Question 1

The economy experiences economic growth if:

Accepted Answer

A) the resource base decreases. 
B) the production possibilities frontier shifts inwards. 
C) the number of workers decreases. 
D) the production possibilities frontier shifts outwards. 
A) the resource base decreases. 
B) the production possibilities frontier shifts inwards. 
C) the number of workers decreases. 
D) the production possibilities frontier shifts outwards.

Question 2

Suppose rice can be produced in country X at a lower cost than in country Y,while tuna can be produced in country Y at a lower cost than in country X.International competition will:

Accepted Answer

A) destroy the rice market in both countries. 
B) drive X to specialise in rice and Y to specialise in tuna. 
C) drive Y to specialise in rice and X to specialise in tuna. 
D) cause both X and Y to reject international specialisation. 
E) result in lower total output of rice and tuna. 
A) destroy the rice market in both countries. 
B) drive X to specialise in rice and Y to specialise in tuna. 
C) drive Y to specialise in rice and X to specialise in tuna. 
D) cause both X and Y to reject international specialisation. 
E) result in lower total output of rice and tuna.

Question 3

The production possibility curve illustrates the important economic concept of opportunity cost.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 2-7 Production possibilities frontier
  
-Which of the following moves from one point to another in Exhibit 2-7 would represent an increase in economic efficiency?

Accepted Answer

A) Z to W. 
B) W to Y. 
C) Z to X. 
D) X to W. 
A) Z to W. 
B) W to Y. 
C) Z to X. 
D) X to W.

Question 5

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) less than what is needed. 
D) the maximum feasible output for a given amount of resources. 
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) less than what is needed. 
D) the maximum feasible output for a given amount of resources. 
E) in excess of what is needed.

Question 6

The production possibility curve is bowed outward from the origin because of:

Accepted Answer

A) the law of decreasing opportunity costs. 
B) the finite nature of the resource base. 
C) inefficiency. 
D) the changes in the opportunity cost due to different efficiencies of the same resource in different use. 
E) unemployment. 
A) the law of decreasing opportunity costs. 
B) the finite nature of the resource base. 
C) inefficiency. 
D) the changes in the opportunity cost due to different efficiencies of the same resource in different use. 
E) unemployment.

Question 7

Why must every nation answer the three fundamental economic questions?

Accepted Answer

A) Because of increased international trade and cooperation. 
B) Because of the problem of scarcity. 
C) Because rich nations must subsidise the development of poor nations. 
D) Because some nations are more successful than others. 
A) Because of increased international trade and cooperation. 
B) Because of the problem of scarcity. 
C) Because rich nations must subsidise the development of poor nations. 
D) Because some nations are more successful than others.

Question 8

A production possibility graph slopes down because of:

Accepted Answer

A) the law of increasing costs. 
B) non-homogeneous resources. 
C) inefficiency. 
D) an improper output mix. 
E) unemployment. 
A) the law of increasing costs. 
B) non-homogeneous resources. 
C) inefficiency. 
D) an improper output mix. 
E) unemployment.

Question 9

Bill has $10 that he can spend on a Superman action figure,a Batman graphic novel or an X-Men T-shirt.Bill decides to buy the action figure,even though the graphic novel was a close second choice.What is the opportunity cost of buying the action figure?

Accepted Answer

A) The amount he spends: $10. 
B) Nothing, since he got his preferred choice. 
C) The Batman graphic novel. 
D) The X-Men T-shirt. 
A) The amount he spends: $10. 
B) Nothing, since he got his preferred choice. 
C) The Batman graphic novel. 
D) The X-Men T-shirt.

Question 10

Suppose a new method is discovered that allows the production of more grapes for the given level of inputs.Assume that this method cannot be used in car production.What will be the impact on the production possibilities curve? The production possibilities curve will:

Accepted Answer

A) shift to the right. 
B) shift to the right only for grape production. 
C) shift to the left for car production. 
D) not change. 
A) shift to the right. 
B) shift to the right only for grape production. 
C) shift to the left for car production. 
D) not change.

