Question 1

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. B

Question 2

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. C

Question 3

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 better off 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. 
E)  is more efficient than country B. 
A)  is better off 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. 
E)  is more efficient than country B. C

Question 4

A nation can accelerate economic growth by increasing its production of consumer goods.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

Compare two economies A and B that start out with identical production possibilities curves. Economy A chooses an efficient point with 6 consumption goods and 3 capital goods, while economy B also chooses an efficient point, but with 4 consumption goods and 5 capital goods. In the future we can predict:

Accepted Answer

A)  economy A will operate inefficiently. 
B)  economy B will operate inefficiently. 
C)  economy A and economy B will grow equally fast. 
D)  economy A will grow faster than economy B. 
E)  economy B will grow faster than economy A. 
A)  economy A will operate inefficiently. 
B)  economy B will operate inefficiently. 
C)  economy A and economy B will grow equally fast. 
D)  economy A will grow faster than economy B. 
E)  economy B will grow faster than economy A.

Question 7

On a production possibilities curve diagram, greater entrepreneurship:

Accepted Answer

A)  causes the curve to shift outward. 
B)  keeps the economy on the curve. 
C)  prevents movement along the curve. 
D)  keeps the economy at the corners of the curve. 
A)  causes the curve to shift outward. 
B)  keeps the economy on the curve. 
C)  prevents movement along the curve. 
D)  keeps the economy at the corners of the curve.

Question 8

The law of increasing costs holds that the opportunity cost:

Accepted Answer

A)  of a good decreases as the quantity of the good produced increases. 
B)  of a good is proportional to the resources used in its production. 
C)  of a good increases as more of the good is produced. 
D)  of a good does not change with the resources used its production. 
E)  changes as more of the good is produced. 
A)  of a good decreases as the quantity of the good produced increases. 
B)  of a good is proportional to the resources used in its production. 
C)  of a good increases as more of the good is produced. 
D)  of a good does not change with the resources used its production. 
E)  changes as more of the good is produced.

Question 9

The production possibilities curve shows that:

Accepted Answer

A)  some of one good must be given up to get more of another good in an economy that is operating efficiently. 
B)  no output combination is impossible. 
C)  an economy that is operating efficiently can have more of one good without giving up some of another good. 
D)  scarcity can be eliminated. 
A)  some of one good must be given up to get more of another good in an economy that is operating efficiently. 
B)  no output combination is impossible. 
C)  an economy that is operating efficiently can have more of one good without giving up some of another good. 
D)  scarcity can be eliminated.

Question 10

Exhibit 2-16  Production possibilities curve   From the information in Exhibit 2-16, which of the following points on the production possibilities curve are attainable with the resources and technology currently available?

Accepted Answer

A)  A, B, C, E, U 
B)  A, B, C, D, W 
C)  E, U, W 
D)  B, C, D, U 
E)  A, B, C, E 
A)  A, B, C, E, U 
B)  A, B, C, D, W 
C)  E, U, W 
D)  B, C, D, U 
E)  A, B, C, E

Question 11

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 12

The law of increasing opportunity costs causes the production possibilities curve to:

Accepted Answer

A)  be a straight line. 
B)  slope upwards. 
C)  have a bowed-out shape. 
D)  shift inward. 
A)  be a straight line. 
B)  slope upwards. 
C)  have a bowed-out shape. 
D)  shift inward.

Question 13

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 14

On the production possibilities curve, a movement between points that yields a loss of one good in order to raise the output of another good will maintain efficient production.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 2-1  Production possibilities curve data   In Exhibit 2-1, the opportunity cost of producing the fourth unit of capital is:

Accepted Answer

A)  0. 
B)  1 unit of consumption goods. 
C)  2 units of consumption goods. 
D)  4 units of consumption goods. 
E)  there is not enough information to estimate the opportunity cost. 
A)  0. 
B)  1 unit of consumption goods. 
C)  2 units of consumption goods. 
D)  4 units of consumption goods. 
E)  there is not enough information to estimate the opportunity cost.

Question 16

If society leaves some of its resources unemployed, then it will be operating at a point:

Accepted Answer

A)  beneath its production possibilities curve. 
B)  at a corner of its production possibilities curve. 
C)  anywhere along its production possibilities curve. 
D)  outside of its production possibilities curve. 
A)  beneath its production possibilities curve. 
B)  at a corner of its production possibilities curve. 
C)  anywhere along its production possibilities curve. 
D)  outside of its production possibilities curve.

Question 17

Given a production possibilities curve, a point:

Accepted Answer

A)  inside the curve represents unemployment. 
B)  on the curve represents full employment. 
C)  outside the curve is currently unattainable. 
D)  all of the above. 
A)  inside the curve represents unemployment. 
B)  on the curve represents full employment. 
C)  outside the curve is currently unattainable. 
D)  all of the above.

Question 18

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 19

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. For Jordan, the marginal cost of the third taco would be:

Accepted Answer

A)  zero. 
B)  50 cents. 
C)  80 cents. 
D)  $1. 
A)  zero. 
B)  50 cents. 
C)  80 cents. 
D)  $1.

Question 20

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.

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

Economic growth may be represented by a(n):

Any point inside the production possibility curve is:

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:

A nation can accelerate economic growth by increasing its production of consumer goods.

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

On a production possibilities curve diagram, greater entrepreneurship:

The law of increasing costs holds that the opportunity cost:

The production possibilities curve shows that:

Exhibit 2-16 Production possibilities curve From the information in Exhibit 2-16, which of the following points on the production possibilities curve are attainable with the resources and technology currently available?

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

The law of increasing opportunity costs causes the production possibilities curve to:

Which of the following is true ?

On the production possibilities curve, a movement between points that yields a loss of one good in order to raise the output of another good will maintain efficient production.

Exhibit 2-1 Production possibilities curve data In Exhibit 2-1, the opportunity cost of producing the fourth unit of capital is:

If society leaves some of its resources unemployed, then it will be operating at a point:

Given a production possibilities curve, a point:

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

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. For Jordan, the marginal cost of the third taco would be:

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

Introducing the Economic Way of Thinking

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

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

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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