Question 1

The amount of a good that is given up to produce another good is:

Accepted Answer

A)  its dollar cost. 
B)  its opportunity cost. 
C)  its relative cost. 
D)  its absolute cost. 
E)  all of the above. 
A)  its dollar cost. 
B)  its opportunity cost. 
C)  its relative cost. 
D)  its absolute cost. 
E)  all of the above.

Question 2

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

Accepted Answer

A)  an increase in Economagic's labor supply. 
B)  innovation in the production of goods in Economagic. 
C)  a war that destroyed some of Economagic's resource base. 
D)  unemployment among Economagic's workers. 
E)  Economagic's choice of more consumption and less capital last period. 
A)  an increase in Economagic's labor supply. 
B)  innovation in the production of goods in Economagic. 
C)  a war that destroyed some of Economagic's resource base. 
D)  unemployment among Economagic's workers. 
E)  Economagic's choice of more consumption and less capital last period.

Question 3

Opportunity cost:

Accepted Answer

A)  represents the best alternative sacrificed for a chosen alternative. 
B)  has no relationship to the various alternatives that must be given up when a choice is made in the context of scarcity. 
C)  represents the worst alternative sacrificed for a chosen alternative. 
D)  Represents all possible alternatives sacrificed for a chosen alternative. 
A)  represents the best alternative sacrificed for a chosen alternative. 
B)  has no relationship to the various alternatives that must be given up when a choice is made in the context of scarcity. 
C)  represents the worst alternative sacrificed for a chosen alternative. 
D)  Represents all possible alternatives sacrificed for a chosen alternative.

Question 4

Exhibit 2-13  Production possibilities curve   In Exhibit 2-13, which of the following is not true regarding point H? Point H:

Accepted Answer

A)  cannot be achieved by this economy today. 
B)  could be achieved today if the economy only achieved full employment. 
C)  could be achieved in the future by an enlargement of the economy's resource base. 
D)  could be achieved in the future by an advancement in technology. 
E)  could be achieved in the future by growth in the economy. 
A)  cannot be achieved by this economy today. 
B)  could be achieved today if the economy only achieved full employment. 
C)  could be achieved in the future by an enlargement of the economy's resource base. 
D)  could be achieved in the future by an advancement in technology. 
E)  could be achieved in the future by growth in the economy.

Question 5

Reductions in available resources will cause the production possibilities curve to:

Accepted Answer

A)  expand. 
B)  disappear. 
C)  become vertical. 
D)  shift inward. 
A)  expand. 
B)  disappear. 
C)  become vertical. 
D)  shift inward.

Question 6

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 7

According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study:

Accepted Answer

A)  is positive. 
B)  outweighs the extra cost. 
C)  exceeds the benefits of the previous hour of study. 
D)  will raise your exam score. 
A)  is positive. 
B)  outweighs the extra cost. 
C)  exceeds the benefits of the previous hour of study. 
D)  will raise your exam score.

Question 8

Exhibit 2-10  Production possibilities curve data   Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. As additional units of capital goods are being produced, the number of consumption goods produced must ____, because ____.

Accepted Answer

A)  increase; the production possibility table shows only the maximum efficiency points 
B)  increase; of the law of increasing costs 
C)  decrease; of the law of increasing costs 
D)  decrease; of the finite nature of the resource base 
E)  increase; capital goods will assist in the production of consumer goods 
A)  increase; the production possibility table shows only the maximum efficiency points 
B)  increase; of the law of increasing costs 
C)  decrease; of the law of increasing costs 
D)  decrease; of the finite nature of the resource base 
E)  increase; capital goods will assist in the production of consumer goods

Question 9

Efficient production means producing:

Accepted Answer

A)  less than feasible output for a given amount of resources. 
B)  more than feasible output for a given amount of resources. 
C)  the maximum feasible output for a given amount of resources. 
D)  no more than what is needed. 
E)  in excess of what is needed. 
A)  less than feasible output for a given amount of resources. 
B)  more than feasible output for a given amount of resources. 
C)  the maximum feasible output for a given amount of resources. 
D)  no more than what is needed. 
E)  in excess of what is needed.

Question 10

When making a rational decision which requires the consideration of costs and benefits involved, the opportunity cost of a decision is often not taken into consideration when indeed it should be.

Accepted Answer

A) True 
 B)False

Question 11

The opportunity cost of an activity means the:

Accepted Answer

A)  amount of money the activity costs. 
B)  number of hours that is required to engage in this activity. 
C)  expected gains by engaging in the activity. 
D)  amount of other things that must be sacrificed in order to engage in the activity. 
E)  expected gains minus the expected costs of engaging in the activity. 
A)  amount of money the activity costs. 
B)  number of hours that is required to engage in this activity. 
C)  expected gains by engaging in the activity. 
D)  amount of other things that must be sacrificed in order to engage in the activity. 
E)  expected gains minus the expected costs of engaging in the activity.

Question 12

Exhibit 2-13  Production possibilities curve   In Exhibit 2-13, point D:

Accepted Answer

A)  is preferred to point A. 
B)  is a point of maximum production for this economy this year. 
C)  is not achievable this year because of limited resources. 
D)  could result from some degree of unemployment of inefficiency. 
E)  is preferred to point H. 
A)  is preferred to point A. 
B)  is a point of maximum production for this economy this year. 
C)  is not achievable this year because of limited resources. 
D)  could result from some degree of unemployment of inefficiency. 
E)  is preferred to point H.

Question 13

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 the above. 
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 the above.

Question 14

Exhibit 2-10  Production possibilities curve data   Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. The second unit of capital goods production will cost ____ units of consumption goods, and the third unit of capital goods production will cost ____ units of consumption goods.

Accepted Answer

A)  4; 6 
B)  25; 23 
C)  23; 19 
D)  1; 23 
E)  2; 19 
A)  4; 6 
B)  25; 23 
C)  23; 19 
D)  1; 23 
E)  2; 19

Question 15

Exhibit 2-18  Production possibilities curves   In Exhibit 2-18, 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)  is worse off in Year Y than in Year X. 
B)  has stagnated production in this two year period. 
C)  is more efficient in Year Y than in Year X. 
D)  has shown growth between these two years. 
E)  has higher unemployment in Year Y than in Year X. 
A)  is worse off in Year Y than in Year X. 
B)  has stagnated production in this two year period. 
C)  is more efficient in Year Y than in Year X. 
D)  has shown growth between these two years. 
E)  has higher unemployment in Year Y than in Year X.

Question 16

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 17

Which word best completes the following sentence? A rational decision maker always chooses the option for which marginal benefit is ____ marginal cost.

Accepted Answer

A)  less than 
B)  equal to 
C)  unrelated to 
D)  more than 
A)  less than 
B)  equal to 
C)  unrelated to 
D)  more than

Question 18

The opportunity cost of an economic decision is:

Accepted Answer

A)  the best alternative that was sacrificed. 
B)  the amount of money needed to implement the decision. 
C)  any land, labor, and capital that are wasted. 
D)  all options that were lost due to scarcity. 
A)  the best alternative that was sacrificed. 
B)  the amount of money needed to implement the decision. 
C)  any land, labor, and capital that are wasted. 
D)  all options that were lost due to scarcity.

Question 19

Production possibilities curve analysis includes the idea of:

Accepted Answer

A)  opportunity cost. 
B)  scarcity. 
C)  maximum production choices. 
D)  all of the above. 
A)  opportunity cost. 
B)  scarcity. 
C)  maximum production choices. 
D)  all of the above.

Question 20

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 demand. 
C)  law of supply. 
D)  law of diminishing returns. 
A)  law of increasing opportunity costs. 
B)  law of demand. 
C)  law of supply. 
D)  law of diminishing returns.

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

The amount of a good that is given up to produce another good is:

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

Opportunity cost:

Exhibit 2-13 Production possibilities curve In Exhibit 2-13, which of the following is not true regarding point H? Point H:

Reductions in available resources will cause the production possibilities curve to:

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?

According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study:

Exhibit 2-10 Production possibilities curve data Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. As additional units of capital goods are being produced, the number of consumption goods produced must ____, because ____.

Efficient production means producing:

When making a rational decision which requires the consideration of costs and benefits involved, the opportunity cost of a decision is often not taken into consideration when indeed it should be.

The opportunity cost of an activity means the:

Exhibit 2-13 Production possibilities curve In Exhibit 2-13, point D:

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

Exhibit 2-18 Production possibilities curves In Exhibit 2-18, 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:

The production possibilities curve shows different combinations of goods that:

Which word best completes the following sentence? A rational decision maker always chooses the option for which marginal benefit is ____ marginal cost.

The opportunity cost of an economic decision is:

Production possibilities curve analysis includes the idea of:

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

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

Exhibit 2-10 Production possibilities curve data Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. As additional units of capital goods are being produced, the number of consumption goods produced must , because .