Question 1

FIGURE 2-8
  
-Refer to Figure 2-8.In order to move from Point D to Point C,what will the economy have to give up?

Accepted Answer

A) 200 bushels of soybeans 
B) 200 bushels of wheat 
C) 100 bushels of wheat 
D) nothing 
A) 200 bushels of soybeans 
B) 200 bushels of wheat 
C) 100 bushels of wheat 
D) nothing

Question 2

FIGURE 2-14
  
-Refer to the figure.Why is the opportunity cost of producing a mountain bike different when moving from Point A to Point B than when moving from Point C to Point D along the production possibilities curve?

Accepted Answer

Some resources are more substitutable ac

Question 3

Any output combination outside the production possibilities curve is attainable in the current period only if prices decrease.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following describes when an economy may be operating at a point inside the production possibilities curve?

Accepted Answer

A) if production resources are being used efficiently 
B) if a substantial amount of machinery is idle 
C) if a substantial amount of labour is employed 
D) if technological progress enables the economy to produce quantities of output otherwise unattainable 
A) if production resources are being used efficiently 
B) if a substantial amount of machinery is idle 
C) if a substantial amount of labour is employed 
D) if technological progress enables the economy to produce quantities of output otherwise unattainable

Question 5

Draw a picture of a production possibilities curve.Identify each axis as measuring either guns or butter.Select and label Point A,which is beyond the economy's ability to produce; Point B,which represents an inefficient level of production; Point C,an efficient combination of output in which more guns are produced than units of butter; and Point D,an efficient production point in which more units of butter are produced than guns.Be sure to label each clearly.

Accepted Answer

Diagrams will vary.A

Question 6

Which of the following is NOT a payment made to households in exchange for the use of factors of production?

Accepted Answer

A) taxes 
B) wages 
C) rent 
D) interest 
A) taxes 
B) wages 
C) rent 
D) interest

Question 7

FIGURE 2-2
  
-Refer to Figure 2-2.Which of the following statements about a movement from Point B to Point C is the most accurate?

Accepted Answer

A) It involves sacrificing bread in order to produce a greater quantity of wine. 
B) It involves no sacrifice, as the opportunity cost of production is zero everywhere along the production possibilities curve. 
C) It involves sacrificing wine in order to produce a greater quantity of bread. 
D) It will increase the level of unemployment in the economy. 
A) It involves sacrificing bread in order to produce a greater quantity of wine. 
B) It involves no sacrifice, as the opportunity cost of production is zero everywhere along the production possibilities curve. 
C) It involves sacrificing wine in order to produce a greater quantity of bread. 
D) It will increase the level of unemployment in the economy.

Question 8

In a market economy,government officials make most production decisions in a centralized manner.

Accepted Answer

A) True 
 B)False

Question 9

When does the law of increasing opportunity costs apply?

Accepted Answer

A) when management is disorganized and production is inefficient 
B) when resources are free 
C) when resources are not equally adaptive among potential productive uses 
D) when market forces do not lead to equality between price and opportunity cost 
A) when management is disorganized and production is inefficient 
B) when resources are free 
C) when resources are not equally adaptive among potential productive uses 
D) when market forces do not lead to equality between price and opportunity cost

Question 10

FIGURE 2-2
  
-Refer to Figure 2-2.Which of the following statements about a movement from Point G to Point F is the most accurate?

Accepted Answer

A) It involves sacrificing wine in order to produce a greater quantity of bread. 
B) It will increase the level of unemployment in the economy. 
C) It involves no sacrifice of output, as both more wine and bread can be produced if available resources are used more efficiently. 
D) It involves sacrificing bread in order to produce a greater quantity of wine. 
A) It involves sacrificing wine in order to produce a greater quantity of bread. 
B) It will increase the level of unemployment in the economy. 
C) It involves no sacrifice of output, as both more wine and bread can be produced if available resources are used more efficiently. 
D) It involves sacrificing bread in order to produce a greater quantity of wine.

Question 11

Which of the following would most likely shift the production possibilities curve inward?

