Question 1

-The figure above illustrates Mary's production possibilities frontier. If Mary wants to move from point b to point c, she must

Accepted Answer

A)  improve technology. 
B)  increase the accumulation of capital. 
C)  give up some of good Y in order to obtain more of good X. 
D)  give up some of good X in order to obtain more of good Y. 
A)  improve technology. 
B)  increase the accumulation of capital. 
C)  give up some of good Y in order to obtain more of good X. 
D)  give up some of good X in order to obtain more of good Y.

Question 2

Marginal benefit curves slope ________ and marginal cost curves slope ________.

Accepted Answer

A)  upward; upward 
B)  upward; downward 
C)  downward; downward 
D)  downward; upward 
A)  upward; upward 
B)  upward; downward 
C)  downward; downward 
D)  downward; upward

Question 3

-If the United States can increase its production of automobiles without decreasing its production of any other good, the United States must have been producing at a point

Accepted Answer

A)  within its PPF. 
B)  on its PPF. 
C)  beyond its PPF. 
D)  None of the above is correct because increasing the production of one good without decreasing the production of another good is impossible. 
A)  within its PPF. 
B)  on its PPF. 
C)  beyond its PPF. 
D)  None of the above is correct because increasing the production of one good without decreasing the production of another good is impossible.

Question 4

-In the figure above, the opportunity cost of moving from point C to point D is

Accepted Answer

A)  the loss in production in the health care sector. 
B)  the increase in production in the education sector. 
C)  zero. 
D)  the loss in production in the education sector. 
A)  the loss in production in the health care sector. 
B)  the increase in production in the education sector. 
C)  zero. 
D)  the loss in production in the education sector.

Question 5

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

Accepted Answer

A)  society's resources are being inefficiently utilized. 
B)  the PPF curve will shift inward. 
C)  society's resources are being used to produce too many consumer goods. 
D)  economic policy must retard further growth of the economy. 
A)  society's resources are being inefficiently utilized. 
B)  the PPF curve will shift inward. 
C)  society's resources are being used to produce too many consumer goods. 
D)  economic policy must retard further growth of the economy.

Question 6

If the marginal benefit of a good exceeds its marginal cost

Accepted Answer

A)  we've achieved efficient resource use. 
B)  we should produce more to achieve the allocatively efficient use of resources. 
C)  we should produce less to achieve the allocatively efficient use of resources. 
D)  we cannot tell if more or less should be produced to achieve the allocatively efficient use of resources. 
A)  we've achieved efficient resource use. 
B)  we should produce more to achieve the allocatively efficient use of resources. 
C)  we should produce less to achieve the allocatively efficient use of resources. 
D)  we cannot tell if more or less should be produced to achieve the allocatively efficient use of resources.

Question 7

-In the figure above, how can the economy represented by the production possibilities frontier move from point C to point F?

Accepted Answer

A)  Increase the available amount of resources. 
B)  Increase the level of technology. 
C)  Redistribute the existing resources to produce more apples and fewer oranges. 
D)  First move to point B and then move to point F. 
A)  Increase the available amount of resources. 
B)  Increase the level of technology. 
C)  Redistribute the existing resources to produce more apples and fewer oranges. 
D)  First move to point B and then move to point F.

Question 8

-In the figure above, which of the following movements has the largest opportunity cost?

Accepted Answer

A)  from point C to point B 
B)  from point C to point A 
C)  from point B to point A 
D)  from point A to point E 
A)  from point C to point B 
B)  from point C to point A 
C)  from point B to point A 
D)  from point A to point E

Question 9

Resource use is allocatively efficient if the

Accepted Answer

A)  total cost of what the resource produces is less than the total benefit of what is produced. 
B)  total cost of what the resource produces is equal to the total benefit of what is produced. 
C)  marginal benefit of what the resource produces has diminished to zero. 
D)  marginal cost of what the resource produces is equal to the marginal benefit of what is produced. 
A)  total cost of what the resource produces is less than the total benefit of what is produced. 
B)  total cost of what the resource produces is equal to the total benefit of what is produced. 
C)  marginal benefit of what the resource produces has diminished to zero. 
D)  marginal cost of what the resource produces is equal to the marginal benefit of what is produced.

Question 10

Opportunity cost is illustrated in a production possibilities frontier (PPF) by a movement

Accepted Answer

A)  from the region within the PPF to a point on the PPF. 
B)  from the region within the PPF to the region outside of the PPF. 
C)  from the region outside of the PPF to a point on the PPF. 
D)  along the PPF where to gain more of one good it is necessary to give some of another good. 
A)  from the region within the PPF to a point on the PPF. 
B)  from the region within the PPF to the region outside of the PPF. 
C)  from the region outside of the PPF to a point on the PPF. 
D)  along the PPF where to gain more of one good it is necessary to give some of another good.

Question 11

Why is it likely that the United States has an absolute advantage in goods and yet it still ends up importing them from other countries?

Accepted Answer

The United States might have an absolute

Question 12

The production possibilities frontier represents

Accepted Answer

A)  the maximum amount of labor and capital available to society. 
B)  combinations of goods and services among which consumers are indifferent. 
C)  the maximum levels of production that can be attained. 
D)  the maximum rate of growth of capital and labor in a country. 
A)  the maximum amount of labor and capital available to society. 
B)  combinations of goods and services among which consumers are indifferent. 
C)  the maximum levels of production that can be attained. 
D)  the maximum rate of growth of capital and labor in a country.

Question 13

-In the figure above, the allocatively efficient output of computers is

Accepted Answer

A)  2 million per year. 
B)  3 million per year. 
C)  4 million per year. 
D)  the largest amount possible. 
A)  2 million per year. 
B)  3 million per year. 
C)  4 million per year. 
D)  the largest amount possible.

Question 14

If Sam is producing at a point on his production possibilities frontier, then he

Accepted Answer

A)  cannot produce any more of either good. 
B)  can produce more of one good only by producing less of the other. 
C)  will be unable to gain from trade. 
D)  is not subject to scarcity. 
A)  cannot produce any more of either good. 
B)  can produce more of one good only by producing less of the other. 
C)  will be unable to gain from trade. 
D)  is not subject to scarcity.

Question 15

-The Hobbits of the Shire are trying to decide how much bread and how much wine to produce. They ask you to be their economic consultant and give you the information in the first table above about different combinations of wine and bread that they can produce if they are fully employed and doing their best. The Hobbits also give you the information in the second table above about their willingness to pay for wine depending on how much wine they already have. To help the Hobbits solve their problem:
a) Draw the Shire's production possibilities frontier. Put wine on the horizontal axis.
b) What is the opportunity cost of the first two thousand bottles of wine? What is the marginal cost of the 3000th bottle of wine? What is the marginal cost of the 3,000th loaf of bread?
c) Draw the marginal cost of wine curve. What happens to the marginal cost if production of wine increases? Why?
d) Draw the marginal benefit from wine curve on the same figure on which you put the marginal cost curve. Describe the relationship between the quantity of wine produced and the marginal benefit from wine.
e) What combination of bread and wine will you recommend the Hobbits to produce? Why? Explain to the Hobbits why they would be worse off by producing a different combination of bread and wine.

Accepted Answer

@#IMG-DLM& a) The figure above shows the Shire's p

Question 16

Before the first Gulf War in 1991, Kuwait had the capacity to produce a certain amount of oil from its oil wells. After the war, it found that capacity greatly diminished because the oil wells had been set on fire. Draw Kuwait's PPF before and after the war, assuming that the only two goods produced are oil and food. Further assume that setting the oil wells on fire did not affect Kuwait's ability to produce food. Explain why the PPF before the war is different from the PPF after the war.

Accepted Answer

@#IMG-DLM& When a PPF is drawn, we draw it for a f

Question 17

Production points inside the production possibilities frontier

Accepted Answer

A)  are unattainable. 
B)  are attainable only with the full utilization of all resources. 
C)  are associated with unused or misallocated resources. 
D)  result in more rapid growth. 
A)  are unattainable. 
B)  are attainable only with the full utilization of all resources. 
C)  are associated with unused or misallocated resources. 
D)  result in more rapid growth.

Question 18

-Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. Point b represents ________ of banking services and ice cream.

Accepted Answer

A)  allocation efficiency and possibly production efficiency 
B)  neither allocative nor production efficiency 
C)  allocative and production efficiency in the production 
D)  production efficiency and possibly allocative efficiency in the production 
A)  allocation efficiency and possibly production efficiency 
B)  neither allocative nor production efficiency 
C)  allocative and production efficiency in the production 
D)  production efficiency and possibly allocative efficiency in the production

Question 19

China's State Council has encouraged more spending to "improve transportation links and other infrastructure...." It will also "step up its spending on vocational training and other educational programs for adults." www.nytimes.com, Keith Bradsher, October 19, 2008
Suppose that capital goods are on the vertical axis while consumption goods are on the horizontal axis of China's PPF. As a result of enacting the policies, China's PPF will

Accepted Answer

A)  shift outward. 
B)  shift inward. 
C)  rotate outward. 
D)  become flatter. 
A)  shift outward. 
B)  shift inward. 
C)  rotate outward. 
D)  become flatter.

Question 20

A person has a comparative advantage in an activity whenever he or she

Accepted Answer

A)  has an absolute advantage in the activity. 
B)  can perform the activity at a lower opportunity cost than can anyone else. 
C)  can do the activity in less time than anyone else. 
D)  can do everything better than anyone else. 
A)  has an absolute advantage in the activity. 
B)  can perform the activity at a lower opportunity cost than can anyone else. 
C)  can do the activity in less time than anyone else. 
D)  can do everything better than anyone else.

-The figure above illustrates Mary's production possibilities frontier. If Mary wants to move from point b to point c, she must

Marginal benefit curves slope and marginal cost curves slope .

-If the United States can increase its production of automobiles without decreasing its production of any other good, the United States must have been producing at a point

-In the figure above, the opportunity cost of moving from point C to point D is

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

If the marginal benefit of a good exceeds its marginal cost

-In the figure above, how can the economy represented by the production possibilities frontier move from point C to point F?

-In the figure above, which of the following movements has the largest opportunity cost?

Resource use is allocatively efficient if the

Opportunity cost is illustrated in a production possibilities frontier (PPF) by a movement

Why is it likely that the United States has an absolute advantage in goods and yet it still ends up importing them from other countries?

The production possibilities frontier represents

-In the figure above, the allocatively efficient output of computers is

If Sam is producing at a point on his production possibilities frontier, then he

Production points inside the production possibilities frontier

-Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. Point b represents ________ of banking services and ice cream.

A person has a comparative advantage in an activity whenever he or she

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

-The figure above illustrates Mary's production possibilities frontier. If Mary wants to move from point b to point c, she must

Marginal benefit curves slope ________ and marginal cost curves slope ________.

-If the United States can increase its production of automobiles without decreasing its production of any other good, the United States must have been producing at a point

-In the figure above, the opportunity cost of moving from point C to point D is

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

If the marginal benefit of a good exceeds its marginal cost

-In the figure above, how can the economy represented by the production possibilities frontier move from point C to point F?

-In the figure above, which of the following movements has the largest opportunity cost?

Resource use is allocatively efficient if the

Opportunity cost is illustrated in a production possibilities frontier (PPF) by a movement

Why is it likely that the United States has an absolute advantage in goods and yet it still ends up importing them from other countries?

The production possibilities frontier represents

-In the figure above, the allocatively efficient output of computers is

If Sam is producing at a point on his production possibilities frontier, then he

Production points inside the production possibilities frontier

-Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. Point b represents ________ of banking services and ice cream.

A person has a comparative advantage in an activity whenever he or she

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

Marginal benefit curves slope and marginal cost curves slope .