Question 11

Exhibit 2-2 Production possibilities frontier
  
-In Exhibit 2-2,what is the maximum possible production of coffee if production of corn has decreased from 4 to 2 million bushels:

Accepted Answer

A) 0 millions of bushels. 
B) 2 millions of bushels. 
C) 5 millions of bushels. 
D) 4 millions of bushels. 
A) 0 millions of bushels. 
B) 2 millions of bushels. 
C) 5 millions of bushels. 
D) 4 millions of bushels.

Question 12

A farmer is deciding whether or not to add fertiliser to his or her crops.If the farmer adds 1 kilogram of fertiliser per hectare,the value of the resulting crops rises from $80 to $100 per hectare.According to marginal analysis,the farmer should add fertiliser if it costs less than:

Accepted Answer

A) $12.50 per kilogram. 
B) $20 per kilogram. 
C) $80 per kilogram. 
D) $100 per kilogram. 
A) $12.50 per kilogram. 
B) $20 per kilogram. 
C) $80 per kilogram. 
D) $100 per kilogram.

Question 13

When making a rational decision which requires the consideration of costs and benefits involved,the opportunity cost of a decision is always taken into consideration.

Accepted Answer

A) True 
 B)False

Question 14

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 meagre 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 meagre consumption levels to increase capital production. 
E) the opportunity cost of shifting resources from consumption goods to capital goods is relatively low.

Question 15

Exhibit 2-6 Production possibilities frontier data
  
-As shown in Exhibit 2-6,a total output of zero units of capital goods and 10 units of consumer goods is:

Accepted Answer

A) the maximum rate of output for this economy. 
B) an inefficient way of using the economy's scarce resources. 
C) the result of maximum use of the economy's labour force. 
D) unobtainable in this economy. 
A) the maximum rate of output for this economy. 
B) an inefficient way of using the economy's scarce resources. 
C) the result of maximum use of the economy's labour force. 
D) unobtainable in this economy.

Question 16

Marginal analysis is the effect of:

Accepted Answer

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

Question 17

One of the assumptions underlying the production possibilities frontier or 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 18

In order to achieve economic growth,investment in capital accumulation is more important than investment in education and other labour productivity enhancing programs.

Accepted Answer

A) True 
 B)False

Question 19

The production possibilities frontier demonstrates the basic economic principle that:

Accepted Answer

A) market-based economies are more efficient. 
B) supply will determine demand in the economy. 
C) the production of more capital goods this year will cause the economy to produce fewer consumption goods next year. 
D) to produce more of any one thing, assuming full employment, the economy must produce less of something else. 
E) to produce more consumption goods this year requires the production of more capital goods this year. 
A) market-based economies are more efficient. 
B) supply will determine demand in the economy. 
C) the production of more capital goods this year will cause the economy to produce fewer consumption goods next year. 
D) to produce more of any one thing, assuming full employment, the economy must produce less of something else. 
E) to produce more consumption goods this year requires the production of more capital goods this year.

Question 20

Exhibit 2-6 Production possibilities frontier data
  
-As shown in Exhibit 2-6,the concept of increasing opportunity costs is reflected in the fact that:

Accepted Answer

A) the quantity of consumer goods produced can never be zero. 
B) the labour force in the economy is homogeneous. 
C) greater amounts of capital goods must be sacrificed to produce an additional 2 units of consumer goods. 
D) a graph of the production data is a downward-sloping straight line. 
A) the quantity of consumer goods produced can never be zero. 
B) the labour force in the economy is homogeneous. 
C) greater amounts of capital goods must be sacrificed to produce an additional 2 units of consumer goods. 
D) a graph of the production data is a downward-sloping straight line.

The economy experiences economic growth if:

Suppose rice can be produced in country X at a lower cost than in country Y,while tuna can be produced in country Y at a lower cost than in country X.International competition will:

The production possibility curve illustrates the important economic concept of opportunity cost.