Accepted Answer

A) an increase in the production of capital goods 
B) an increase in the number of hours factories are in use 
C) technological progress 
D) a decrease in the average number of hours worked per week 
A) an increase in the production of capital goods 
B) an increase in the number of hours factories are in use 
C) technological progress 
D) a decrease in the average number of hours worked per week

Question 12

FIGURE 2-4
  
-Refer to Figure 2-4.Which of the following statements about the movement from Point D to Point E is the most accurate?

Accepted Answer

A) It results in an increase in the production of both capital and consumption goods this period. 
B) It results in an increase in the production of capital goods but a decrease in the production of consumption goods this period. 
C) It does not change the level of output produced since both points are on the production possibilities curve. 
D) It results in an increase in the production of consumption goods but a decrease in the production of capital goods this period. 
A) It results in an increase in the production of both capital and consumption goods this period. 
B) It results in an increase in the production of capital goods but a decrease in the production of consumption goods this period. 
C) It does not change the level of output produced since both points are on the production possibilities curve. 
D) It results in an increase in the production of consumption goods but a decrease in the production of capital goods this period.

Question 13

Any point NOT on the production possibilities curve cannot be optimal.What reasoning supports this?

Accepted Answer

A) Operating inside the curve means sacrificing economic growth for current consumption, and economic growth is always a goal worth pursuing. 
B) Operating inside the curve leads to inflation and inflation can be very costly. 
C) Operating inside the curve is inefficient and represents wasted resources. 
D) A point inside the curve implies that society is not facing up to the problem of scarcity. 
A) Operating inside the curve means sacrificing economic growth for current consumption, and economic growth is always a goal worth pursuing. 
B) Operating inside the curve leads to inflation and inflation can be very costly. 
C) Operating inside the curve is inefficient and represents wasted resources. 
D) A point inside the curve implies that society is not facing up to the problem of scarcity.

Question 14

In the circular flow model,in what forms do households receive income?

Accepted Answer

A) wages, rent, interest, and profits 
B) wages and rent while firms receive interest and profits 
C) wages, rent, and interest while firms receive profits 
D) wages while firms receive rent, interest, and profits 
A) wages, rent, interest, and profits 
B) wages and rent while firms receive interest and profits 
C) wages, rent, and interest while firms receive profits 
D) wages while firms receive rent, interest, and profits

Question 15

A virulent disease spreads throughout the population of an economy,causing death and disability.How can this be portrayed on the production possibilities curve?

Accepted Answer

A) a movement from a point on the curve to the northeast 
B) a movement along the curve to the southeast 
C) an outward shift of the curve 
D) an inward shift of the curve 
A) a movement from a point on the curve to the northeast 
B) a movement along the curve to the southeast 
C) an outward shift of the curve 
D) an inward shift of the curve

Question 16

FIGURE 2-10
  
-Refer to Figure 2-10.Societies choose between the level of current consumption and current investment.What is occurring if a society moves from Point B to Point A?

Accepted Answer

A) The economy is producing a lower overall level of output. 
B) Society is opting for more consumption in the current time period. 
C) Society is sacrificing present consumption for economic growth in the future. 
D) There is no change in consumption or investment, simply a change in the allocation of resources. An equal amount of consumption and investment occurs anywhere along the production possibilities curve. 
A) The economy is producing a lower overall level of output. 
B) Society is opting for more consumption in the current time period. 
C) Society is sacrificing present consumption for economic growth in the future. 
D) There is no change in consumption or investment, simply a change in the allocation of resources. An equal amount of consumption and investment occurs anywhere along the production possibilities curve.

Question 17

Capital accumulation causes the production possibilities curve to shift inward over time.

Accepted Answer

A) True 
 B)False

Question 18

In a market economy,how are resources allocated?

Accepted Answer

A) by central planners using a price system 
B) by decentralized planners at the local level 
C) by government bureaucracies because of the absence of a price system 
D) by individual decision makers responding to market prices 
A) by central planners using a price system 
B) by decentralized planners at the local level 
C) by government bureaucracies because of the absence of a price system 
D) by individual decision makers responding to market prices

Question 19

The production possibilities curve marks the boundary between attainable and unattainable combinations of output.

Accepted Answer

A) True 
 B)False

Question 20

Is increased capital spending the only way for an economy to expand its production possibilities curve?

