Question 1

Exhibit 2-13  Production possibilities curve   In Exhibit 2-13, point H is:

Accepted Answer

A)  achievable with today's resource base. 
B)  not achievable today because the economy has not achieved full employment. 
C)  not achievable today because the economy is not at its maximum point of efficiency. 
D)  not achievable today because of waste. 
E)  not achievable today because of inadequate production capacity. 
A)  achievable with today's resource base. 
B)  not achievable today because the economy has not achieved full employment. 
C)  not achievable today because the economy is not at its maximum point of efficiency. 
D)  not achievable today because of waste. 
E)  not achievable today because of inadequate production capacity.

Question 2

Which of the following is correctly lists the three fundamental economic questions?

Accepted Answer

A)  If to produce? Why to produce? When to produce? 
B)  If to produce? What to produce? How to produce? 
C)  Why to produce? What to produce? How to produce? 
D)  What to produce? How to produce? For whom to produce? 
A)  If to produce? Why to produce? When to produce? 
B)  If to produce? What to produce? How to produce? 
C)  Why to produce? What to produce? How to produce? 
D)  What to produce? How to produce? For whom to produce?

Question 3

Exhibit 2-5  Production possibilities curve   In Exhibit 2-5, movement between which of the following points represents an increase in economic efficiency?

Accepted Answer

A)  A to C. 
B)  C to D. 
C)  D to B. 
D)  A to B. 
E)  A to D. 
A)  A to C. 
B)  C to D. 
C)  D to B. 
D)  A to B. 
E)  A to D.

Question 4

In order for an economy to shift its production possibilities curve rightward, it must:

Accepted Answer

A)  suffer resource unemployment. 
B)  experience an increase in its resources and/or an improvement in its technology. 
C)  use its resources more efficiently than at points along the curve. 
D)  all of the above. 
A)  suffer resource unemployment. 
B)  experience an increase in its resources and/or an improvement in its technology. 
C)  use its resources more efficiently than at points along the curve. 
D)  all of the above.

Question 5

One of the assumptions underlying the production possibilities curve for any given economy is that:

Accepted Answer

A)  the state of technology changes. 
B)  there is an unlimited supply of resources. 
C)  there is full employment of resources when the economy is on the curve. 
D)  goods can be produced outside the curve. 
A)  the state of technology changes. 
B)  there is an unlimited supply of resources. 
C)  there is full employment of resources when the economy is on the curve. 
D)  goods can be produced outside the curve.

Question 6

With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an economy?

Accepted Answer

A)  passage of legislation reducing the workweek to 30 hours. 
B)  instituting a tax policy encouraging consumption at the expense of investment. 
C)  instituting a tax policy encouraging investment at the expense of consumption. 
D)  an increase in the marginal income tax rate, which would reduce the work effort of individuals. 
A)  passage of legislation reducing the workweek to 30 hours. 
B)  instituting a tax policy encouraging consumption at the expense of investment. 
C)  instituting a tax policy encouraging investment at the expense of consumption. 
D)  an increase in the marginal income tax rate, which would reduce the work effort of individuals.

Question 7

The opportunity cost of producing a good or service is the good or service that is foregone by choosing to produce another good with the same resources in a given period of time.

Accepted Answer

A) True 
 B)False

Question 8

A production possibilities curve shows the various:

Accepted Answer

A)  prices that can be charged for capital and consumption goods. 
B)  combinations of prices and outputs that can be produced. 
C)  combinations of goods the economy has the capacity to produce. 
D)  combinations of resources and prices that the economy can produce. 
A)  prices that can be charged for capital and consumption goods. 
B)  combinations of prices and outputs that can be produced. 
C)  combinations of goods the economy has the capacity to produce. 
D)  combinations of resources and prices that the economy can produce.

Question 9

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 10

The ability of an economy to produce greater levels of output in the same period of time is called:

Accepted Answer

A)  positive economics. 
B)  negative economics. 
C)  economic growth. 
D)  marginal productivity. 
A)  positive economics. 
B)  negative economics. 
C)  economic growth. 
D)  marginal productivity.

Question 11

Only socialist economies need to answer the What, How , and For Whom.

Accepted Answer

A) True 
 B)False

Question 12

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.

Question 13

Exhibit 2-15  Production possibilities curve   In Exhibit 2-15, if the economy moves from point L to point M, the opportunity cost of producing 10 more capital goods is:

Accepted Answer

A)  40 less consumer goods. 
B)  25 less consumer goods. 
C)  15 less consumer goods. 
D)  15 more consumer goods. 
E)  25 more consumer goods. 
A)  40 less consumer goods. 
B)  25 less consumer goods. 
C)  15 less consumer goods. 
D)  15 more consumer goods. 
E)  25 more consumer goods.

Question 14

Exhibit 2-19  Production possibilities curves   In Exhibit 2-19, the production possibilities curves for a country are shown for the years Year X and Year Y. Suppose this country was located at point A in Year X and point B in Year Y. This economy:

Accepted Answer

A)  has lower unemployment in Year Y than in Year X. 
B)  was more efficient in Year X than in Year Y. 
C)  achieved full employment in Year X and in Year Y. 
D)  showed no growth between Year X and Year Y. 
E)  is worse off in Year Y than in Year X. 
A)  has lower unemployment in Year Y than in Year X. 
B)  was more efficient in Year X than in Year Y. 
C)  achieved full employment in Year X and in Year Y. 
D)  showed no growth between Year X and Year Y. 
E)  is worse off in Year Y than in Year X.

Question 15

Exhibit 2-2  Production possibilities curve   The production possibilities in Exhibit 2-2 indicates that the opportunity cost of corn is:

Accepted Answer

A)  increasing. 
B)  decreasing. 
C)  zero. 
D)  constant. 
E)  indeterminate. 
A)  increasing. 
B)  decreasing. 
C)  zero. 
D)  constant. 
E)  indeterminate.

Question 16

In economics, investment refers to the process of accumulating:

Accepted Answer

A)  capital goods. 
B)  consumer goods. 
C)  money. 
D)  stocks and bonds. 
A)  capital goods. 
B)  consumer goods. 
C)  money. 
D)  stocks and bonds.

Question 17

Marginal analysis examines the effects of additions to or subtractions from a current situation.

Accepted Answer

A) True 
 B)False

Question 18

If more of one good can be produced without producing less of another output, the economy must have been operating efficiently.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

Accepted Answer

A)  an increase in the labor force 
B)  an increase in unemployment 
C)  development of an improved technological method of production 
D)  a decrease in the stock of physical capital 
A)  an increase in the labor force 
B)  an increase in unemployment 
C)  development of an improved technological method of production 
D)  a decrease in the stock of physical capital

Question 20

Opportunity cost is the best alternative sacrificed for a chosen alternative.

Accepted Answer

A) True 
 B)False

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

Exhibit 2-13 Production possibilities curve In Exhibit 2-13, point H is:

Which of the following is correctly lists the three fundamental economic questions?

Exhibit 2-5 Production possibilities curve In Exhibit 2-5, movement between which of the following points represents an increase in economic efficiency?

In order for an economy to shift its production possibilities curve rightward, it must:

One of the assumptions underlying the production possibilities curve for any given economy is that:

With time, which one of the following strategies would most likely result in an outward shift in the production possibilities curve of an economy?

The opportunity cost of producing a good or service is the good or service that is foregone by choosing to produce another good with the same resources in a given period of time.

A production possibilities curve shows the various:

Opportunity cost is the:

The ability of an economy to produce greater levels of output in the same period of time is called:

Only socialist economies need to answer the What, How , and For Whom.

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

Exhibit 2-15 Production possibilities curve In Exhibit 2-15, if the economy moves from point L to point M, the opportunity cost of producing 10 more capital goods is:

Exhibit 2-19 Production possibilities curves In Exhibit 2-19, the production possibilities curves for a country are shown for the years Year X and Year Y. Suppose this country was located at point A in Year X and point B in Year Y. This economy:

Exhibit 2-2 Production possibilities curve The production possibilities in Exhibit 2-2 indicates that the opportunity cost of corn is:

In economics, investment refers to the process of accumulating:

Marginal analysis examines the effects of additions to or subtractions from a current situation.

If more of one good can be produced without producing less of another output, the economy must have been operating efficiently.

Which of the following will be most likely to cause the production possibilities curve for a country to shift inward?

Opportunity cost is the best alternative sacrificed for a chosen alternative.

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

Filters