Question 1

-In the production possibilities frontier depicted in the figure above, which of the following combinations of hats and bananas is inefficient?

Accepted Answer

A)  4 million pounds of bananas and 4 million hats 
B)  2 million pounds of bananas and 5 million hats 
C)  0 pounds of bananas and 6 million hats 
D)  1 million pounds of bananas and 3 million hats 
A)  4 million pounds of bananas and 4 million hats 
B)  2 million pounds of bananas and 5 million hats 
C)  0 pounds of bananas and 6 million hats 
D)  1 million pounds of bananas and 3 million hats

Question 2

-The figure above shows Prakash's and Gail's production possibilities frontiers for writing books and magazine articles.
a) What is Prakash's opportunity cost of a book? What is Gail's opportunity cost? Who has the comparative advantage in writing books?
b) Who has the comparative advantage in writing magazine articles?
c) According to their comparative advantages, who should write books and who should write magazine articles?

Accepted Answer

a) In a year, Prakash can write 2 books

Question 3

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 4

A point inside a production possibilities frontier

Accepted Answer

A)  could indicate that resources are misallocated. 
B)  is more efficient than a point on the production possibilities frontier. 
C)  reflects the fact that more technology needs to be developed to fully employ all resources. 
D)  implies that too much labor and not enough capital is being used. 
A)  could indicate that resources are misallocated. 
B)  is more efficient than a point on the production possibilities frontier. 
C)  reflects the fact that more technology needs to be developed to fully employ all resources. 
D)  implies that too much labor and not enough capital is being used.

Question 5

What factors generate economic growth?

Accepted Answer

Two key factors create economic growth:

Question 6

The fact that individual productive resources are NOT equally useful in all activities

Accepted Answer

A)  implies that a production possibilities frontier will be bowed outward. 
B)  implies that gain from specialization and trade is unlikely. 
C)  follows from the law of demand. 
D)  implies a linear production possibilities frontier. 
A)  implies that a production possibilities frontier will be bowed outward. 
B)  implies that gain from specialization and trade is unlikely. 
C)  follows from the law of demand. 
D)  implies a linear production possibilities frontier.

Question 7

The fact of increasing opportunity costs means that a production possibilities frontier will

Accepted Answer

A)  be a straight line. 
B)  reach a maximum and then gradually decrease. 
C)  bow outward. 
D)  shift outward over time. 
A)  be a straight line. 
B)  reach a maximum and then gradually decrease. 
C)  bow outward. 
D)  shift outward over time.

Question 8

Allocative efficiency occurs when it is

Accepted Answer

A)  possible to produce more of one good without giving up the production of some other good. 
B)  possible to produce more of all goods. 
C)  not possible to produce more of one good without giving up the production of some other good that is valued less highly. 
D)  not possible to produce more of one good without giving up the production of some other good that is valued more highly. 
A)  possible to produce more of one good without giving up the production of some other good. 
B)  possible to produce more of all goods. 
C)  not possible to produce more of one good without giving up the production of some other good that is valued less highly. 
D)  not possible to produce more of one good without giving up the production of some other good that is valued more highly.

Question 9

A country that has an absolute advantage in producing all goods will

Accepted Answer

A)  have a comparative advantage in some goods but not all. 
B)  produce all goods at lowest opportunity cost. 
C)  have a comparative advantage in all goods. 
D)  not gain from specialization and trade. 
A)  have a comparative advantage in some goods but not all. 
B)  produce all goods at lowest opportunity cost. 
C)  have a comparative advantage in all goods. 
D)  not gain from specialization and trade.

Question 10

A bowed outward production possibilities frontier occurs when

Accepted Answer

A)  opportunity costs are constant. 
B)  resources are not scarce. 
C)  as more of a good is produced, producing additional units of it require greater reductions in the other good. 
D)  the society is operating on the production possibilities frontier. 
A)  opportunity costs are constant. 
B)  resources are not scarce. 
C)  as more of a good is produced, producing additional units of it require greater reductions in the other good. 
D)  the society is operating on the production possibilities frontier.

Question 11

Any point on a production possibilities frontier (PPF) itself is

Accepted Answer

A)  production efficient. 
B)  unattainable. 
C)  inefficient. 
D)  equitable. 
A)  production efficient. 
B)  unattainable. 
C)  inefficient. 
D)  equitable.

Question 12

Economic growth can be represented by

Accepted Answer

A)  a movement down the production possibilities frontier (PPF). 
B)  a movement up the production possibilities frontier (PPF). 
C)  an inward shift of the production possibilities frontier (PPF). 
D)  an outward shift of the production possibilities frontier (PPF). 
A)  a movement down the production possibilities frontier (PPF). 
B)  a movement up the production possibilities frontier (PPF). 
C)  an inward shift of the production possibilities frontier (PPF). 
D)  an outward shift of the production possibilities frontier (PPF).

Question 13

-In the figure above, moving from production at point d to production at point a requires

Accepted Answer

A)  technological change. 
B)  a decrease in unemployment. 
C)  decreasing the output of consumer goods in order to boost the output of capital goods. 
D)  both capital accumulation and a decrease in unemployment. 
A)  technological change. 
B)  a decrease in unemployment. 
C)  decreasing the output of consumer goods in order to boost the output of capital goods. 
D)  both capital accumulation and a decrease in unemployment.

Question 14

A country possesses a comparative advantage in the production of a good if

Accepted Answer

A)  the opportunity cost in terms of forgone output of alternative goods is lower for this country than it is for its trading partners. 
B)  it possesses an absolute advantage in the production of this good. 
C)  it is able to produce more of this good per hour than can any other country. 
D)  all of the above. 
A)  the opportunity cost in terms of forgone output of alternative goods is lower for this country than it is for its trading partners. 
B)  it possesses an absolute advantage in the production of this good. 
C)  it is able to produce more of this good per hour than can any other country. 
D)  all of the above.

Question 15

Comparative advantage is

Accepted Answer

A)  the ability to perform an activity at a lower opportunity cost than anyone else. 
B)  the ability to perform an activity at a higher opportunity cost than anyone else. 
C)  the ability to perform an activity at a zero opportunity cost. 
D)  another name for absolute advantage. 
A)  the ability to perform an activity at a lower opportunity cost than anyone else. 
B)  the ability to perform an activity at a higher opportunity cost than anyone else. 
C)  the ability to perform an activity at a zero opportunity cost. 
D)  another name for absolute advantage.

Question 16

-Refer to the production possibilities frontier in the figure above. Production point ________ represents an ________ production point.

Accepted Answer

A)  b; unattainable 
B)  c; unattainable 
C)  e; inefficient 
D)  c; inefficient 
A)  b; unattainable 
B)  c; unattainable 
C)  e; inefficient 
D)  c; inefficient

Question 17

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue and Fred can gain from trade if Sue changes the ________ and Fred changes the ________.

Accepted Answer

A)  tires; oil 
B)  oil; oil 
C)  oil; tires 
D)  tires; tires 
A)  tires; oil 
B)  oil; oil 
C)  oil; tires 
D)  tires; tires

Question 18

A nation can produce at a point outside its PPF

Accepted Answer

A)  when it trades with other nations. 
B)  when it produces inefficiently. 
C)  when its PPF is bowed out. 
D)  never. 
A)  when it trades with other nations. 
B)  when it produces inefficiently. 
C)  when its PPF is bowed out. 
D)  never.

Question 19

Markets

Accepted Answer

A)  facilitate trade. 
B)  allow traders to enjoy gains from trade. 
C)  coordinate price information between buyers and sellers. 
D)  All of the above answers are correct. 
A)  facilitate trade. 
B)  allow traders to enjoy gains from trade. 
C)  coordinate price information between buyers and sellers. 
D)  All of the above answers are correct.

Question 20

-In the above figure, point A is ________, and point B is ________.

Accepted Answer

A)  attainable; attainable 
B)  attainable; unattainable 
C)  unattainable; attainable 
D)  unattainable; unattainable 
A)  attainable; attainable 
B)  attainable; unattainable 
C)  unattainable; attainable 
D)  unattainable; unattainable

-In the production possibilities frontier depicted in the figure above, which of the following combinations of hats and bananas is inefficient?

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.

A point inside a production possibilities frontier

What factors generate economic growth?

The fact that individual productive resources are NOT equally useful in all activities

The fact of increasing opportunity costs means that a production possibilities frontier will

Allocative efficiency occurs when it is

A country that has an absolute advantage in producing all goods will

A bowed outward production possibilities frontier occurs when

Any point on a production possibilities frontier (PPF) itself is

Economic growth can be represented by

-In the figure above, moving from production at point d to production at point a requires

A country possesses a comparative advantage in the production of a good if

Comparative advantage is

-Refer to the production possibilities frontier in the figure above. Production point represents an production point.

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue and Fred can gain from trade if Sue changes the and Fred changes the .

A nation can produce at a point outside its PPF

Markets

-In the above figure, point A is , and point B is .

What Is Economics

Demand and Supply

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 Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 2: The Economic Problem

-In the production possibilities frontier depicted in the figure above, which of the following combinations of hats and bananas is inefficient?

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.

A point inside a production possibilities frontier

What factors generate economic growth?

The fact that individual productive resources are NOT equally useful in all activities

The fact of increasing opportunity costs means that a production possibilities frontier will

Allocative efficiency occurs when it is

A country that has an absolute advantage in producing all goods will

A bowed outward production possibilities frontier occurs when

Any point on a production possibilities frontier (PPF) itself is

Economic growth can be represented by

-In the figure above, moving from production at point d to production at point a requires

A country possesses a comparative advantage in the production of a good if

Comparative advantage is

-Refer to the production possibilities frontier in the figure above. Production point ________ represents an ________ production point.

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue and Fred can gain from trade if Sue changes the ________ and Fred changes the ________.

A nation can produce at a point outside its PPF

Markets

-In the above figure, point A is ________, and point B is ________.

What Is Economics

Demand and Supply

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 Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

-Refer to the production possibilities frontier in the figure above. Production point represents an production point.

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue and Fred can gain from trade if Sue changes the and Fred changes the .

-In the above figure, point A is , and point B is .