Question 1

The law of increasing costs indicates that the opportunity cost of producing a good:

Accepted Answer

A)  is proportional to the production of the good. 
B)  is constant to the production of the good. 
C)  increases as more of the good is produced. 
D)  decreases as more of the good is produced. 
E)  increases as less of the good is produced. 
A)  is proportional to the production of the good. 
B)  is constant to the production of the good. 
C)  increases as more of the good is produced. 
D)  decreases as more of the good is produced. 
E)  increases as less of the good is produced.

Question 2

Exhibit 2-10 Production possibilities curve data $$\begin{array} { | l | r | r | r | r | r | } 
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { Capital goods } & 0 & 1 & 2 & 3 & 4 \
\text { Consumption goods } & 25 & 23 & 19 & 13 & 0 \
\hline
\end{array}$$
-Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. The second unit of capital goods production will cost ____ units of consumption goods, and the third unit of capital goods production will cost ____ units of consumption goods.

Accepted Answer

A)  4; 6 
B)  25; 23 
C)  23; 19 
D)  1; 23 
E)  2; 19 
A)  4; 6 
B)  25; 23 
C)  23; 19 
D)  1; 23 
E)  2; 19

Question 3

Adding more resources causes:

Accepted Answer

A)  downward movement along a production possibilities curve. 
B)  the production possibilities curve to shift in. 
C)  upward movement along a production possibilities curve. 
D)  the production possibilities curve to shift out. 
E)  the production possibilities curve to become positively sloped. 
A)  downward movement along a production possibilities curve. 
B)  the production possibilities curve to shift in. 
C)  upward movement along a production possibilities curve. 
D)  the production possibilities curve to shift out. 
E)  the production possibilities curve to become positively sloped.

Question 4

Which of the following would most likely cause the production possibilities curve for DVDs and food to shift outward?

Accepted Answer

A)  A choice of more food and more DVDs. 
B)  A choice of more food and less DVDs. 
C)  A choice of more DVDs and less food. 
D)  An increase in the quantity of natural resources. 
A)  A choice of more food and more DVDs. 
B)  A choice of more food and less DVDs. 
C)  A choice of more DVDs and less food. 
D)  An increase in the quantity of natural resources.

Question 5

The process of accumulating capital is called:

Accepted Answer

A)  capitalization. 
B)  loanable funds. 
C)  investment. 
D)  debt management. 
A)  capitalization. 
B)  loanable funds. 
C)  investment. 
D)  debt management.

Question 6

The highest valued alternative that must be given up in order to choose an option is called the:

Accepted Answer

A)  opportunity cost. 
B)  utility cost. 
C)  scarcity expense. 
D)  disutility option. 
A)  opportunity cost. 
B)  utility cost. 
C)  scarcity expense. 
D)  disutility option.

Question 7

If society leaves some of its resources unemployed, then it will be operating at a point:

Accepted Answer

A)  beneath its production possibilities curve. 
B)  at a corner of its production possibilities curve. 
C)  anywhere along its production possibilities curve. 
D)  outside of its production possibilities curve. 
A)  beneath its production possibilities curve. 
B)  at a corner of its production possibilities curve. 
C)  anywhere along its production possibilities curve. 
D)  outside of its production possibilities curve.

Question 8

If an economy is producing at full employment, it means that:

Accepted Answer

A)  there are idle resources in this economy. 
B)  the production is not efficient. 
C)  the economy is producing along its production possibilities curve. 
D)  the economy is producing at a point that is to the left of the production possibilities curve. 
E)  the economy is producing at a point that is to the right of the production possibilities curve. 
A)  there are idle resources in this economy. 
B)  the production is not efficient. 
C)  the economy is producing along its production possibilities curve. 
D)  the economy is producing at a point that is to the left of the production possibilities curve. 
E)  the economy is producing at a point that is to the right of the production possibilities curve.

Question 9

While waiting in line to buy a cheeseburger for $2 and a drink for 75 cents, Aaron notices that the restaurant has a value meal containing a cheeseburger, drink, and French fries for $3. For Aaron, the marginal cost of purchasing the French fries:

Accepted Answer

A)  would be zero. 
B)  would be 25 cents. 
C)  would be 50 cents. 
D)  cannot be determined because the information about the price of the French fries is not provided. 
A)  would be zero. 
B)  would be 25 cents. 
C)  would be 50 cents. 
D)  cannot be determined because the information about the price of the French fries is not provided.

Question 10

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n):

Accepted Answer

A)  flattening of the curve. 
B)  movement from one point to another point along the curve. 
C)  outward shift of the curve. 
D)  movement from a point on the curve to a point inside the curve. 
A)  flattening of the curve. 
B)  movement from one point to another point along the curve. 
C)  outward shift of the curve. 
D)  movement from a point on the curve to a point inside the curve.

Question 11

In economics, the term marginal refers to:

Accepted Answer

A)  the change or difference from a current situation. 
B)  man-made resources as opposed to natural resources. 
C)  the satisfaction a consumer receives from a good. 
D)  holding everything else constant in the analysis. 
A)  the change or difference from a current situation. 
B)  man-made resources as opposed to natural resources. 
C)  the satisfaction a consumer receives from a good. 
D)  holding everything else constant in the analysis.

Question 12

A major technological advance would be represented on a production possibilities curve by a(n):

Accepted Answer

A)  movement off the production possibilities curve toward a point outside the curve. 
B)  movement toward the curve from a point inside the curve. 
C)  outward shift of the entire curve. 
D)  movement to the left along the curve to a higher point. 
A)  movement off the production possibilities curve toward a point outside the curve. 
B)  movement toward the curve from a point inside the curve. 
C)  outward shift of the entire curve. 
D)  movement to the left along the curve to a higher point.

Question 13

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

Accepted Answer

A)  an increase in the labor force 
B)  an increase in unemployment 
C)  development of an improved technological method of production 
D)  a decrease in the stock of physical capital 
A)  an increase in the labor force 
B)  an increase in unemployment 
C)  development of an improved technological method of production 
D)  a decrease in the stock of physical capital

Question 14

The principle that the opportunity cost increases as the production of one output expands along the production possibilities curve is the:

Accepted Answer

A)  law of increasing opportunity costs. 
B)  law of supply. 
C)  law of demand. 
D)  law of diminishing returns. 
A)  law of increasing opportunity costs. 
B)  law of supply. 
C)  law of demand. 
D)  law of diminishing returns.

Question 15

Exhibit 2-16 Production possibilities curve  
-From the information in Exhibit 2-16, which of the following points on the production possibilities curve are attainable with the resources and technology currently available?

Accepted Answer

A)  A, B, C, E, U 
B)  A, B, C, D, W 
C)  E, U, W 
D)  B, C, D, U 
E)  A, B, C, E 
A)  A, B, C, E, U 
B)  A, B, C, D, W 
C)  E, U, W 
D)  B, C, D, U 
E)  A, B, C, E

Question 16

A point outside the production possibilities curve represents a combination of goods that is:

Accepted Answer

A)  inefficient. 
B)  efficient. 
C)  unattainable. 
D)  attainable. 
A)  inefficient. 
B)  efficient. 
C)  unattainable. 
D)  attainable.

Question 17

If an economy is operating at a point inside the production possibilities curve,

Accepted Answer

A)  its resources are not being used efficiently. 
B)  the curve will begin to shift inward. 
C)  the curve will begin to shift outward. 
D)  This is a trick question because an economy cannot produce at a point inside the curve. 
A)  its resources are not being used efficiently. 
B)  the curve will begin to shift inward. 
C)  the curve will begin to shift outward. 
D)  This is a trick question because an economy cannot produce at a point inside the curve.

Question 18

An opportunity cost is the highest valued alternative foregone whenever one chooses an alternative.

Accepted Answer

A) True 
 B)False

Question 19

Discuss the three fundamental economic questions that all nations must address.

Accepted Answer

The three fundamental economic questions

Question 20

When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the:

Accepted Answer

A)  benefits expected from two cars with the cost of both. 
B)  additional benefits expected from a second car with the cost of the two cars. 
C)  dollar cost of the two cars with the potential income that the cars will generate. 
D)  additional benefits of the second car with the additional cost of the second car. 
A)  benefits expected from two cars with the cost of both. 
B)  additional benefits expected from a second car with the cost of the two cars. 
C)  dollar cost of the two cars with the potential income that the cars will generate. 
D)  additional benefits of the second car with the additional cost of the second car.

The law of increasing costs indicates that the opportunity cost of producing a good:

Adding more resources causes:

Which of the following would most likely cause the production possibilities curve for DVDs and food to shift outward?

The process of accumulating capital is called:

The highest valued alternative that must be given up in order to choose an option is called the:

If society leaves some of its resources unemployed, then it will be operating at a point:

If an economy is producing at full employment, it means that:

While waiting in line to buy a cheeseburger for $2 and a drink for 75 cents, Aaron notices that the restaurant has a value meal containing a cheeseburger, drink, and French fries for $3. For Aaron, the marginal cost of purchasing the French fries:

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n):

In economics, the term marginal refers to:

A major technological advance would be represented on a production possibilities curve by a(n):

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

The principle that the opportunity cost increases as the production of one output expands along the production possibilities curve is the:

Exhibit 2-16 Production possibilities curve -From the information in Exhibit 2-16, which of the following points on the production possibilities curve are attainable with the resources and technology currently available?

A point outside the production possibilities curve represents a combination of goods that is:

If an economy is operating at a point inside the production possibilities curve,

An opportunity cost is the highest valued alternative foregone whenever one chooses an alternative.

Discuss the three fundamental economic questions that all nations must address.

When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the:

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

The law of increasing costs indicates that the opportunity cost of producing a good:

Adding more resources causes:

Which of the following would most likely cause the production possibilities curve for DVDs and food to shift outward?

The process of accumulating capital is called:

The highest valued alternative that must be given up in order to choose an option is called the:

If society leaves some of its resources unemployed, then it will be operating at a point:

If an economy is producing at full employment, it means that:

While waiting in line to buy a cheeseburger for $2 and a drink for 75 cents, Aaron notices that the restaurant has a value meal containing a cheeseburger, drink, and French fries for $3. For Aaron, the marginal cost of purchasing the French fries:

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n):

In economics, the term marginal refers to:

A major technological advance would be represented on a production possibilities curve by a(n):

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

The principle that the opportunity cost increases as the production of one output expands along the production possibilities curve is the:

Exhibit 2-16 Production possibilities curve -From the information in Exhibit 2-16, which of the following points on the production possibilities curve are attainable with the resources and technology currently available?

A point outside the production possibilities curve represents a combination of goods that is:

If an economy is operating at a point inside the production possibilities curve,

An opportunity cost is the highest valued alternative foregone whenever one chooses an alternative.

Discuss the three fundamental economic questions that all nations must address.

When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the:

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