Question 1

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. 
E)  of an inferior quality. 
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. 
E)  of an inferior quality.

Question 2

Susan wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Susan, the marginal cost of the tenth gallon of gasoline is:

Accepted Answer

A)  zero. 
B)  50 cents. 
C)  $1. 
D)  $1.50. 
A)  zero. 
B)  50 cents. 
C)  $1. 
D)  $1.50.

Question 3

Exhibit 2-10  Production possibilities curve data   Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. If this economy chooses the combination of goods at point A,

Accepted Answer

A)  only capital goods are being produced. 
B)  every resource in the economy is utilized in the production of capital goods. 
C)  no capital goods are being used as factors of production. 
D)  every resource in the economy is being used in the production of consumption goods. 
E)  no consumption goods are being produced. 
A)  only capital goods are being produced. 
B)  every resource in the economy is utilized in the production of capital goods. 
C)  no capital goods are being used as factors of production. 
D)  every resource in the economy is being used in the production of consumption goods. 
E)  no consumption goods are being produced.

Question 4

Robinson Crusoe's decision to produce more capital goods and fewer consumer goods in a given period causes:

Accepted Answer

A)  a decrease in the resources available in its economy. 
B)  an increase in economic growth in future periods. 
C)  a decrease in economic growth in future periods. 
D)  no change in the availability of resources in its economy. 
E)  a decrease in the ability to produce goods in the next period. 
A)  a decrease in the resources available in its economy. 
B)  an increase in economic growth in future periods. 
C)  a decrease in economic growth in future periods. 
D)  no change in the availability of resources in its economy. 
E)  a decrease in the ability to produce goods in the next period.

Question 5

Any point on the production possibilities curve illustrates:

Accepted Answer

A)  minimum production combinations. 
B)  maximum production combinations. 
C)  economic growth. 
D)  a nonfeasible production combination. 
A)  minimum production combinations. 
B)  maximum production combinations. 
C)  economic growth. 
D)  a nonfeasible production combination.

Question 6

Graphically express a production possibilities curve. What do points on, inside and outside the curve represent? What does a rightward shift of the curve represent? How is economic growth expressed in terms of the production possibilities model?

Accepted Answer

The production possibilities curve will

Question 7

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n):

Accepted Answer

A)  flattening of the curve. 
B)  movement from one point to another point along the curve. 
C)  outward shift of the curve. 
D)  movement from a point on the curve to a point inside the curve. 
A)  flattening of the curve. 
B)  movement from one point to another point along the curve. 
C)  outward shift of the curve. 
D)  movement from a point on the curve to a point inside the curve.

Question 8

After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. As long as our resources were being used efficiently, the production possibilities curve would suggest that:

Accepted Answer

A)  we will have to give up the production of other goods that could have been produced with these resources. 
B)  we will be able to produce the same amount of other goods as before. 
C)  the military spending will result in an outward shift in the production possibilities curve but that the relief effort will result in an offsetting inward shift. 
D)  we will be unable to devote the resources necessary toward these efforts unless there is an improvement in technology. 
A)  we will have to give up the production of other goods that could have been produced with these resources. 
B)  we will be able to produce the same amount of other goods as before. 
C)  the military spending will result in an outward shift in the production possibilities curve but that the relief effort will result in an offsetting inward shift. 
D)  we will be unable to devote the resources necessary toward these efforts unless there is an improvement in technology.

Question 9

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. 
E)  it is not possible to determine. 
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. 
E)  it is not possible to determine.

Question 10

Exhibit 2-2  Production possibilities curve   In Exhibit 2-2, the slope of the production possibilities curve indicates that the opportunity cost of:

Accepted Answer

A)  coffee is constant. 
B)  coffee is increasing. 
C)  coffee is decreasing. 
D)  corn is increasing. 
E)  corn is decreasing, 
A)  coffee is constant. 
B)  coffee is increasing. 
C)  coffee is decreasing. 
D)  corn is increasing. 
E)  corn is decreasing,

Question 11

Exhibit 2-4  Production possibilities curve data   According to the data in Exhibit 2-4, a total output of 140 units of consumer goods and 10 units of capital goods would:

Accepted Answer

A)  be unobtainable in this economy. 
B)  be an efficient way of using the economy's scarce resources. 
C)  result in the maximum use of the economy's labor force. 
D)  result in a less than maximum rate of growth for this economy. 
A)  be unobtainable in this economy. 
B)  be an efficient way of using the economy's scarce resources. 
C)  result in the maximum use of the economy's labor force. 
D)  result in a less than maximum rate of growth for this economy.

Question 12

Exhibit 2-14  Production possibilities curve   In Exhibit 2-14, this economy was located at point E but has now moved to point F.

Accepted Answer

A)  This would be an impossible move because the economy does not have sufficient resources. 
B)  The rate of unemployment in this economy would have increased. 
C)  Consumption goods production has increased, but capital goods production has decreased. 
D)  The economy has decreased unemployment, but some degree of unemployment still exists. 
E)  This economy has achieved full employment. 
A)  This would be an impossible move because the economy does not have sufficient resources. 
B)  The rate of unemployment in this economy would have increased. 
C)  Consumption goods production has increased, but capital goods production has decreased. 
D)  The economy has decreased unemployment, but some degree of unemployment still exists. 
E)  This economy has achieved full employment.

Question 13

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

Accepted Answer

A)  its resources are not being used efficiently. 
B)  the curve will begin to shift inward. 
C)  the curve will begin to shift outward. 
D)  This is a trick question because an economy cannot produce at a point inside the curve. 
A)  its resources are not being used efficiently. 
B)  the curve will begin to shift inward. 
C)  the curve will begin to shift outward. 
D)  This is a trick question because an economy cannot produce at a point inside the curve.

Question 14

Every economic choice has an opportunity cost.

Accepted Answer

A) True 
 B)False

Question 15

A nation can accelerate its economic growth by:

Accepted Answer

A)  reducing the number of immigrants allowed into the country. 
B)  adding to its stock of capital. 
C)  printing more money. 
D)  imposing tariffs and quotas on imported goods. 
A)  reducing the number of immigrants allowed into the country. 
B)  adding to its stock of capital. 
C)  printing more money. 
D)  imposing tariffs and quotas on imported goods.

Question 16

The opportunity cost of your college education is:

Accepted Answer

A)  c and d. 
B)  d and e. 
C)  the actual dollar cost of your college education. 
D)  your best alternative use of the money you spend for a college education. 
E)  money you could have earned working instead of going to college. 
A)  c and d. 
B)  d and e. 
C)  the actual dollar cost of your college education. 
D)  your best alternative use of the money you spend for a college education. 
E)  money you could have earned working instead of going to college.

Question 17

A point inside a production possibilities curve reflects:

Accepted Answer

A)  the law of increasing costs. 
B)  technological innovation. 
C)  less than full use of resources and technology. 
D)  economic efficiency. 
E)  a way to increase future economic growth. 
A)  the law of increasing costs. 
B)  technological innovation. 
C)  less than full use of resources and technology. 
D)  economic efficiency. 
E)  a way to increase future economic growth.

Question 18

Which of the following statements is true ?

Accepted Answer

A)  An opportunity cost is what must be given up in order to get something else. 
B)  The three fundamental economic questions refer to What to produce? How to produce? and When to produce? 
C)  The term "investment" refers to the purchase of stocks and bonds and other financial securities. 
D)  The law of increasing opportunity cost implies that as production of one type of good is expanded then fewer and fewer of other goods must be given up. 
A)  An opportunity cost is what must be given up in order to get something else. 
B)  The three fundamental economic questions refer to What to produce? How to produce? and When to produce? 
C)  The term "investment" refers to the purchase of stocks and bonds and other financial securities. 
D)  The law of increasing opportunity cost implies that as production of one type of good is expanded then fewer and fewer of other goods must be given up.

Question 19

What to produce, how to produce, and for who to produce are the three fundamental economic questions.

Accepted Answer

A) True 
 B)False

Question 20

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.

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

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

Susan wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Susan, the marginal cost of the tenth gallon of gasoline is:

Exhibit 2-10 Production possibilities curve data Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. If this economy chooses the combination of goods at point A,

Robinson Crusoe's decision to produce more capital goods and fewer consumer goods in a given period causes:

Any point on the production possibilities curve illustrates:

Graphically express a production possibilities curve. What do points on, inside and outside the curve represent? What does a rightward shift of the curve represent? How is economic growth expressed in terms of the production possibilities model?

Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n):

After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. As long as our resources were being used efficiently, the production possibilities curve would suggest that:

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

Exhibit 2-2 Production possibilities curve In Exhibit 2-2, the slope of the production possibilities curve indicates that the opportunity cost of:

Exhibit 2-4 Production possibilities curve data According to the data in Exhibit 2-4, a total output of 140 units of consumer goods and 10 units of capital goods would:

Exhibit 2-14 Production possibilities curve In Exhibit 2-14, this economy was located at point E but has now moved to point F.

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

Every economic choice has an opportunity cost.

A nation can accelerate its economic growth by:

The opportunity cost of your college education is:

A point inside a production possibilities curve reflects:

Which of the following statements is true ?

What to produce, how to produce, and for who to produce are the three fundamental economic questions.

In economics, the term marginal refers to:

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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