Question 1

A bowed out production possibility frontier shows that the

Accepted Answer

A)  opportunity cost of a good is constant as more of the good is produced. 
B)  opportunity cost of a good decreases as more of the good is produced. 
C)  opportunity cost of a good increases as more of the good is produced. 
D)  opportunity cost relationship is linear. 
E)  opportunity cost of producing another good is negative. 
A)  opportunity cost of a good is constant as more of the good is produced. 
B)  opportunity cost of a good decreases as more of the good is produced. 
C)  opportunity cost of a good increases as more of the good is produced. 
D)  opportunity cost relationship is linear. 
E)  opportunity cost of producing another good is negative.

Question 2

In the production possibilities model,the vertical axis measures ________ and the horizontal axis measures ________.

Accepted Answer

A)  the quantity of a good or service; the quantity of another good or service 
B)  the price of a good or service; the quantity of the good or service 
C)  the price of a good or service; the price of another good or service 
D)  the quantity of a good or service; time 
E)  people's wants; the quantity of a good or service 
A)  the quantity of a good or service; the quantity of another good or service 
B)  the price of a good or service; the quantity of the good or service 
C)  the price of a good or service; the price of another good or service 
D)  the quantity of a good or service; time 
E)  people's wants; the quantity of a good or service

Question 3

-The above figure shows the production possibility frontier for a country.Suppose the country is producing at point E.What would be the opportunity cost to increase the production of wine to 9 thousand bottles?

Accepted Answer

A)  12 tons of rice 
B)  15 thousand bottles of wine 
C)  9 thousand bottles of wine 
D)  3 tons of rice 
E)  Nothing, it is a free lunch. 
A)  12 tons of rice 
B)  15 thousand bottles of wine 
C)  9 thousand bottles of wine 
D)  3 tons of rice 
E)  Nothing, it is a free lunch.

Question 4

Which of the following is the best definition of economic growth?

Accepted Answer

A)  The investment in capital and consumption goods by an economy. 
B)  The opportunity cost of capital. 
C)  The opportunity cost of consumption. 
D)  Increased development of land and entrepreneurship. 
E)  The sustained expansion of production possibilities. 
A)  The investment in capital and consumption goods by an economy. 
B)  The opportunity cost of capital. 
C)  The opportunity cost of consumption. 
D)  Increased development of land and entrepreneurship. 
E)  The sustained expansion of production possibilities.

Question 5

-The figure above shows Prakash's and Gail's production possibilities frontiers for writing books and magazine articles.
a.What is Prakash's opportunity cost of a book? What is Gail's opportunity cost? Who has the comparative advantage in writing books?
b.Who has the comparative advantage in writing magazine articles?
c.According to their comparative advantages,who should write books and who should write magazine articles?

Accepted Answer

a.In a year,Prakash can write 2 books or

Question 6

Points inside the PPF are all

Accepted Answer

A)  unattainable and have fully employed resources. 
B)  attainable and have fully employed resources. 
C)  unattainable and have some unemployed resources. 
D)  attainable and have some unemployed resources. 
E)  unaffordable. 
A)  unattainable and have fully employed resources. 
B)  attainable and have fully employed resources. 
C)  unattainable and have some unemployed resources. 
D)  attainable and have some unemployed resources. 
E)  unaffordable.

Question 7

Explain why a movement from a point inside a production possibilities frontier to the production possibilities frontier is described as a free lunch and a movement along a production possibilities frontier is described as a tradeoff.

Accepted Answer

The key point to answer this question is

Question 8

-The above figure shows the PPF for a country that produces computers and computer factories.The nation's production possibilities frontier is PPF₀ .At which of the following production points would the economy grow most rapidly?

Accepted Answer

A)  Point A 
B)  Point B 
C)  Point C 
D)  It makes no difference among the three points because they are all production efficient. 
E)  More information is needed to answer the question. 
A)  Point A 
B)  Point B 
C)  Point C 
D)  It makes no difference among the three points because they are all production efficient. 
E)  More information is needed to answer the question.

Question 9

-The table above presents the production possibilities frontier for a nation.Using the information in the table,moving from possibility C to B means that

Accepted Answer

A)  4 units of capital goods are given up to get 55 units of consumption goods. 
B)  2 units of capital goods are given up to get 55 additional units of consumption goods. 
C)  4 units of capital goods are given up to get 10 additional units of consumption goods. 
D)  4 units of capital goods are given up to get 45 units of consumption goods. 
E)  2 units of capital goods are given up to get 10 additional units of consumption goods. 
A)  4 units of capital goods are given up to get 55 units of consumption goods. 
B)  2 units of capital goods are given up to get 55 additional units of consumption goods. 
C)  4 units of capital goods are given up to get 10 additional units of consumption goods. 
D)  4 units of capital goods are given up to get 45 units of consumption goods. 
E)  2 units of capital goods are given up to get 10 additional units of consumption goods.

Question 10

How can a combination of goods be unattainable?

Accepted Answer

A combination of goods can be

Question 11

-The table above gives the production possibilities frontier for two countries,Anaconda and Bear.The table shows that

Accepted Answer

A)  Bear achieves production efficiency only at its production point A. 
B)  Anaconda achieves production efficiency only at its production point A. 
C)  Anaconda has a comparative advantage in the production of corn. 
D)  Bear has an absolute advantage in the production of both goods. 
E)  Both answers A and B are correct. 
A)  Bear achieves production efficiency only at its production point A. 
B)  Anaconda achieves production efficiency only at its production point A. 
C)  Anaconda has a comparative advantage in the production of corn. 
D)  Bear has an absolute advantage in the production of both goods. 
E)  Both answers A and B are correct.

Question 12

What is gained when people engage in specialization and trade?

Accepted Answer

A)  Specialization and trade allow people to consume outside their individual production possibilities frontiers. 
B)  Specialization and trade allow people to consume inside their production possibilities frontiers. 
C)  Specialization and trade allow people to consume at a point on their production possibilities frontiers. 
D)  Specialization and trade allow people to produce outside their individual production possibilities frontiers. 
E)  There are no gains from specialization and trade. 
A)  Specialization and trade allow people to consume outside their individual production possibilities frontiers. 
B)  Specialization and trade allow people to consume inside their production possibilities frontiers. 
C)  Specialization and trade allow people to consume at a point on their production possibilities frontiers. 
D)  Specialization and trade allow people to produce outside their individual production possibilities frontiers. 
E)  There are no gains from specialization and trade.

Question 13

-The table above shows a nation's production possibilities frontier.The opportunity cost of a robot between combination D and E is

Accepted Answer

A)  4 pizzas. 
B)  34 pizzas. 
C)  30 pizzas. 
D)  1/4 of a pizza. 
E)  undefined because neither point is production efficient. 
A)  4 pizzas. 
B)  34 pizzas. 
C)  30 pizzas. 
D)  1/4 of a pizza. 
E)  undefined because neither point is production efficient.

Question 14

Moving along the production possibilities frontier itself illustrates

Accepted Answer

A)  the existence of tradeoffs. 
B)  the existence of unemployment of some factors of production. 
C)  the benefits of free lunches. 
D)  how free lunches can be exploited through trade. 
E)  how tradeoffs need not occur if the economy is efficient. 
A)  the existence of tradeoffs. 
B)  the existence of unemployment of some factors of production. 
C)  the benefits of free lunches. 
D)  how free lunches can be exploited through trade. 
E)  how tradeoffs need not occur if the economy is efficient.

Question 15

To find the opportunity cost of producing one more unit of any product while on the production possibilities frontier requires

Accepted Answer

A)  setting the amounts of the two products equal to each other. 
B)  setting the change in one product equal to the change in the other product. 
C)  dividing the amount of the product forgone by the amount of the product gained. 
D)  subtracting the change in the product whose production increased from the change in the product whose production decreased. 
E)  None of these describe how to find opportunity cost. 
A)  setting the amounts of the two products equal to each other. 
B)  setting the change in one product equal to the change in the other product. 
C)  dividing the amount of the product forgone by the amount of the product gained. 
D)  subtracting the change in the product whose production increased from the change in the product whose production decreased. 
E)  None of these describe how to find opportunity cost.

Question 16

-The above figure shows the PPF for a country that produces computers and computer factories.Which of the following would most likely shift the PPF from PPF₀ in one year to PPF₁ in the next?

Accepted Answer

A)  Nothing, because the PPF does not shift. 
B)  Increase the production of computers from 9 million (at point 
C)  to 11 million (at point 
B) . 
C)  Decrease the production of computers from 11 million (at point 
B)  to 9 million (at point 
C)  and build 9 new computer factories. 
D)  Increase consumption of both computers and computer factories. 
E)  Decrease production of both computers and computer factories by moving into the interior of the PPF. 
A)  Nothing, because the PPF does not shift. 
B)  Increase the production of computers from 9 million (at point 
C)  to 11 million (at point 
B) . 
C)  Decrease the production of computers from 11 million (at point 
B)  to 9 million (at point 
C)  and build 9 new computer factories. 
D)  Increase consumption of both computers and computer factories. 
E)  Decrease production of both computers and computer factories by moving into the interior of the PPF.

Question 17

-The figure above represents the production possibilities frontier for a country.
a.The nation is currently producing at point B and wants to move to point C.What is the opportunity cost of the move?
b.The nation is currently producing at point B and wants to move to point A.What is the opportunity cost of the move?
c.The nation is currently producing at point D and wants to move to point B.What is the opportunity cost of the move?

Accepted Answer

a.By moving from point B to point C,the

Question 18

The fact of increasing opportunity cost when moving on the PPF means that

Accepted Answer

A)  to increase the production of one product requires larger and larger sacrifices of the other good. 
B)  to decrease the production of one product requires smaller and smaller sacrifices of the other good. 
C)  to increase the production of one product requires smaller and smaller sacrifices of the other good. 
D)  when the government forces a movement from one point on the PPF to another point, no production is lost. 
E)  the PPF will be a negatively sloped straight line. 
A)  to increase the production of one product requires larger and larger sacrifices of the other good. 
B)  to decrease the production of one product requires smaller and smaller sacrifices of the other good. 
C)  to increase the production of one product requires smaller and smaller sacrifices of the other good. 
D)  when the government forces a movement from one point on the PPF to another point, no production is lost. 
E)  the PPF will be a negatively sloped straight line.

Question 19

-The table above gives four production possibilities for airplanes and cruise ships.In possibility A,how many resources are devoted to the production of airplanes?

Accepted Answer

A)  0 
B)  few 
C)  most 
D)  all 
E)  It is impossible to tell without more information about the prices of airplanes and cruise ships. 
A)  0 
B)  few 
C)  most 
D)  all 
E)  It is impossible to tell without more information about the prices of airplanes and cruise ships.

Question 20

In order for Ireland to grow more potatoes,wool production must decrease.This situation is an example of

Accepted Answer

A)  producing at a point that lies beyond the PPF. 
B)  zero opportunity cost. 
C)  opportunity benefit. 
D)  a free lunch. 
E)  a tradeoff. 
A)  producing at a point that lies beyond the PPF. 
B)  zero opportunity cost. 
C)  opportunity benefit. 
D)  a free lunch. 
E)  a tradeoff.

A bowed out production possibility frontier shows that the

In the production possibilities model,the vertical axis measures and the horizontal axis measures .

-The above figure shows the production possibility frontier for a country.Suppose the country is producing at point E.What would be the opportunity cost to increase the production of wine to 9 thousand bottles?

Which of the following is the best definition of economic growth?

Points inside the PPF are all

Explain why a movement from a point inside a production possibilities frontier to the production possibilities frontier is described as a free lunch and a movement along a production possibilities frontier is described as a tradeoff.

-The above figure shows the PPF for a country that produces computers and computer factories.The nation's production possibilities frontier is PPF₀ .At which of the following production points would the economy grow most rapidly?

-The table above presents the production possibilities frontier for a nation.Using the information in the table,moving from possibility C to B means that

How can a combination of goods be unattainable?

-The table above gives the production possibilities frontier for two countries,Anaconda and Bear.The table shows that

What is gained when people engage in specialization and trade?

-The table above shows a nation's production possibilities frontier.The opportunity cost of a robot between combination D and E is

Moving along the production possibilities frontier itself illustrates

To find the opportunity cost of producing one more unit of any product while on the production possibilities frontier requires

-The above figure shows the PPF for a country that produces computers and computer factories.Which of the following would most likely shift the PPF from PPF₀ in one year to PPF₁ in the next?

The fact of increasing opportunity cost when moving on the PPF means that

-The table above gives four production possibilities for airplanes and cruise ships.In possibility A,how many resources are devoted to the production of airplanes?

In order for Ireland to grow more potatoes,wool production must decrease.This situation is an example of

Getting Started

The Usand Global Economies

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

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Exam 3: The Economic Problem

A bowed out production possibility frontier shows that the

In the production possibilities model,the vertical axis measures ________ and the horizontal axis measures ________.

-The above figure shows the production possibility frontier for a country.Suppose the country is producing at point E.What would be the opportunity cost to increase the production of wine to 9 thousand bottles?

Which of the following is the best definition of economic growth?

Points inside the PPF are all

Explain why a movement from a point inside a production possibilities frontier to the production possibilities frontier is described as a free lunch and a movement along a production possibilities frontier is described as a tradeoff.

-The above figure shows the PPF for a country that produces computers and computer factories.The nation's production possibilities frontier is PPF₀ .At which of the following production points would the economy grow most rapidly?

-The table above presents the production possibilities frontier for a nation.Using the information in the table,moving from possibility C to B means that

How can a combination of goods be unattainable?

-The table above gives the production possibilities frontier for two countries,Anaconda and Bear.The table shows that

What is gained when people engage in specialization and trade?

-The table above shows a nation's production possibilities frontier.The opportunity cost of a robot between combination D and E is

Moving along the production possibilities frontier itself illustrates

To find the opportunity cost of producing one more unit of any product while on the production possibilities frontier requires

-The above figure shows the PPF for a country that produces computers and computer factories.Which of the following would most likely shift the PPF from PPF₀ in one year to PPF₁ in the next?

The fact of increasing opportunity cost when moving on the PPF means that

-The table above gives four production possibilities for airplanes and cruise ships.In possibility A,how many resources are devoted to the production of airplanes?

In order for Ireland to grow more potatoes,wool production must decrease.This situation is an example of

Getting Started

The Usand Global Economies

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

In the production possibilities model,the vertical axis measures and the horizontal axis measures .