Accepted Answer

A) Yes, more capital investment is the only way to expand production possibilities. 
B) Yes, although increased production of capital clearly increases the opportunity cost. 
C) No, an economy can also grow by reallocating more resources toward the production of consumption goods. 
D) No, an economy can also expand by invention and innovation. 
A) Yes, more capital investment is the only way to expand production possibilities. 
B) Yes, although increased production of capital clearly increases the opportunity cost. 
C) No, an economy can also grow by reallocating more resources toward the production of consumption goods. 
D) No, an economy can also expand by invention and innovation.

FIGURE 2-8 -Refer to Figure 2-8.In order to move from Point D to Point C,what will the economy have to give up?

FIGURE 2-14 -Refer to the figure.Why is the opportunity cost of producing a mountain bike different when moving from Point A to Point B than when moving from Point C to Point D along the production possibilities curve?

Any output combination outside the production possibilities curve is attainable in the current period only if prices decrease.

Which of the following describes when an economy may be operating at a point inside the production possibilities curve?

Which of the following is NOT a payment made to households in exchange for the use of factors of production?

FIGURE 2-2 -Refer to Figure 2-2.Which of the following statements about a movement from Point B to Point C is the most accurate?

In a market economy,government officials make most production decisions in a centralized manner.

When does the law of increasing opportunity costs apply?

FIGURE 2-2 -Refer to Figure 2-2.Which of the following statements about a movement from Point G to Point F is the most accurate?

Which of the following would most likely shift the production possibilities curve inward?

FIGURE 2-4 -Refer to Figure 2-4.Which of the following statements about the movement from Point D to Point E is the most accurate?

Any point NOT on the production possibilities curve cannot be optimal.What reasoning supports this?

In the circular flow model,in what forms do households receive income?

A virulent disease spreads throughout the population of an economy,causing death and disability.How can this be portrayed on the production possibilities curve?

FIGURE 2-10 -Refer to Figure 2-10.Societies choose between the level of current consumption and current investment.What is occurring if a society moves from Point B to Point A?

Capital accumulation causes the production possibilities curve to shift inward over time.

In a market economy,how are resources allocated?

The production possibilities curve marks the boundary between attainable and unattainable combinations of output.

Is increased capital spending the only way for an economy to expand its production possibilities curve?

The Role and Method of Economics

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters

Exam 2: Scarcity, trade-Offs, and Production Possibilities

FIGURE 2-8 -Refer to Figure 2-8.In order to move from Point D to Point C,what will the economy have to give up?

FIGURE 2-14 -Refer to the figure.Why is the opportunity cost of producing a mountain bike different when moving from Point A to Point B than when moving from Point C to Point D along the production possibilities curve?

Any output combination outside the production possibilities curve is attainable in the current period only if prices decrease.

Which of the following describes when an economy may be operating at a point inside the production possibilities curve?

Which of the following is NOT a payment made to households in exchange for the use of factors of production?

FIGURE 2-2 -Refer to Figure 2-2.Which of the following statements about a movement from Point B to Point C is the most accurate?

In a market economy,government officials make most production decisions in a centralized manner.

When does the law of increasing opportunity costs apply?

FIGURE 2-2 -Refer to Figure 2-2.Which of the following statements about a movement from Point G to Point F is the most accurate?

Which of the following would most likely shift the production possibilities curve inward?

FIGURE 2-4 -Refer to Figure 2-4.Which of the following statements about the movement from Point D to Point E is the most accurate?

Any point NOT on the production possibilities curve cannot be optimal.What reasoning supports this?

In the circular flow model,in what forms do households receive income?

A virulent disease spreads throughout the population of an economy,causing death and disability.How can this be portrayed on the production possibilities curve?

FIGURE 2-10 -Refer to Figure 2-10.Societies choose between the level of current consumption and current investment.What is occurring if a society moves from Point B to Point A?

Capital accumulation causes the production possibilities curve to shift inward over time.

In a market economy,how are resources allocated?

The production possibilities curve marks the boundary between attainable and unattainable combinations of output.

Is increased capital spending the only way for an economy to expand its production possibilities curve?

The Role and Method of Economics

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters