Question 1

Law of increasing opportunity cost states:

Accepted Answer

A) that opportunity cost decreases as production of one output expands. 
B) that the economy is operating at full employment. 
C) that the stock of technology is increasing. 
D) the production possibilities frontier bows inwards. 
A) that opportunity cost decreases as production of one output expands. 
B) that the economy is operating at full employment. 
C) that the stock of technology is increasing. 
D) the production possibilities frontier bows inwards.

Question 2

Which of the following statements is true?

Accepted Answer

A) Free trade theory suggests that when trade takes place any gains made by one nation comes at the expense of another. 
B) If a hairdresser has a comparative advantage over the cleaner, she should do both: cutting hair and cleaning. 
C) According to the theory of comparative advantage, a nation should specialise in the production of those goods for which it has an absolute advantage. 
D) Specialisation allows nations to trade the surplus of their production. 
A) Free trade theory suggests that when trade takes place any gains made by one nation comes at the expense of another. 
B) If a hairdresser has a comparative advantage over the cleaner, she should do both: cutting hair and cleaning. 
C) According to the theory of comparative advantage, a nation should specialise in the production of those goods for which it has an absolute advantage. 
D) Specialisation allows nations to trade the surplus of their production.

Question 3

If Japan gives up 10 bushels of rice to produce 1 bicycle,while Australia gives up 5 bushels of rice to produce 1 bicycle,then:

Accepted Answer

A) the opportunity cost of producing bicycles in Australia is higher than in Japan. 
B) Japan has a comparative advantage in the production of bicycles. 
C) Australia has an absolute advantage in the production of rice. 
D) total output will be highest if Australia specialises in rice and Japan specialises in bicycles. 
E) total output will be highest if Japan specialises in rice and Australia specialises in bicycles. 
A) the opportunity cost of producing bicycles in Australia is higher than in Japan. 
B) Japan has a comparative advantage in the production of bicycles. 
C) Australia has an absolute advantage in the production of rice. 
D) total output will be highest if Australia specialises in rice and Japan specialises in bicycles. 
E) total output will be highest if Japan specialises in rice and Australia specialises in bicycles.

Question 4

The production possibilities frontier illustrates all of the following concepts except:

Accepted Answer

A) the law of increasing costs. 
B) unlimited wants. 
C) scarcity. 
D) opportunity cost. 
E) availability of resources. 
A) the law of increasing costs. 
B) unlimited wants. 
C) scarcity. 
D) opportunity cost. 
E) availability of resources.

Question 5

The opportunity cost of watching television is:

Accepted Answer

A) the cost of not watching all other programs that appear on other stations. 
B) unable to be estimated because there is no money expenditure involved. 
C) the next best alternative you do instead of watching the program. 
D) zero if it benefits you. 
A) the cost of not watching all other programs that appear on other stations. 
B) unable to be estimated because there is no money expenditure involved. 
C) the next best alternative you do instead of watching the program. 
D) zero if it benefits you.

Question 6

Exhibit 2-8 Production possibilities frontier data
  
-Suppose an economy is faced with the production possibilities table shown in Exhibit 2-8.As additional units of capital goods are produced,the opportunity cost in terms of sacrificed units of consumption goods _____ because of _____.

Accepted Answer

A) decreases; greater efficiency in production 
B) increases; decreasing opportunity cost 
C) increases; the law of increasing costs 
D) increases; greater efficiency in production 
E) decreases; the law of increasing costs 
A) decreases; greater efficiency in production 
B) increases; decreasing opportunity cost 
C) increases; the law of increasing costs 
D) increases; greater efficiency in production 
E) decreases; the law of increasing costs

Question 7

Which would be least likely to cause the production possibilities curve to shift to the right?

Accepted Answer

A) An increase in the labour force. 
B) Improved methods of production. 
C) An increase in the education and training of the labour force. 
D) A decrease in unemployment. 
A) An increase in the labour force. 
B) Improved methods of production. 
C) An increase in the education and training of the labour force. 
D) A decrease in unemployment.

Question 8

A production possibilities frontier shows the various:

Accepted Answer

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

Question 9

An opportunity cost is the total cost of all other alternatives foregone whenever one chooses an alternative.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) 2 million bushels of corn. 
B) 6 million bushels of corn. 
C) 8 million bushels of corn. 
D) 14 million bushels of corn. 
E) not possible to determine. 
A) 2 million bushels of corn. 
B) 6 million bushels of corn. 
C) 8 million bushels of corn. 
D) 14 million bushels of corn. 
E) not possible to determine.

Question 11

The production of capital goods will:

Accepted Answer

A) increase the present productive capacity of the economy. 
B) increase the future productive capacity of the economy. 
C) promote future economic growth. 
D) not change the future productive capacity of the economy. 
E) do both B and C above. 
A) increase the present productive capacity of the economy. 
B) increase the future productive capacity of the economy. 
C) promote future economic growth. 
D) not change the future productive capacity of the economy. 
E) do both B and C above.

Question 12

Which of the following is not true about a production possibilities curve? The curve:

Accepted Answer

A) indicates the combinations of goods and services that can be produced with given technology. 
B) indicates the efficient production points. 
C) indicates the non-efficient production points. 
D) indicates the feasible and non-feasible production points. 
E) indicates which production point will be chosen. 
A) indicates the combinations of goods and services that can be produced with given technology. 
B) indicates the efficient production points. 
C) indicates the non-efficient production points. 
D) indicates the feasible and non-feasible production points. 
E) indicates which production point will be chosen.

Question 13

Economic growth:

Accepted Answer

A) causes an inward shift in the production possibilities curve. 
B) does not cause a shift in the production possibilities curve. 
C) causes an outward shift in the production possibilities curve.D causes a movement along the production possibilities curve. 
A) causes an inward shift in the production possibilities curve. 
B) does not cause a shift in the production possibilities curve. 
C) causes an outward shift in the production possibilities curve.D causes a movement along the production possibilities curve.

Question 14

Compare two economies A and B that start out with identical production possibilities curves.Economy A chooses an efficient point with 6 consumption goods and 3 capital goods,while economy B chooses an efficient point with 4 consumption goods and 5 capital goods.In the future we can predict:

Accepted Answer

A) economy A will operate inefficiently. 
B) economy B will operate inefficiently. 
C) economy A and economy B will grow equally fast. 
D)  economy A will grow faster than economy B. 
E)  economy B will grow faster than economy A. 
A) economy A will operate inefficiently. 
B) economy B will operate inefficiently. 
C) economy A and economy B will grow equally fast. 
D)  economy A will grow faster than economy B. 
E)  economy B will grow faster than economy A.

Question 15

Exhibit 2-11 Production possibilities frontiers
  
-In Exhibit 2-11,the production possibilities curves for a country are shown for the years 2002 and 2003.Suppose this country was located at point A in 2002 and point B in 2003.This economy:

Accepted Answer

A) is worse off in 2003 than in 2002. 
B) has stagnated production in this two-year period. 
C) is more efficient in 2003 than in 2002. 
D) has shown growth between these two years. 
E) has higher unemployment in 2003 than in 2002. 
A) is worse off in 2003 than in 2002. 
B) has stagnated production in this two-year period. 
C) is more efficient in 2003 than in 2002. 
D) has shown growth between these two years. 
E) has higher unemployment in 2003 than in 2002.

Question 16

Exhibit 2-10 Production possibilities frontier
  
-In Exhibit 2-10,to move from U to B,the opportunity cost:

Accepted Answer

A) would be 4 units of consumption goods. 
B) would be 2 units of capital goods. 
C) would be zero. 
D) would be 5 units of capital goods. 
E) cannot be estimated. 
A) would be 4 units of consumption goods. 
B) would be 2 units of capital goods. 
C) would be zero. 
D) would be 5 units of capital goods. 
E) cannot be estimated.

Question 17

Inefficient production occurs:

Accepted Answer

A) at any point inside the production possibilities curve. 
B) at any point along the production possibilities curve. 
C) at any point outside the production possibilities curve. 
D) at a point that cannot be determined. 
A) at any point inside the production possibilities curve. 
B) at any point along the production possibilities curve. 
C) at any point outside the production possibilities curve. 
D) at a point that cannot be determined.

Question 18

Exhibit 2-11 Production possibilities frontiers
  
-In 2002 a country,in Exhibit 2-11,is located at point A on its 2002 production possibilities curve.In 2003 this same country is located at point B on its 2003 production possibility curve.Which of the following could have brought about this shift in production possibilities curves?

Accepted Answer

A) More efficient production in 2002. 
B) A natural disaster in 2002 which leads to a destruction of resources. 
C) Higher unemployment in 2002. 
D) An advance in technology occurring in 2002. 
A) More efficient production in 2002. 
B) A natural disaster in 2002 which leads to a destruction of resources. 
C) Higher unemployment in 2002. 
D) An advance in technology occurring in 2002.

Question 19

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

Question 20

Exhibit 2-9 Production possibilities frontier
  
-In Exhibit 2-9,it can be inferred that:

Accepted Answer

A)  point A is preferred to point B. 
B)  point A is preferred to point E. 
C)  point A is preferred to point D. 
D)  point B is preferred to point A. 
E)  point B is preferred to point C. 
A)  point A is preferred to point B. 
B)  point A is preferred to point E. 
C)  point A is preferred to point D. 
D)  point B is preferred to point A. 
E)  point B is preferred to point C.

Law of increasing opportunity cost states:

Which of the following statements is true?

If Japan gives up 10 bushels of rice to produce 1 bicycle,while Australia gives up 5 bushels of rice to produce 1 bicycle,then:

The production possibilities frontier illustrates all of the following concepts except:

The opportunity cost of watching television is:

Exhibit 2-8 Production possibilities frontier data -Suppose an economy is faced with the production possibilities table shown in Exhibit 2-8.As additional units of capital goods are produced,the opportunity cost in terms of sacrificed units of consumption goods _ because of _.

Which would be least likely to cause the production possibilities curve to shift to the right?

A production possibilities frontier shows the various:

An opportunity cost is the total cost of all other alternatives foregone whenever one chooses an alternative.

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

The production of capital goods will:

Which of the following is not true about a production possibilities curve? The curve:

Economic growth:

Compare two economies A and B that start out with identical production possibilities curves.Economy A chooses an efficient point with 6 consumption goods and 3 capital goods,while economy B chooses an efficient point with 4 consumption goods and 5 capital goods.In the future we can predict:

Exhibit 2-11 Production possibilities frontiers -In Exhibit 2-11,the production possibilities curves for a country are shown for the years 2002 and 2003.Suppose this country was located at point A in 2002 and point B in 2003.This economy:

Exhibit 2-10 Production possibilities frontier -In Exhibit 2-10,to move from U to B,the opportunity cost:

Inefficient production occurs:

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

Exhibit 2-9 Production possibilities frontier -In Exhibit 2-9,it can be inferred 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

Law of increasing opportunity cost states:

Which of the following statements is true?

If Japan gives up 10 bushels of rice to produce 1 bicycle,while Australia gives up 5 bushels of rice to produce 1 bicycle,then:

The production possibilities frontier illustrates all of the following concepts except:

The opportunity cost of watching television is:

Exhibit 2-8 Production possibilities frontier data -Suppose an economy is faced with the production possibilities table shown in Exhibit 2-8.As additional units of capital goods are produced,the opportunity cost in terms of sacrificed units of consumption goods _____ because of _____.

Which would be least likely to cause the production possibilities curve to shift to the right?

A production possibilities frontier shows the various:

An opportunity cost is the total cost of all other alternatives foregone whenever one chooses an alternative.

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

The production of capital goods will:

Which of the following is not true about a production possibilities curve? The curve:

Economic growth:

Compare two economies A and B that start out with identical production possibilities curves.Economy A chooses an efficient point with 6 consumption goods and 3 capital goods,while economy B chooses an efficient point with 4 consumption goods and 5 capital goods.In the future we can predict:

Exhibit 2-11 Production possibilities frontiers -In Exhibit 2-11,the production possibilities curves for a country are shown for the years 2002 and 2003.Suppose this country was located at point A in 2002 and point B in 2003.This economy:

Exhibit 2-10 Production possibilities frontier -In Exhibit 2-10,to move from U to B,the opportunity cost:

Inefficient production occurs:

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

Exhibit 2-9 Production possibilities frontier -In Exhibit 2-9,it can be inferred 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

Exhibit 2-8 Production possibilities frontier data -Suppose an economy is faced with the production possibilities table shown in Exhibit 2-8.As additional units of capital goods are produced,the opportunity cost in terms of sacrificed units of consumption goods _ because of _.