:

In order for an economy to shift its production possibilities curve rightward, it must:

People in poor countries may have difficulties achieving economic growth because:

A local restaurant offers an "all you can eat" Sunday brunch for $12. Susan eats four servings, but leaves half of a fifth helping uneaten. Why?

Introducing the Economic Way of Thinking

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Exam 2: Production Possibilities, Opportunity Cost, and Economic Growth

Exhibit 2-13 Production possibilities curve -In Exhibit 2-13, which of the following is not true regarding point H? Point H:

A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than:

Unemployment or underemployment of labor might explain why an economy would be operating inside its production possibilities curve (PPC).

Efficient production means producing:

The various combinations of goods and services that can be produced, when an economy uses its available resources and technology efficiently, is called:

Using a production possibilities curve, an economy that produces an output combination less than the maximum possible is depicted by a point located:

Three basic decisions must be made by all economies. What are they?

​ Which of the following best describes the three fundamental economic questions?

Opportunity cost is the:

Which fundamental economic question requires society to choose the technological and resource mix used to produce goods?

Of factors which affect any economy's production potential, the best two listed below are:

Which of the following would not lead to a shift in an economy's production possibilities curve?

A nation's current location on its production possibilities curve can determine the future location of that nation's production possibilities curve.

In economics terminology, the process of accumulating money is investment.

The production possibility curve is bowed outward from the origin because of:

In order for an economy to shift its production possibilities curve rightward, it must:

People in poor countries may have difficulties achieving economic growth because:

A local restaurant offers an "all you can eat" Sunday brunch for $12. Susan eats four servings, but leaves half of a fifth helping uneaten. Why?

Introducing the Economic Way of Thinking

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Which of the following best describes the three fundamental economic questions?