Exhibit 2-7 Production possibilities frontier -Which of the following moves from one point to another in Exhibit 2-7 would represent an increase in economic efficiency?

Efficient production means producing:

The production possibility curve is bowed outward from the origin because of:

Why must every nation answer the three fundamental economic questions?

A production possibility graph slopes down because of:

Bill has $10 that he can spend on a Superman action figure,a Batman graphic novel or an X-Men T-shirt.Bill decides to buy the action figure,even though the graphic novel was a close second choice.What is the opportunity cost of buying the action figure?

Suppose a new method is discovered that allows the production of more grapes for the given level of inputs.Assume that this method cannot be used in car production.What will be the impact on the production possibilities curve? The production possibilities curve will:

Exhibit 2-2 Production possibilities frontier -In Exhibit 2-2,what is the maximum possible production of coffee if production of corn has decreased from 4 to 2 million bushels:

A farmer is deciding whether or not to add fertiliser to his or her crops.If the farmer adds 1 kilogram of fertiliser per hectare,the value of the resulting crops rises from $80 to $100 per hectare.According to marginal analysis,the farmer should add fertiliser if it costs less than:

When making a rational decision which requires the consideration of costs and benefits involved,the opportunity cost of a decision is always taken into consideration.

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

Exhibit 2-6 Production possibilities frontier data -As shown in Exhibit 2-6,a total output of zero units of capital goods and 10 units of consumer goods is:

Marginal analysis is the effect of:

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

In order to achieve economic growth,investment in capital accumulation is more important than investment in education and other labour productivity enhancing programs.

The production possibilities frontier demonstrates the basic economic principle that:

Exhibit 2-6 Production possibilities frontier data -As shown in Exhibit 2-6,the concept of increasing opportunity costs is reflected in the fact that:

Thinking like an economist

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters

Exam 2: Production possibilities and opportunity cost

The economy experiences economic growth if:

Suppose rice can be produced in country X at a lower cost than in country Y,while tuna can be produced in country Y at a lower cost than in country X.International competition will:

The production possibility curve illustrates the important economic concept of opportunity cost.

Exhibit 2-7 Production possibilities frontier -Which of the following moves from one point to another in Exhibit 2-7 would represent an increase in economic efficiency?

Efficient production means producing:

The production possibility curve is bowed outward from the origin because of:

Why must every nation answer the three fundamental economic questions?

A production possibility graph slopes down because of:

Bill has $10 that he can spend on a Superman action figure,a Batman graphic novel or an X-Men T-shirt.Bill decides to buy the action figure,even though the graphic novel was a close second choice.What is the opportunity cost of buying the action figure?

Suppose a new method is discovered that allows the production of more grapes for the given level of inputs.Assume that this method cannot be used in car production.What will be the impact on the production possibilities curve? The production possibilities curve will:

Exhibit 2-2 Production possibilities frontier -In Exhibit 2-2,what is the maximum possible production of coffee if production of corn has decreased from 4 to 2 million bushels:

A farmer is deciding whether or not to add fertiliser to his or her crops.If the farmer adds 1 kilogram of fertiliser per hectare,the value of the resulting crops rises from $80 to $100 per hectare.According to marginal analysis,the farmer should add fertiliser if it costs less than:

When making a rational decision which requires the consideration of costs and benefits involved,the opportunity cost of a decision is always taken into consideration.

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

Exhibit 2-6 Production possibilities frontier data -As shown in Exhibit 2-6,a total output of zero units of capital goods and 10 units of consumer goods is:

Marginal analysis is the effect of:

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

In order to achieve economic growth,investment in capital accumulation is more important than investment in education and other labour productivity enhancing programs.

The production possibilities frontier demonstrates the basic economic principle that:

Exhibit 2-6 Production possibilities frontier data -As shown in Exhibit 2-6,the concept of increasing opportunity costs is reflected in the fact that:

Thinking like an economist

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Perfect competition

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters