Question 1

Which of the following is correctly lists the three fundamental economic questions?

Accepted Answer

A)  If to produce? Why to produce? When to produce? 
B)  If to produce? What to produce? How to produce? 
C)  Why to produce? What to produce? How to produce? 
D)  What to produce? How to produce? For whom to produce? 
A)  If to produce? Why to produce? When to produce? 
B)  If to produce? What to produce? How to produce? 
C)  Why to produce? What to produce? How to produce? 
D)  What to produce? How to produce? For whom to produce?

Question 2

The opportunity cost of a purchase is:

Accepted Answer

A)  the selling price of the good or service. 
B)  zero if the good or service satisfies a need. 
C)  greater for persons who are rich. 
D)  the good or service given up for the good or service purchased. 
A)  the selling price of the good or service. 
B)  zero if the good or service satisfies a need. 
C)  greater for persons who are rich. 
D)  the good or service given up for the good or service purchased.

Question 3

Reductions in available resources will cause the production possibilities curve to:

Accepted Answer

A)  expand. 
B)  disappear. 
C)  become vertical. 
D)  shift inward. 
A)  expand. 
B)  disappear. 
C)  become vertical. 
D)  shift inward.

Question 4

Exhibit 2-5 Production possibilities curve
  
-In Exhibit 2-5,movement between which of the following points represents an increase in economic efficiency?

Accepted Answer

A)  A to C. 
B)  C to D. 
C)  D to B. 
D)  A to B. 
E)  A to D. 
A)  A to C. 
B)  C to D. 
C)  D to B. 
D)  A to B. 
E)  A to D.

Question 5

While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00,Sally notices that she could get a value meal that contains both the cheeseburger and medium drink and also a medium order of fries for $2.75.She thinks to herself,"Is it worth the extra 25 cents to get the medium fries?" To an economist,Sally's decision is an example of:

Accepted Answer

A)  marginal analysis. 
B)  basing decisions on total, rather than marginal, value. 
C)  an unintended consequence. 
D)  the fallacy of composition. 
A)  marginal analysis. 
B)  basing decisions on total, rather than marginal, value. 
C)  an unintended consequence. 
D)  the fallacy of composition.

Question 6

Exhibit 2-2 Production possibilities curve
  
-The production possibilities in Exhibit 2-2 indicates that the opportunity cost of corn is:

Accepted Answer

A)  increasing. 
B)  decreasing. 
C)  zero. 
D)  constant. 
E)  indeterminate. 
A)  increasing. 
B)  decreasing. 
C)  zero. 
D)  constant. 
E)  indeterminate.

Question 7

Susan wishes to buy gasoline and have her car washed.She finds that if she buys 9 gallons of gasoline at $1.50 per gallon,the car wash costs $1,but if she buys 10 gallons of gasoline,the car wash is free.For Susan,the marginal cost of the tenth gallon of gasoline is:

Accepted Answer

A)  zero. 
B)  50 cents. 
C)  $1. 
D)  $1.50. 
A)  zero. 
B)  50 cents. 
C)  $1. 
D)  $1.50.

Question 8

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

Accepted Answer

A)  the same as moving from A to C. 
B)  the same as moving from A to D. 
C)  the same as moving from B to D. 
D)  the same as moving from B to C. 
E)  it is not possible to determine. 
A)  the same as moving from A to C. 
B)  the same as moving from A to D. 
C)  the same as moving from B to D. 
D)  the same as moving from B to C. 
E)  it is not possible to determine.

Question 9

Which of the following would not lead to a shift in an economy's production possibilities curve?

Accepted Answer

A)  Change in technology. 
B)  Change in the number of resources. 
C)  An earthquake. 
D)  Improvement in the education level. 
E)  Change in the composition of current output. 
A)  Change in technology. 
B)  Change in the number of resources. 
C)  An earthquake. 
D)  Improvement in the education level. 
E)  Change in the composition of current output.

Question 10

A rightward (an outward)shift of a nation's production possibilities curve could be caused by:

Accepted Answer

A)  a decrease in technology. 
B)  an increase in resources. 
C)  producing more consumer and fewer capital goods. 
D)  a decline in the labor force's level of education and skills. 
A)  a decrease in technology. 
B)  an increase in resources. 
C)  producing more consumer and fewer capital goods. 
D)  a decline in the labor force's level of education and skills.

Question 11

Opportunity cost is the best alternative sacrificed for a chosen alternative.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 2-12 Production possibilities curve
  
-In Exhibit 2-12,suppose an economy with the given production possibilities curve is currently located at point A in the figure.Which of the following statements is false?

Accepted Answer

A)  This economy could produce more of both capital and consumption goods. 
B)  This economy is experiencing full employment. 
C)  This economy could produce more capital goods while holding fixed the number of consumption goods produced. 
D)  This economy could produce more consumption goods while holding fixed the number of capital goods produced. 
E)  Not every resource in this economy is being utilized 
A)  This economy could produce more of both capital and consumption goods. 
B)  This economy is experiencing full employment. 
C)  This economy could produce more capital goods while holding fixed the number of consumption goods produced. 
D)  This economy could produce more consumption goods while holding fixed the number of capital goods produced. 
E)  Not every resource in this economy is being utilized

Question 13

Exhibit 2-1 Production possibilities curve data
  
-In Exhibit 2-1,the opportunity cost of producing the fourth unit of capital is:

Accepted Answer

A)  0. 
B)  1 unit of consumption goods. 
C)  2 units of consumption goods. 
D)  4 units of consumption goods. 
E)  there is not enough information to estimate the opportunity cost. 
A)  0. 
B)  1 unit of consumption goods. 
C)  2 units of consumption goods. 
D)  4 units of consumption goods. 
E)  there is not enough information to estimate the opportunity cost.

Question 14

The highest valued alternative that must be given up in order to choose an option is called the:

Accepted Answer

A)  opportunity cost. 
B)  utility cost. 
C)  scarcity expense. 
D)  disutility option. 
A)  opportunity cost. 
B)  utility cost. 
C)  scarcity expense. 
D)  disutility option.

Question 15

Which of the following statements is false?

Accepted Answer

A)  Marginal analysis is an examination of the effects of additions or subtractions from a current situation. 
B)  The production possibilities curve shows the maximum combination of two outputs that an economy can produce, given its available resources and technology. 
C)  Technology is the body of knowledge and skills applied to how goods are produced. 
D)  Economic growth is illustrated as an inward shift of the production possibilities curve. 
A)  Marginal analysis is an examination of the effects of additions or subtractions from a current situation. 
B)  The production possibilities curve shows the maximum combination of two outputs that an economy can produce, given its available resources and technology. 
C)  Technology is the body of knowledge and skills applied to how goods are produced. 
D)  Economic growth is illustrated as an inward shift of the production possibilities curve.

Question 16

What shape is the production possibilities curve usually expected to exhibit?

Accepted Answer

A)  Upward-sloping. 
B)  Bowed out. 
C)  Bowed in. 
D)  Straight line. 
E)  U-shaped. 
A)  Upward-sloping. 
B)  Bowed out. 
C)  Bowed in. 
D)  Straight line. 
E)  U-shaped.

Question 17

Unemployment or underemployment of labor might explain why an economy would be operating inside its production possibilities curve (PPC).

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would be least likely to cause the production possibilities curve to shift outward?

Accepted Answer

A)  a decreased desire for leisure by workers in the economy. 
B)  an invention that requires fewer resources to produce a good. 
C)  a shift in consumer preferences that causes expansion in the output of one product and a decline in output of other products. 
D)  an expansion in the man-made productive resources available to the economy as the result of a high rate of investment. 
A)  a decreased desire for leisure by workers in the economy. 
B)  an invention that requires fewer resources to produce a good. 
C)  a shift in consumer preferences that causes expansion in the output of one product and a decline in output of other products. 
D)  an expansion in the man-made productive resources available to the economy as the result of a high rate of investment.

Question 19

Which of the following statements is true?

Accepted Answer

A)  An opportunity cost is what must be given up in order to get something else. 
B)  The three fundamental economic questions refer to What to produce? How to produce? and When to produce? 
C)  The term "investment" refers to the purchase of stocks and bonds and other financial securities. 
D)  The law of increasing opportunity cost implies that as production of one type of good is expanded then fewer and fewer of other goods must be given up. 
A)  An opportunity cost is what must be given up in order to get something else. 
B)  The three fundamental economic questions refer to What to produce? How to produce? and When to produce? 
C)  The term "investment" refers to the purchase of stocks and bonds and other financial securities. 
D)  The law of increasing opportunity cost implies that as production of one type of good is expanded then fewer and fewer of other goods must be given up.

Question 20

Which fundamental economic question is most closely related to the issues of income distribution and poverty?

Accepted Answer

A)  The What to Produce question. 
B)  The Why to Produce question. 
C)  The How to Produce question. 
D)  The For Whom to Produce question. 
A)  The What to Produce question. 
B)  The Why to Produce question. 
C)  The How to Produce question. 
D)  The For Whom to Produce question.

Exam 2: Production Possibilities,Opportunity Cost,and Economic Growth

Which of the following is correctly lists the three fundamental economic questions?

The opportunity cost of a purchase is:

Reductions in available resources will cause the production possibilities curve to:

Exhibit 2-5 Production possibilities curve -In Exhibit 2-5,movement between which of the following points represents an increase in economic efficiency?

Exhibit 2-2 Production possibilities curve -The production possibilities in Exhibit 2-2 indicates that the opportunity cost of corn is:

Susan wishes to buy gasoline and have her car washed.She finds that if she buys 9 gallons of gasoline at $1.50 per gallon,the car wash costs $1,but if she buys 10 gallons of gasoline,the car wash is free.For Susan,the marginal cost of the tenth gallon of gasoline is:

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

Which of the following would not lead to a shift in an economy's production possibilities curve?

A rightward (an outward)shift of a nation's production possibilities curve could be caused by:

Opportunity cost is the best alternative sacrificed for a chosen alternative.

Exhibit 2-12 Production possibilities curve -In Exhibit 2-12,suppose an economy with the given production possibilities curve is currently located at point A in the figure.Which of the following statements is false?

Exhibit 2-1 Production possibilities curve data -In Exhibit 2-1,the opportunity cost of producing the fourth unit of capital is:

The highest valued alternative that must be given up in order to choose an option is called the:

Which of the following statements is false?

What shape is the production possibilities curve usually expected to exhibit?

Unemployment or underemployment of labor might explain why an economy would be operating inside its production possibilities curve (PPC).

Which of the following would be least likely to cause the production possibilities curve to shift outward?

Which of the following statements is true?

Which fundamental economic question is most closely related to the issues of income distribution and poverty?

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters