Question 1

In order for a production possibilities curve to shift to the right, which of the following must occur?

Accepted Answer

A) government involvement 
B) increasing consumer wants 
C) economic growth 
D) reductions in the supply of resources 
A) government involvement 
B) increasing consumer wants 
C) economic growth 
D) reductions in the supply of resources

Question 2

A person has a comparative advantage in an activity whenever she

Accepted Answer

A) has an absolute advantage in the activity. 
B) can perform the activity at a lower opportunity cost than another person can. 
C) can do the activity in less time than anyone else. 
D) can do everything better than anyone else. 
A) has an absolute advantage in the activity. 
B) can perform the activity at a lower opportunity cost than another person can. 
C) can do the activity in less time than anyone else. 
D) can do everything better than anyone else.

Question 3

The opportunity cost of attending college might best be described as

Accepted Answer

A) the money that must be paid in order to attend college. 
B) the lowest-valued alternative use of the student's time. 
C) the highest-valued alternative use of the student's time. 
D) the value that the student attaches to not working. 
A) the money that must be paid in order to attend college. 
B) the lowest-valued alternative use of the student's time. 
C) the highest-valued alternative use of the student's time. 
D) the value that the student attaches to not working.

Question 4

Efficiency is achieved

Accepted Answer

A) when output is being produced at a point inside a production possibilities curve. 
B) when producers are getting the maximum possible output from the available resources. 
C) when consumers are able to buy everything that they want. 
D) when prices of all goods and services go to zero. 
A) when output is being produced at a point inside a production possibilities curve. 
B) when producers are getting the maximum possible output from the available resources. 
C) when consumers are able to buy everything that they want. 
D) when prices of all goods and services go to zero.

Question 5

Comparative advantage implies choosing the activity that

Accepted Answer

A) has a high opportunity cost. 
B) is inside the production possibilities frontier. 
C) has the lowest opportunity cost. 
D) does not demand any specialization. 
A) has a high opportunity cost. 
B) is inside the production possibilities frontier. 
C) has the lowest opportunity cost. 
D) does not demand any specialization.

Question 6

The law of increasing additional cost is due to

Accepted Answer

A) scarcity. 
B) inefficient use of technology. 
C) the fact that resources are not perfectly adaptable for alternative uses. 
D) the fact that there are always alternatives and it is costly to figure out which alternative is best. 
A) scarcity. 
B) inefficient use of technology. 
C) the fact that resources are not perfectly adaptable for alternative uses. 
D) the fact that there are always alternatives and it is costly to figure out which alternative is best.

Question 7

-Refer to the above figure. Which one of the following statements is TRUE with regard to the economy depicted in the graph?

Accepted Answer

A) Point C cannot be produced. 
B) The best production point is 500 loaves of bread and 50 bales of wool. 
C) The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is more than the amount of resources needed to produce 50 bales of wool and 250 loaves of bread. 
D) The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is the same as the amount of resources needed to produce 50 bales of wool and 250 loaves of bread. 
A) Point C cannot be produced. 
B) The best production point is 500 loaves of bread and 50 bales of wool. 
C) The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is more than the amount of resources needed to produce 50 bales of wool and 250 loaves of bread. 
D) The total amount of resources it takes to produce 20 bales of wool and 500 loaves of bread is the same as the amount of resources needed to produce 50 bales of wool and 250 loaves of bread.

Question 8

A point on a production possibilities curve indicates

Accepted Answer

A) resources are not being used efficiently. 
B) resources are being used efficiently. 
C) opportunity costs are constant. 
D) an output combination that can be attained only if society gets more resources or there is technological change. 
A) resources are not being used efficiently. 
B) resources are being used efficiently. 
C) opportunity costs are constant. 
D) an output combination that can be attained only if society gets more resources or there is technological change.

Question 9

A bowed production possibilities curve is consistent with

Accepted Answer

A) an unchanged opportunity cost. 
B) a technologically inefficient society. 
C) the underutilization of productive resources. 
D) highly specialized resources. 
A) an unchanged opportunity cost. 
B) a technologically inefficient society. 
C) the underutilization of productive resources. 
D) highly specialized resources.

Question 10

Economic bads are items

Accepted Answer

A) for which the produced quantity is less than the amount desired at a positive price. 
B) for which the desired quantity is less than what nature provides at a zero price. 
C) that individuals desire but which receive social disapproval. 
D) that receive social approval but which governments dislike. 
A) for which the produced quantity is less than the amount desired at a positive price. 
B) for which the desired quantity is less than what nature provides at a zero price. 
C) that individuals desire but which receive social disapproval. 
D) that receive social approval but which governments dislike.

Question 11

What is the difference between comparative advantage and absolute advantage?

Accepted Answer

Absolute advantage refers to the ability

Question 12

An irrigation system is installed on a farm in North Dakota. This is an example of which factor of production?

Accepted Answer

A) labor 
B) land 
C) human capital 
D) physical capital 
A) labor 
B) land 
C) human capital 
D) physical capital

Question 13

When deriving the production possibilities curve, it is assumed that

Accepted Answer

A) the amount of each good that is to be produced is fixed. 
B) the prices of resources are fixed along the curve. 
C) most resources can be used to produce only one good. 
D) resources are efficiently used. 
A) the amount of each good that is to be produced is fixed. 
B) the prices of resources are fixed along the curve. 
C) most resources can be used to produce only one good. 
D) resources are efficiently used.

Question 14

Suppose that at a bicycle shop, instead of having each worker assemble an entire bicycle themselves, one person welds the frames, another person works on the braking system, another person works on the tires, and another person works on the gears. This best demonstrates the concept of

Accepted Answer

A) division of labor. 
B) microeconomics. 
C) comparative advantage. 
D) absolute advantage. 
A) division of labor. 
B) microeconomics. 
C) comparative advantage. 
D) absolute advantage.

Question 15

There are not enough of four goods to satisfy the wants of people. For good A, this is true when the price is $100. This is true for good B at a price of $10, for good C at a price of $1, and for good D at a price of zero. Which situation reflects scarcity rather than shortage?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 16

-Refer to the above figure. How do you describe what is happening as the economy moves from point A to point C?

Accepted Answer

A) The economy has acquired new resources that are well suited for producing bread. 
B) Land that was once used to graze sheep is now being used to grow wheat. 
C) Resources are becoming unemployed. 
D) The technology for growing wheat has improved. 
A) The economy has acquired new resources that are well suited for producing bread. 
B) Land that was once used to graze sheep is now being used to grow wheat. 
C) Resources are becoming unemployed. 
D) The technology for growing wheat has improved.

Question 17

Why is it that all of our wants cannot be satisfied?

Accepted Answer

A) because of shortages 
B) because we cannot seem to decide what we really want 
C) because other people try to change your mind about what you want 
D) because limited resources mean all the goods we want cannot be obtained 
A) because of shortages 
B) because we cannot seem to decide what we really want 
C) because other people try to change your mind about what you want 
D) because limited resources mean all the goods we want cannot be obtained

Question 18

Which of the following is an assumption used in deriving a production possibilities curve?

Accepted Answer

A) Poverty always exists in society. 
B) The wages in an industry increase constantly. 
C) Prices will continue to increase. 
D) The amount of resources is fixed. 
A) Poverty always exists in society. 
B) The wages in an industry increase constantly. 
C) Prices will continue to increase. 
D) The amount of resources is fixed.

Question 19

-Refer to the above figure. If the farmer is producing 4,000 bushels of beans and 38,000 bushels of wheat, then we know the farmer

Accepted Answer

A) is using resources efficiently. 
B) is producing too much wheat. 
C) is inefficient because point a is the most efficient point on the curve. 
D) must be using more resources than were assumed available in constructing the graph. 
A) is using resources efficiently. 
B) is producing too much wheat. 
C) is inefficient because point a is the most efficient point on the curve. 
D) must be using more resources than were assumed available in constructing the graph.

Question 20

A straight-line production possibilities curve takes this shape because

Accepted Answer

A) the opportunity cost of producing a good is constant. 
B) the opportunity cost of producing more of a good is decreasing. 
C) resources are better suited for producing one output than another. 
D) resources are fixed. 
A) the opportunity cost of producing a good is constant. 
B) the opportunity cost of producing more of a good is decreasing. 
C) resources are better suited for producing one output than another. 
D) resources are fixed.

In order for a production possibilities curve to shift to the right, which of the following must occur?

A person has a comparative advantage in an activity whenever she

The opportunity cost of attending college might best be described as

Efficiency is achieved

Comparative advantage implies choosing the activity that

The law of increasing additional cost is due to

-Refer to the above figure. Which one of the following statements is TRUE with regard to the economy depicted in the graph?

A point on a production possibilities curve indicates

A bowed production possibilities curve is consistent with

Economic bads are items

What is the difference between comparative advantage and absolute advantage?

An irrigation system is installed on a farm in North Dakota. This is an example of which factor of production?

When deriving the production possibilities curve, it is assumed that

Suppose that at a bicycle shop, instead of having each worker assemble an entire bicycle themselves, one person welds the frames, another person works on the braking system, another person works on the tires, and another person works on the gears. This best demonstrates the concept of

There are not enough of four goods to satisfy the wants of people. For good A, this is true when the price is $100. This is true for good B at a price of $10, for good C at a price of $1, and for good D at a price of zero. Which situation reflects scarcity rather than shortage?

-Refer to the above figure. How do you describe what is happening as the economy moves from point A to point C?

Why is it that all of our wants cannot be satisfied?

Which of the following is an assumption used in deriving a production possibilities curve?

-Refer to the above figure. If the farmer is producing 4,000 bushels of beans and 38,000 bushels of wheat, then we know the farmer

A straight-line production possibilities curve takes this shape because

The Nature of Economics

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 2: Scarcity and the World of Trade-Offs

In order for a production possibilities curve to shift to the right, which of the following must occur?

A person has a comparative advantage in an activity whenever she

The opportunity cost of attending college might best be described as

Efficiency is achieved

Comparative advantage implies choosing the activity that

The law of increasing additional cost is due to

-Refer to the above figure. Which one of the following statements is TRUE with regard to the economy depicted in the graph?

A point on a production possibilities curve indicates

A bowed production possibilities curve is consistent with

Economic bads are items

What is the difference between comparative advantage and absolute advantage?

An irrigation system is installed on a farm in North Dakota. This is an example of which factor of production?

When deriving the production possibilities curve, it is assumed that

Suppose that at a bicycle shop, instead of having each worker assemble an entire bicycle themselves, one person welds the frames, another person works on the braking system, another person works on the tires, and another person works on the gears. This best demonstrates the concept of

There are not enough of four goods to satisfy the wants of people. For good A, this is true when the price is $100. This is true for good B at a price of $10, for good C at a price of $1, and for good D at a price of zero. Which situation reflects scarcity rather than shortage?

-Refer to the above figure. How do you describe what is happening as the economy moves from point A to point C?

Why is it that all of our wants cannot be satisfied?

Which of the following is an assumption used in deriving a production possibilities curve?

-Refer to the above figure. If the farmer is producing 4,000 bushels of beans and 38,000 bushels of wheat, then we know the farmer

A straight-line production possibilities curve takes this shape because

The Nature of Economics

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters