Question 1

Which of the following conditions is true for a nation operating at a point lying inside its production possibilities curve?

Accepted Answer

A)  The nation is experiencing a technological breakthrough in one of its key industries. 
B)  The nation is clearly utilizing its resources efficiently. 
C)  The nation is producing the maximum output that can be produced with a limited quantity of resources. 
D)  The nation is not utilizing its resources efficiently. 
E)  The nation is producing the maximum output that can be produced with its unlimited quantity of resources. 
A)  The nation is experiencing a technological breakthrough in one of its key industries. 
B)  The nation is clearly utilizing its resources efficiently. 
C)  The nation is producing the maximum output that can be produced with a limited quantity of resources. 
D)  The nation is not utilizing its resources efficiently. 
E)  The nation is producing the maximum output that can be produced with its unlimited quantity of resources.

Question 2

Given below is the production possibilities schedule for capital goods and consumer goods.?Table 2.2
  
-Consider Table 2.2. The production possibilities curve [PPC] representing this schedule would be:

Accepted Answer

A)  bowed in. 
B)  bowed out. 
C)  a negatively sloped straight line. 
D)  a positively sloped straight line. 
E)  bowed in if consumer goods are plotted on the horizontal axis and bowed out if capital goods are plotted on the horizontal axis. 
A)  bowed in. 
B)  bowed out. 
C)  a negatively sloped straight line. 
D)  a positively sloped straight line. 
E)  bowed in if consumer goods are plotted on the horizontal axis and bowed out if capital goods are plotted on the horizontal axis.

Question 3

Which of the following is an assumption made while constructing a production possibilities frontier [PPF]?

Accepted Answer

A)  Dynamic technological know-how 
B)  Flexible resource quality 
C)  Fixed resource quantity 
D)  Full and efficient use of resources 
E)  Flexible money supply 
A)  Dynamic technological know-how 
B)  Flexible resource quality 
C)  Fixed resource quantity 
D)  Full and efficient use of resources 
E)  Flexible money supply

Question 4

Betty goes out to enjoy a bouffe with her friend instead of practicing calculus problems for her maths examination that is due the following day. This implies that the opportunity cost of the bouffe to Betty is zero.

Accepted Answer

A) True 
 B)False

Question 5

The figure given below represents an economy producing corn and planes under different economic situations.?Figure 2.2
  
-Refer to Figure 2.2. Assume that the economy experiences a 20% drop in the work force. Which of the following graph(s) in the figure describe(s) the change in the economy's production possibilities curve [PPC]?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph B and C 
E)  Graph A and C 
A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph B and C 
E)  Graph A and C

Question 6

It has been generally observed that most trade in the world occurs between a developed and a less-developed nation rather than between industrial or developed nations.

Accepted Answer

A) True 
 B)False

Question 7

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.?Table 2.4
  
-Refer to Table 2.4. The opportunity cost of a cookie in Iowa is:

Accepted Answer

A)  8 chilies. 
B)  4 chilies. 
C)  96 chilies. 
D)  less than in Ohio. 
E)  the same as in Ohio. 
A)  8 chilies. 
B)  4 chilies. 
C)  96 chilies. 
D)  less than in Ohio. 
E)  the same as in Ohio.

Question 8

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.?Table 2.4
  
-Refer to Table 2.4. Identify the correct statement.

Accepted Answer

A)  Ohio should specialize in the production of cookies and trade with Iowa. 
B)  Iowa should specialize in the production of cookies and trade with Ohio. 
C)  Ohio should specialize in the production of chilies and trade with Iowa. 
D)  Both should specialize in the production of chilies. 
E)  Each of the nations should continue to produce both the commodities and not specialize in any one commodity. 
A)  Ohio should specialize in the production of cookies and trade with Iowa. 
B)  Iowa should specialize in the production of cookies and trade with Ohio. 
C)  Ohio should specialize in the production of chilies and trade with Iowa. 
D)  Both should specialize in the production of chilies. 
E)  Each of the nations should continue to produce both the commodities and not specialize in any one commodity.

Question 9

The table given below represents butter and ham production by two countries Norway and Sweden.?Table 2.5
  
-According to Table 2.5, Norway has a comparative advantage in the production of _____ and an absolute advantage in the production of _____.

Accepted Answer

A)  butter and ham; butter 
B)  ham; butter 
C)  none of the goods; butter 
D)  ham; none of the goods 
E)  butter; ham 
A)  butter and ham; butter 
B)  ham; butter 
C)  none of the goods; butter 
D)  ham; none of the goods 
E)  butter; ham

Question 10

Specialization and trade do not allow individuals, firms, or even nations to acquire goods that lie beyond their production capabilities.

Accepted Answer

A) True 
 B)False

Question 11

There is no cost of using your own savings in your business.

Accepted Answer

A) True 
 B)False

Question 12

The tradeoffs faced by a society can be illustrated in a graph known as the:

Accepted Answer

A)  production operations curve. 
B)  production cost curve. 
C)  production cost model. 
D)  production cost forecast curve. 
E)  production possibilities curve. 
A)  production operations curve. 
B)  production cost curve. 
C)  production cost model. 
D)  production cost forecast curve. 
E)  production possibilities curve.

Question 13

If the resources within a nation are not being fully or efficiently utilized, it means:

Accepted Answer

A)  that the nation is operating at a point inside its production possibilities curve. 
B)  that the nation is operating at a point outside its production possibilities curve. 
C)  that the nation is operating at a point along its production possibilities curve. 
D)  that the nation is probably technologically advanced. 
E)  the government of that nation should seize ownership of the resources in order to attain the necessary efficiencies. 
A)  that the nation is operating at a point inside its production possibilities curve. 
B)  that the nation is operating at a point outside its production possibilities curve. 
C)  that the nation is operating at a point along its production possibilities curve. 
D)  that the nation is probably technologically advanced. 
E)  the government of that nation should seize ownership of the resources in order to attain the necessary efficiencies.

Question 14

Economists refer to the ability of one person or nation to do something with a lower opportunity cost than another as _____.

Accepted Answer

A)  voluntary trade 
B)  specialization 
C)  gains from trade 
D)  absolute advantage 
E)  comparative advantage 
A)  voluntary trade 
B)  specialization 
C)  gains from trade 
D)  absolute advantage 
E)  comparative advantage

Question 15

The difference between what can be produced and consumed without specialization and trade and with specialization and trade is called:

Accepted Answer

A)  comparative advantage. 
B)  a tradeoff. 
C)  marginal cost. 
D)  opportunity cost. 
E)  gains from trade. 
A)  comparative advantage. 
B)  a tradeoff. 
C)  marginal cost. 
D)  opportunity cost. 
E)  gains from trade.

Question 16

Given below is the production possibilities schedule for a small island nation in South Pacific that produces capital and consumer goods.?Table 2.3
  
-Refer to Table 2.3. Identify the correct statement.

Accepted Answer

A)  The best the economy can do is to produce 10 units of capital goods and 4 units of consumer goods. 
B)  The best the economy can do is to produce no capital goods and produce 2 units of consumer goods. 
C)  If the economy produces 10 units of capital goods and no units of consumer goods, there is unemployment. 
D)  If the economy produces 4 units of capital goods, it can manage to produce only 3 units of consumer goods. 
E)  In order to produce the 10th unit of capital goods, 4 units of consumer goods must be forgone. 
A)  The best the economy can do is to produce 10 units of capital goods and 4 units of consumer goods. 
B)  The best the economy can do is to produce no capital goods and produce 2 units of consumer goods. 
C)  If the economy produces 10 units of capital goods and no units of consumer goods, there is unemployment. 
D)  If the economy produces 4 units of capital goods, it can manage to produce only 3 units of consumer goods. 
E)  In order to produce the 10th unit of capital goods, 4 units of consumer goods must be forgone.

Question 17

The figure given below represents the production possibilities curves [PPC] of a country producing wine and cars.?Figure 2.1
  
-Refer to Figure 2.1. Identify the correct statement.

Accepted Answer

A)  If the country is at point A and is using all of its resources, point D is unattainable. 
B)  If the country is at point A and is using all of its resources, Point C is unattainable. 
C)  If the country is at point B and is using all of its resources, there will be an underutilization of resources at point C. 
D)  If the country is at point C, point B is unattainable. 
E)  If the country is at point B, it will not move. 
A)  If the country is at point A and is using all of its resources, point D is unattainable. 
B)  If the country is at point A and is using all of its resources, Point C is unattainable. 
C)  If the country is at point B and is using all of its resources, there will be an underutilization of resources at point C. 
D)  If the country is at point C, point B is unattainable. 
E)  If the country is at point B, it will not move.

Question 18

Which of the following ideas is illustrated by the production possibilities curve [PPC]?

Accepted Answer

A)  There are no limits on the total production feasible in an economy. 
B)  An economy need not decrease the production of one commodity to increase the production of another. 
C)  It is possible to satisfy unlimited wants in an economy through proper investment in research and development. 
D)  When an economy chooses to produce a combination of goods and services, other combinations of goods and services are sacrificed. 
E)  An economy can specialize in the production of only one good. 
A)  There are no limits on the total production feasible in an economy. 
B)  An economy need not decrease the production of one commodity to increase the production of another. 
C)  It is possible to satisfy unlimited wants in an economy through proper investment in research and development. 
D)  When an economy chooses to produce a combination of goods and services, other combinations of goods and services are sacrificed. 
E)  An economy can specialize in the production of only one good.

Question 19

A person has a comparative advantage in producing a good if:

Accepted Answer

A)  that person can produce the good at a lower absolute cost than anyone else. 
B)  that person can produce the good at a lower opportunity cost than anyone else. 
C)  that person has a perfectly elastic demand curve for her good. 
D)  that person spends less on advertizements. 
E)  that person can produce the good at a higher opportunity cost than anyone else. 
A)  that person can produce the good at a lower absolute cost than anyone else. 
B)  that person can produce the good at a lower opportunity cost than anyone else. 
C)  that person has a perfectly elastic demand curve for her good. 
D)  that person spends less on advertizements. 
E)  that person can produce the good at a higher opportunity cost than anyone else.

Question 20

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.?Table 2.4
  
-Refer to Table 2.4. The opportunity cost of a chili in Ohio is:

Accepted Answer

A)  the same as in Iowa. 
B)  1/4 unit of a cookie. 
C)  4 units of cookies. 
D)  1/8 unit of a cookie. 
E)  8 units of cookies. 
A)  the same as in Iowa. 
B)  1/4 unit of a cookie. 
C)  4 units of cookies. 
D)  1/8 unit of a cookie. 
E)  8 units of cookies.

Which of the following conditions is true for a nation operating at a point lying inside its production possibilities curve?

Given below is the production possibilities schedule for capital goods and consumer goods.?Table 2.2 -Consider Table 2.2. The production possibilities curve [PPC] representing this schedule would be:

Which of the following is an assumption made while constructing a production possibilities frontier [PPF]?

Betty goes out to enjoy a bouffe with her friend instead of practicing calculus problems for her maths examination that is due the following day. This implies that the opportunity cost of the bouffe to Betty is zero.

It has been generally observed that most trade in the world occurs between a developed and a less-developed nation rather than between industrial or developed nations.

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.?Table 2.4 -Refer to Table 2.4. The opportunity cost of a cookie in Iowa is:

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.?Table 2.4 -Refer to Table 2.4. Identify the correct statement.

The table given below represents butter and ham production by two countries Norway and Sweden.?Table 2.5 -According to Table 2.5, Norway has a comparative advantage in the production of _ and an absolute advantage in the production of _.

Specialization and trade do not allow individuals, firms, or even nations to acquire goods that lie beyond their production capabilities.

There is no cost of using your own savings in your business.

The tradeoffs faced by a society can be illustrated in a graph known as the:

If the resources within a nation are not being fully or efficiently utilized, it means:

Economists refer to the ability of one person or nation to do something with a lower opportunity cost than another as _____.

The difference between what can be produced and consumed without specialization and trade and with specialization and trade is called:

Given below is the production possibilities schedule for a small island nation in South Pacific that produces capital and consumer goods.?Table 2.3 -Refer to Table 2.3. Identify the correct statement.

The figure given below represents the production possibilities curves [PPC] of a country producing wine and cars.?Figure 2.1 -Refer to Figure 2.1. Identify the correct statement.

Which of the following ideas is illustrated by the production possibilities curve [PPC]?

A person has a comparative advantage in producing a good if:

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.?Table 2.4 -Refer to Table 2.4. The opportunity cost of a chili in Ohio is:

The Wealth of Nations: Ownership and Economic Freedom

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters

Exam 2: Scarcity and Opportunity Costs

Which of the following conditions is true for a nation operating at a point lying inside its production possibilities curve?

Given below is the production possibilities schedule for capital goods and consumer goods.?Table 2.2 -Consider Table 2.2. The production possibilities curve [PPC] representing this schedule would be:

Which of the following is an assumption made while constructing a production possibilities frontier [PPF]?

Betty goes out to enjoy a bouffe with her friend instead of practicing calculus problems for her maths examination that is due the following day. This implies that the opportunity cost of the bouffe to Betty is zero.

It has been generally observed that most trade in the world occurs between a developed and a less-developed nation rather than between industrial or developed nations.

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.?Table 2.4 -Refer to Table 2.4. The opportunity cost of a cookie in Iowa is:

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.?Table 2.4 -Refer to Table 2.4. Identify the correct statement.

The table given below represents butter and ham production by two countries Norway and Sweden.?Table 2.5 -According to Table 2.5, Norway has a comparative advantage in the production of _____ and an absolute advantage in the production of _____.

Specialization and trade do not allow individuals, firms, or even nations to acquire goods that lie beyond their production capabilities.

There is no cost of using your own savings in your business.

The tradeoffs faced by a society can be illustrated in a graph known as the:

If the resources within a nation are not being fully or efficiently utilized, it means:

Economists refer to the ability of one person or nation to do something with a lower opportunity cost than another as _____.

The difference between what can be produced and consumed without specialization and trade and with specialization and trade is called:

Given below is the production possibilities schedule for a small island nation in South Pacific that produces capital and consumer goods.?Table 2.3 -Refer to Table 2.3. Identify the correct statement.

The figure given below represents the production possibilities curves [PPC] of a country producing wine and cars.?Figure 2.1 -Refer to Figure 2.1. Identify the correct statement.

Which of the following ideas is illustrated by the production possibilities curve [PPC]?

A person has a comparative advantage in producing a good if:

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.?Table 2.4 -Refer to Table 2.4. The opportunity cost of a chili in Ohio is:

The Wealth of Nations: Ownership and Economic Freedom

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchapterange Rates and Financial Links Between Countries

Filters

The table given below represents butter and ham production by two countries Norway and Sweden.?Table 2.5 -According to Table 2.5, Norway has a comparative advantage in the production of _ and an absolute advantage in the production of _.