Question 1

Any point inside the production possibility curve is:

Accepted Answer

A) efficient. 
B) nonfeasible. 
C) inefficient. 
D) optimal. 
A) efficient. 
B) nonfeasible. 
C) inefficient. 
D) optimal.

Question 2

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 3

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 4

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 5

On a production possibilities curve, the opportunity cost of good X, in terms of good Y, is represented by the:

Accepted Answer

A) distance to the curve from the vertical axis. 
B) distance to the curve from the horizontal axis. 
C) movement along the curve. 
D) all of these. 
A) distance to the curve from the vertical axis. 
B) distance to the curve from the horizontal axis. 
C) movement along the curve. 
D) all of these.

Question 6

Over time, an increase in a nation's stock of physical capital will:

Accepted Answer

A) shift the production possibilities curve inward. 
B) cause an economy to operate inside its production possibilities curve. 
C) shift the production possibilities curve outward. 
D) eliminate the basic economic problem of scarcity. 
A) shift the production possibilities curve inward. 
B) cause an economy to operate inside its production possibilities curve. 
C) shift the production possibilities curve outward. 
D) eliminate the basic economic problem of scarcity.

Question 7

Exhibit 2-11 Production possibilities curves   In Exhibit 2-11, which of the following could have caused the production possibilities curve of an economy to shift from the one labeled A to the one labeled B?

Accepted Answer

A) A major natural disaster 
B) An increase in consumption goods production this year 
C) An advance in technology 
D) An increase in unemployment 
E) A decrease in consumption goods production this year 
A) A major natural disaster 
B) An increase in consumption goods production this year 
C) An advance in technology 
D) An increase in unemployment 
E) A decrease in consumption goods production this year

Question 8

Bill has $10 to spend on a Superman, Batman, or an X-Men T-shirt. Bill buys the Superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost?

Accepted Answer

A) The amount he spent, $10. 
B) Nothing, since he got his preferred choice. 
C) The Batman T-shirt. 
D) The X-Men T-shirt. 
A) The amount he spent, $10. 
B) Nothing, since he got his preferred choice. 
C) The Batman T-shirt. 
D) The X-Men T-shirt.

Question 9

Suppose that an economy can produce various combinations of fish and bread. If more people with strong fishing skills became employed in this economy, how would the production possibilities curve (PPC)change?

Accepted Answer

A) The PPC would shift outward on the fish axis, but would not change on the bread axis. 
B) The PPC would shift outward equally along both the fish and the bread axes. 
C) The PPC would shift inward on the bread axis, but would not change on the fish axis. 
D) The PPC would shift inward equally along both the fish and the bread axes. 
A) The PPC would shift outward on the fish axis, but would not change on the bread axis. 
B) The PPC would shift outward equally along both the fish and the bread axes. 
C) The PPC would shift inward on the bread axis, but would not change on the fish axis. 
D) The PPC would shift inward equally along both the fish and the bread axes.

Question 10

Investment is an economic term for the act of increasing the stock of money available for business loans.

Accepted Answer

A) True 
 B)False

Question 11

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.

Question 12

If an economy keeps increasing its capital stock, then over time its production possibilities curve will:

Accepted Answer

A) not move. 
B) shift to the left. 
C) shift to the right. 
D) disappear because scarcity ceases to exist. 
E) demonstrate massive job loss for workers. 
A) not move. 
B) shift to the left. 
C) shift to the right. 
D) disappear because scarcity ceases to exist. 
E) demonstrate massive job loss for workers.

Question 13

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 14

Which would be least likely to cause the production possibilities curve to shift to the right?

Accepted Answer

A) An increase in the labor force. 
B) Improved methods of production. 
C) An increase in the education and training of the labor force. 
D) A decrease in unemployment. 
A) An increase in the labor force. 
B) Improved methods of production. 
C) An increase in the education and training of the labor force. 
D) A decrease in unemployment.

Question 15

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 16

Exhibit 2-7 Production possibilities curve   For the economy shown in Exhibit 2-7 to operate at point C, it must:

Accepted Answer

A) be willing to lower the price of grain. 
B) use its given resources more efficiently than it would at point A. 
C) experience resource unemployment. 
D) experience an increase in its resources and\or an improvement in its technology. 
A) be willing to lower the price of grain. 
B) use its given resources more efficiently than it would at point A. 
C) experience resource unemployment. 
D) experience an increase in its resources and\or an improvement in its technology.

Question 17

If some resources went to waste rather to use in production, the economy would operate outside its production possibility curve.

Accepted Answer

A) True 
 B)False

Question 18

As production of a good increases, opportunity costs rise because:

Accepted Answer

A) there will be more inefficiency. 
B) people always prefer having more goods. 
C) of inflationary pressures. 
D) workers are not equally suited to all tasks. 
A) there will be more inefficiency. 
B) people always prefer having more goods. 
C) of inflationary pressures. 
D) workers are not equally suited to all tasks.

Question 19

The production possibilities curve shows different combinations of goods that:

Accepted Answer

A) can be consumed by households. 
B) can be consumed by firms. 
C) can be produced with the available technology. 
D) are produced and consumed by firms. 
E) are bought and sold in the market. 
A) can be consumed by households. 
B) can be consumed by firms. 
C) can be produced with the available technology. 
D) are produced and consumed by firms. 
E) are bought and sold in the market.

Question 20

An analysis of production possibilities curves indicates that the reason why underdeveloped nations have difficulties increasing their economic growth rates is because:

Accepted Answer

A) low population growth rates mean fewer workers to produce food and other necessities. 
B) their production possibilities curves shift in when resources are increased. 
C) their production possibilities curves are positively sloped, unlike those in more developed economies. 
D) they must cut back their already meager consumption levels to increase capital production. 
E) the opportunity cost of shifting resources from consumption goods to capital goods is relatively low. 
A) low population growth rates mean fewer workers to produce food and other necessities. 
B) their production possibilities curves shift in when resources are increased. 
C) their production possibilities curves are positively sloped, unlike those in more developed economies. 
D) they must cut back their already meager consumption levels to increase capital production. 
E) the opportunity cost of shifting resources from consumption goods to capital goods is relatively low.

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

Any point inside the production possibility curve is:

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

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

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

On a production possibilities curve, the opportunity cost of good X, in terms of good Y, is represented by the:

Over time, an increase in a nation's stock of physical capital will:

Exhibit 2-11 Production possibilities curves In Exhibit 2-11, which of the following could have caused the production possibilities curve of an economy to shift from the one labeled A to the one labeled B?

Bill has $10 to spend on a Superman, Batman, or an X-Men T-shirt. Bill buys the Superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost?

Suppose that an economy can produce various combinations of fish and bread. If more people with strong fishing skills became employed in this economy, how would the production possibilities curve (PPC)change?

Investment is an economic term for the act of increasing the stock of money available for business loans.

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

If an economy keeps increasing its capital stock, then over time its production possibilities curve will:

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

Which would be least likely to cause the production possibilities curve to shift to the right?

Opportunity cost is the:

Exhibit 2-7 Production possibilities curve For the economy shown in Exhibit 2-7 to operate at point C, it must:

If some resources went to waste rather to use in production, the economy would operate outside its production possibility curve.

As production of a good increases, opportunity costs rise because:

The production possibilities curve shows different combinations of goods that:

An analysis of production possibilities curves indicates that the reason why underdeveloped nations have difficulties increasing their economic growth rates is because:

Introducing the Economic Way of Thinking

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters