Question 1

Why does the opportunity cost of your college education include money you could have earned working instead of going to college?

Accepted Answer

A)  Because most people who don't go to college work instead. 
B)  Because the best alternative use of your time is working. 
C)  Because people should be productive members of society. 
D)  Because working a full time job takes as much time as going to college. 
A)  Because most people who don't go to college work instead. 
B)  Because the best alternative use of your time is working. 
C)  Because people should be productive members of society. 
D)  Because working a full time job takes as much time as going to college.

Question 2

Which fundamental economic question requires society to decide the mix and quantity of goods and services it will produce?

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 3

The production possibilities curve for the nation of Economania shifts to the right. This could have been caused by:

Accepted Answer

A)  a decrease in Economania's capital stock. 
B)  technological innovation in the production of Economania goods. 
C)  high unemployment in Economania the previous time period. 
D)  Economania producing all consumer goods in the previous period. 
A)  a decrease in Economania's capital stock. 
B)  technological innovation in the production of Economania goods. 
C)  high unemployment in Economania the previous time period. 
D)  Economania producing all consumer goods in the previous period.

Question 4

The production possibility curve is bowed outward from the origin because of:

Accepted Answer

A)  the law of increasing opportunity costs. 
B)  the finite nature of the resource base. 
C)  inefficiency. 
D)  unemployment. 
A)  the law of increasing opportunity costs. 
B)  the finite nature of the resource base. 
C)  inefficiency. 
D)  unemployment.

Question 5

Mikki decides to work five hours the night before her economics exam. She earns an extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the:

Accepted Answer

A)  five hours she worked. 
B)  $75 she earned. 
C)  10 points she lost on her exam. 
D)  time she could have spent watching television. 
A)  five hours she worked. 
B)  $75 she earned. 
C)  10 points she lost on her exam. 
D)  time she could have spent watching television.

Question 6

A production possibility graph slopes down because of:

Accepted Answer

A)  the law of increasing costs. 
B)  scarcity. 
C)  inefficiency. 
D)  unemployment. 
A)  the law of increasing costs. 
B)  scarcity. 
C)  inefficiency. 
D)  unemployment.

Question 7

The agricultural nation of Luckidom is attempting to answer the three fundamental economic questions. Develop the three questions as they relate to this nation.

Accepted Answer

A)  1. Should we produce more wheat and fewer soybeans? 2. Should we farm with equipment or by hand? 3. Do the farmers or the governors receive a higher salary? 
B)  1. Should we farm with equipment or by hand? 2. Do the farmers or the governors receive a higher salary? 3. Should we grow near the riverbed or by the coast? 
C)  1. Do the farmers or the governors receive a higher salary? 2. Should we grow near the riverbed or by the coast? 3. Should we produce more wheat and fewer soybeans? 
D)  1. Should we grow near the riverbed or by the coast? 2. Should we produce more wheat and fewer soybeans? 3. Should we farm with equipment or by hand? 
A)  1. Should we produce more wheat and fewer soybeans? 2. Should we farm with equipment or by hand? 3. Do the farmers or the governors receive a higher salary? 
B)  1. Should we farm with equipment or by hand? 2. Do the farmers or the governors receive a higher salary? 3. Should we grow near the riverbed or by the coast? 
C)  1. Do the farmers or the governors receive a higher salary? 2. Should we grow near the riverbed or by the coast? 3. Should we produce more wheat and fewer soybeans? 
D)  1. Should we grow near the riverbed or by the coast? 2. Should we produce more wheat and fewer soybeans? 3. Should we farm with equipment or by hand?

Question 8

Which of the following is true ?

Accepted Answer

A)  The production possibilities curve indicates that it will be impossible to expand total output with the passage of time. 
B)  As long as resources are scarce, output cannot be increased. 
C)  The size of the economic pie is fixed, and therefore, if one individual has more income, others must have less. 
D)  Over time, the output of goods and services can be increased through human ingenuity and discovery of better ways of doing things. 
A)  The production possibilities curve indicates that it will be impossible to expand total output with the passage of time. 
B)  As long as resources are scarce, output cannot be increased. 
C)  The size of the economic pie is fixed, and therefore, if one individual has more income, others must have less. 
D)  Over time, the output of goods and services can be increased through human ingenuity and discovery of better ways of doing things.

Question 9

The amount of a good that must be given up to produce another good is the concept of:

Accepted Answer

A)  scarcity. 
B)  specialization. 
C)  opportunity cost. 
D)  efficiency. 
A)  scarcity. 
B)  specialization. 
C)  opportunity cost. 
D)  efficiency.

Question 10

In economics, the term marginal refers to:

Accepted Answer

A)  the change or difference from a current situation. 
B)  man-made resources as opposed to natural resources. 
C)  the satisfaction a consumer receives from a good. 
D)  holding everything else constant in the analysis. 
A)  the change or difference from a current situation. 
B)  man-made resources as opposed to natural resources. 
C)  the satisfaction a consumer receives from a good. 
D)  holding everything else constant in the analysis.

Question 11

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. 
A)  not move. 
B)  shift to the left. 
C)  shift to the right. 
D)  disappear because scarcity ceases to exist.

Question 12

A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than:

Accepted Answer

A)  $12.50 per pound. 
B)  $20 per pound. 
C)  $80 per pound. 
D)  $100 per pound. 
A)  $12.50 per pound. 
B)  $20 per pound. 
C)  $80 per pound. 
D)  $100 per pound.

Question 13

Which fundamental economic question requires society to choose the technological and resource mix used to produce goods?

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

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 15

Exhibit 2-2 Production possibilities curve
 
-In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is:

Accepted Answer

A)  the same as moving from A to C . 
B)  the same as moving from A to D . 
C)  the same as moving from B to D . 
D)  the same as moving from B to C . 
A)  the same as moving from A to C . 
B)  the same as moving from A to D . 
C)  the same as moving from B to D . 
D)  the same as moving from B to C .

Question 16

While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. Jordan should purchase the value meal if

Accepted Answer

A)  his marginal cost exceeds his marginal benefit. 
B)  his marginal benefit of the third taco is greater than 50 cents. 
C)  his value of the third taco is less than 50 cents. 
D)  he has $3 in his wallet. 
A)  his marginal cost exceeds his marginal benefit. 
B)  his marginal benefit of the third taco is greater than 50 cents. 
C)  his value of the third taco is less than 50 cents. 
D)  he has $3 in his wallet.

Question 17

While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00, Sally notices that she could get a value meal that contains both the cheeseburger and medium drink and also a medium order of fries for $2.75. She thinks to herself, "Is it worth the extra 25 cents to get the medium fries?" To an economist, Sally's decision is an example of:

Accepted Answer

A)  marginal analysis. 
B)  basing decisions on total, rather than marginal, value. 
C)  an unintended consequence. 
D)  the fallacy of composition. 
A)  marginal analysis. 
B)  basing decisions on total, rather than marginal, value. 
C)  an unintended consequence. 
D)  the fallacy of composition.

Question 18

The question "Should bank withdrawals be conducted by tellers or ATMs?" 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 19

Exhibit 2-4 Production possibilities curve data
      A   B   C   D   E    Capital goods      0     10     20   30   40    Consumer goods  200   180   140   80     0   
In Exhibit 2-4, choose the best production alternative if the only goal of the economy is investment.

Accepted Answer

A)  A 
B)  C 
C)  E 
D)  All production alternatives represent the same level of investment because all are efficient. 
A)  A 
B)  C 
C)  E 
D)  All production alternatives represent the same level of investment because all are efficient.

Question 20

When the production possibilities curve is bowed out, resources are:

Accepted Answer

A)  equally well-suited to production of both goods. 
B)  not being used efficiently. 
C)  not equally suited to the production of both types of goods. 
D)  increasing as more of one good is produced. 
A)  equally well-suited to production of both goods. 
B)  not being used efficiently. 
C)  not equally suited to the production of both types of goods. 
D)  increasing as more of one good is produced.

	A	B	C	D	E
Capital goods	0	10	20	30	40
Consumer goods	200	180	140	80	0

Exam 2: Production Possibilities Opportunity Cost and Economic Growth

Why does the opportunity cost of your college education include money you could have earned working instead of going to college?

Which fundamental economic question requires society to decide the mix and quantity of goods and services it will produce?

The production possibilities curve for the nation of Economania shifts to the right. This could have been caused by:

The production possibility curve is bowed outward from the origin because of:

Mikki decides to work five hours the night before her economics exam. She earns an extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the:

A production possibility graph slopes down because of:

The agricultural nation of Luckidom is attempting to answer the three fundamental economic questions. Develop the three questions as they relate to this nation.

Which of the following is true ?

The amount of a good that must be given up to produce another good is the concept of:

In economics, the term marginal refers to:

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

A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than:

Which fundamental economic question requires society to choose the technological and resource mix used to produce goods?

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

Exhibit 2-2 Production possibilities curve -In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is:

While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. Jordan should purchase the value meal if

The question "Should bank withdrawals be conducted by tellers or ATMs?" is an example of which fundamental economic question?

Exhibit 2-4 Production possibilities curve data A B C D E Capital goods 0 10 20 30 40 Consumer goods 200 180 140 80 0 In Exhibit 2-4, choose the best production alternative if the only goal of the economy is investment.

When the production possibilities curve is bowed out, resources are:

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

Filters

Exhibit 2-4 Production possibilities curve data

A

B

C

D

E

Capital goods
0

10

20

30

40

Consumer goods
200

180

140

80

0

In Exhibit 2-4, choose the best production alternative if the only goal of the economy is investment.