Exam 2: Scarcity, Trade-Offs, and Production Possibilities

Alex must prepare for exams in both biology and economics this week. Assume that the production possibilities curve showing the trade-off between exam scores in biology and economics is concave toward the origin. As Alex moves along the curve spending more of his time studying for economics, what is the effect on the opportunity cost of an hour of preparation for economics?

What is the circular flow of economic activity a model of?

FIGURE 2-2 -Refer to Figure 2-2. Which of the following statements about a movement from Point C to Point B is the most accurate?

Draw a picture of a production possibilities curve. Identify each axis as measuring either guns or butter. Select and label Point A, which is beyond the economy's ability to produce; Point B, which represents an inefficient level of production; Point C, an efficient combination of output in which more guns are produced than units of butter; and Point D, an efficient production point in which more units of butter are produced than guns. Be sure to label each clearly.

Using the production possibilities curve, which of the following illustrates an inefficient use of resources?

FIGURE 2-8 -Refer to Figure 2-8. Assume the economy is operating at Point D. What is the opportunity cost of moving to Point B?

Why is a production possibilities curve negatively sloped?

Which of the following would most likely shift the production possibilities curve inward?

What effect will improving the level of education of the labour force have on the production possibilities curve?

FIGURE 2-4 -Refer to Figure 2-4. Which of the following statements about the movement from Point D to Point E is the most accurate?

Movement from one point on the production possibilities curve to another leads to more of both goods being produced.

FIGURE 2-2 -Refer to Figure 2-2. Which of the following statements about a movement from Point G to Point F is the most accurate?

A virulent disease spreads throughout the population of an economy, causing death and disability. How can this be portrayed on the production possibilities curve?

If additional units of output could be produced at constant opportunity cost, what would the shape of the production possibilities curve be?

Under what circumstances will an economy's production possibility curve be a straight line?

What could one expect approximately two decades after a "baby boom"?

A consulting firm is advising its government clients that their economies really do not need to sacrifice consumption goods today in order to grow. Which of the following options would make it possible for clients to experience growth without making sacrifices?

It can be said that, ultimately, consumers are the driving force behind answers to the three basic economic questions faced by societies. Explain the consumer's role in providing these answers.

FIGURE 2-1 -Refer to Figure 2-1. What does the arrow from the factor markets to the households represent?

FIGURE 2-6 -Refer to Figure 2-6. If the economy moves from Point C to Point A, what is the result?