Question 1

Exhibit 2-15 Production possibilities curve
 
In Exhibit 2-15, the shape of the production possibilities curve demonstrates:

Accepted Answer

A)  changing prices. 
B)  economic growth. 
C)  decreases in resources. 
D)  the law of increasing opportunity costs. 
A)  changing prices. 
B)  economic growth. 
C)  decreases in resources. 
D)  the law of increasing opportunity costs.

Question 2

A production possibilities curve shows the:

Accepted Answer

A)  dollar costs of producing two different goods. 
B)  amounts of labor and capital needed to produce one good. 
C)  various combinations of goods that can be produced. 
D)  prices of different goods that are produced in an economy. 
A)  dollar costs of producing two different goods. 
B)  amounts of labor and capital needed to produce one good. 
C)  various combinations of goods that can be produced. 
D)  prices of different goods that are produced in an economy.

Question 3

Exhibit 2-9 Production possibilities curve
 
-If the economy represented in Exhibit 2-9 is operating at Point W:

Accepted Answer

A)  no tractor product must be forgone to produce more food in the current period. 
B)  resources are not fully used. 
C)  some tractor production must be forgone to produce more food in the current period. 
D)  increased food production would be impossible. 
A)  no tractor product must be forgone to produce more food in the current period. 
B)  resources are not fully used. 
C)  some tractor production must be forgone to produce more food in the current period. 
D)  increased food production would be impossible.

Question 4

The opportunity cost to a city for using local tax revenues to construct a new park is the:

Accepted Answer

A)  best alternative foregone by building the park. 
B)  dollar cost of constructing the new park. 
C)  dollar cost of the old park. 
D)  increased taxes necessary to pay for maintenance of the new park. 
A)  best alternative foregone by building the park. 
B)  dollar cost of constructing the new park. 
C)  dollar cost of the old park. 
D)  increased taxes necessary to pay for maintenance of the new park.

Question 5

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)  the opportunity cost of shifting resources from consumption goods to capital goods is relatively low. 
D)  they must cut back their already meager consumption levels to increase capital production. 
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)  the opportunity cost of shifting resources from consumption goods to capital goods is relatively low. 
D)  they must cut back their already meager consumption levels to increase capital production.

Question 6

A production possibilities curve has "good X" on the horizontal axis and "good Y" on the vertical axis. On this diagram, the opportunity cost of good X, in terms of good Y, is represented by the:

Accepted Answer

A)  distance to the curve from the horizontal axis. 
B)  distance to the curve from the vertical axis. 
C)  distance from the origin to the curve. 
D)  change in Y for each change in X along the curve. 
A)  distance to the curve from the horizontal axis. 
B)  distance to the curve from the vertical axis. 
C)  distance from the origin to the curve. 
D)  change in Y for each change in X along the curve.

Question 7

Suppose a 50-seat bus is about to depart from Boston to New York with five empty seats. The total cost to the bus company of the trip is $1,000 and no services, food, or beverages are provided to passengers. Use marginal analysis to develop conditions under which the bus company would be willing to sell tickets for the five remaining seats.

Accepted Answer

A)  The bus company would be willing to sell the five remaining tickets at a price of at least $20 each to cover the cost per seat of those passengers. 
B)  The bus company would be willing to sell the five remaining tickets at any price over $0 because there is no additional cost of five more passengers. 
C)  The bus company would not be willing to sell the five remaining tickets because it already covered the cost of the trip with the revenue from the 45 passengers on board. 
D)  The bus company would be willing to sell the five remaining tickets at a price of at least $25 each because they need to make a profit on each passenger. 
A)  The bus company would be willing to sell the five remaining tickets at a price of at least $20 each to cover the cost per seat of those passengers. 
B)  The bus company would be willing to sell the five remaining tickets at any price over $0 because there is no additional cost of five more passengers. 
C)  The bus company would not be willing to sell the five remaining tickets because it already covered the cost of the trip with the revenue from the 45 passengers on board. 
D)  The bus company would be willing to sell the five remaining tickets at a price of at least $25 each because they need to make a profit on each passenger.

Question 8

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

Accepted Answer

The three fundamental economic questions

Question 9

Economic growth may be represented by a(n):

Accepted Answer

A)  leftward shift of a production possibilities curve. 
B)  outward shift of a production possibilities curve. 
C)  movement along a production possibilities curve. 
D)  production possibilities curve that remains fixed. 
A)  leftward shift of a production possibilities curve. 
B)  outward shift of a production possibilities curve. 
C)  movement along a production possibilities curve. 
D)  production possibilities curve that remains fixed.

Question 10

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)  accounting cost. 
A)  opportunity cost. 
B)  utility cost. 
C)  scarcity expense. 
D)  accounting cost.

Question 11

When an economy's resources are not fully employed, then it must be true that the:

Accepted Answer

A)  production point is located outside and to the right of the production possibilities curve. 
B)  production point is located along the production possibilities curve. 
C)  production point is located inside and to the left of the production possibilities curve. 
D)  production possibilities curve shifts to the left. 
A)  production point is located outside and to the right of the production possibilities curve. 
B)  production point is located along the production possibilities curve. 
C)  production point is located inside and to the left of the production possibilities curve. 
D)  production possibilities curve shifts to the left.

Question 12

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 13

The question "Should more capital goods be produced instead of consumer goods?" is an example of which fundamental economic question?

Accepted Answer

A)  The What to Produce question. 
B)  The Why to Produce question. 
C)  The How to Produce question. 
D)  The For Whom to Produce question. 
A)  The What to Produce question. 
B)  The Why to Produce question. 
C)  The How to Produce question. 
D)  The For Whom to Produce question.

Question 14

Why must every nation answer the three fundamental economic questions?

Accepted Answer

A)  because of differences in the distribution of resources 
B)  because some nations have better production technology 
C)  because some nations are wealthy and others are poor 
D)  because of the problem of scarcity 
A)  because of differences in the distribution of resources 
B)  because some nations have better production technology 
C)  because some nations are wealthy and others are poor 
D)  because of the problem of scarcity

Question 15

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 16

Exhibit 2-18 Production possibilities curves
 
-In Exhibit 2-18, a country is located at point A on its Year X production possibilities curve. In Year Y this same country is located at point B on its Year Y production possibilities curve. Which of the following could have brought about this outward shift in production possibilities curves?

Accepted Answer

A)  More efficient production in Year X. 
B)  A natural disaster in Year X which leads to a destruction of resources. 
C)  Higher unemployment in Year X. 
D)  An advance in technology occurred in Year X. 
A)  More efficient production in Year X. 
B)  A natural disaster in Year X which leads to a destruction of resources. 
C)  Higher unemployment in Year X. 
D)  An advance in technology occurred in Year X.

Question 17

Exhibit 2-17 Production possibilities curve
 
In Exhibit 2-17, if countries A and B currently have the same production possibilities curve (PPC) as given in the figure, but this year country A locates at point A on its PPC and country B locates at point B on its PPC, then country A:

Accepted Answer

A)  is more efficient than country B. 
B)  will grow at a faster rate than country B. 
C)  will grow at a slower rate than country B. 
D)  is producing more capital goods than country B. 
A)  is more efficient than country B. 
B)  will grow at a faster rate than country B. 
C)  will grow at a slower rate than country B. 
D)  is producing more capital goods than country B.

Question 18

Exhibit 2-14 Production possibilities curve
 
In Exhibit 2-14, which of the following explains this economy's movement from point E to point F?

Accepted Answer

A)  The rate of unemployment in this economy would have increased. 
B)  Consumption goods production has increased, but capital goods production has decreased. 
C)  The economy has decreased unemployment, but some degree of unemployment still exists 
D)  The economy has achieved full employment. 
A)  The rate of unemployment in this economy would have increased. 
B)  Consumption goods production has increased, but capital goods production has decreased. 
C)  The economy has decreased unemployment, but some degree of unemployment still exists 
D)  The economy has achieved full employment.

Question 19

Which of the following is not one of the three fundamental economic questions?

Accepted Answer

A)  Where to produce? 
B)  For whom to produce? 
C)  How to produce? 
D)  What to produce? 
A)  Where to produce? 
B)  For whom to produce? 
C)  How to produce? 
D)  What to produce?

Question 20

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

Accepted Answer

A)  its resources are not being used efficiently. 
B)  opportunity costs are decreasing as more of one good is traded for the other good. 
C)  technology has improved. 
D)  there is full employment of all resources. 
A)  its resources are not being used efficiently. 
B)  opportunity costs are decreasing as more of one good is traded for the other good. 
C)  technology has improved. 
D)  there is full employment of all resources.

Exam 2: Production Possibilities Opportunity Cost and Economic Growth

Exhibit 2-15 Production possibilities curve In Exhibit 2-15, the shape of the production possibilities curve demonstrates:

A production possibilities curve shows the:

Exhibit 2-9 Production possibilities curve -If the economy represented in Exhibit 2-9 is operating at Point W:

The opportunity cost to a city for using local tax revenues to construct a new park is the:

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

A production possibilities curve has "good X" on the horizontal axis and "good Y" on the vertical axis. On this diagram, the opportunity cost of good X, in terms of good Y, is represented by the:

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

Economic growth may be represented by a(n):

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

When an economy's resources are not fully employed, then it must be true that the:

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?

The question "Should more capital goods be produced instead of consumer goods?" is an example of which fundamental economic question?

Why must every nation answer the three fundamental economic questions?

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

Exhibit 2-17 Production possibilities curve In Exhibit 2-17, if countries A and B currently have the same production possibilities curve (PPC) as given in the figure, but this year country A locates at point A on its PPC and country B locates at point B on its PPC, then country A:

Exhibit 2-14 Production possibilities curve In Exhibit 2-14, which of the following explains this economy's movement from point E to point F?

Which of the following is not one of the three fundamental economic questions?

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

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

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

Understanding Direct and Inverse Relationships between Variables

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