Question 1

-In the above figure, the opportunity cost of moving from producing 75 guitars and 25 ukuleles to producing 50 guitars and 50 ukuleles is

Accepted Answer

A)  25 ukuleles. 
B)  50 guitars. 
C)  100 guitars. 
D)  25 guitars. 
A)  25 ukuleles. 
B)  50 guitars. 
C)  100 guitars. 
D)  25 guitars.

Question 2

Explain why even the most affluent people, businesses and counties never solve the problem of scarcity.

Accepted Answer

Scarcity is a problem that is never comp

Question 3

A production point that lies outside the Production Possibilities Curve (PPC)

Accepted Answer

A)  denotes inefficiency. 
B)  indicates unemployment. 
C)  is currently not attainable. 
D)  can never be reached, even in future periods. 
A)  denotes inefficiency. 
B)  indicates unemployment. 
C)  is currently not attainable. 
D)  can never be reached, even in future periods.

Question 4

Entrepreneurs are important to market economies because

Accepted Answer

A)  they engage in risk taking and innovation. 
B)  they make up a large portion of low-skilled labor. 
C)  they take few risks and thereby, suffer fewer bankruptcies. 
D)  they represent the bulk of employment at large corporations. 
A)  they engage in risk taking and innovation. 
B)  they make up a large portion of low-skilled labor. 
C)  they take few risks and thereby, suffer fewer bankruptcies. 
D)  they represent the bulk of employment at large corporations.

Question 5

Explain what will happen to the production possibilities curve over time if society gives up some consumption goods in favor of more capital goods.

Accepted Answer

If society chooses to give up some consu

Question 6

Opportunity costs arise from

Accepted Answer

A)  choices. 
B)  taxes. 
C)  mistakes. 
D)  regrets. 
A)  choices. 
B)  taxes. 
C)  mistakes. 
D)  regrets.

Question 7

Which of the following is NOT an example of investment in human capital?

Accepted Answer

A)  A medical student's internship 
B)  The purchase of a personal computer for playing games 
C)  A mechanic attends a training workshop on a new type of engine 
D)  Johnny learns how to read 
A)  A medical student's internship 
B)  The purchase of a personal computer for playing games 
C)  A mechanic attends a training workshop on a new type of engine 
D)  Johnny learns how to read

Question 8

-In the above figure, the opportunity cost of moving from point A to point C is

Accepted Answer

A)  50 guitars. 
B)  0 guitars. 
C)  25 guitars. 
D)  50 ukuleles. 
A)  50 guitars. 
B)  0 guitars. 
C)  25 guitars. 
D)  50 ukuleles.

Question 9

Why do most people choose to specialize in a narrow set of skills for their work, rather than to learn a little bit about several varied fields of endeavor?

Accepted Answer

A)  They feel that doing so will minimize their chances of being unemployed. 
B)  They don't correctly perceive the costs of being so specialized. 
C)  It allows them to earn more income by being more productive. 
D)  They are unaware of how much better off they would be if they diversified their skills. 
A)  They feel that doing so will minimize their chances of being unemployed. 
B)  They don't correctly perceive the costs of being so specialized. 
C)  It allows them to earn more income by being more productive. 
D)  They are unaware of how much better off they would be if they diversified their skills.

Question 10

If an economy is operating at a point inside the production possibilities curve, then

Accepted Answer

A)  society's resources are being inefficiently utilized. 
B)  the curve will move to the left. 
C)  society's resources are being used to produce too many consumer goods. 
D)  economic policy must implemented to slow growth of the economy further. 
A)  society's resources are being inefficiently utilized. 
B)  the curve will move to the left. 
C)  society's resources are being used to produce too many consumer goods. 
D)  economic policy must implemented to slow growth of the economy further.

Question 11

The production possibilities curve bows outward because

Accepted Answer

A)  opportunity costs are decreasing as the production of a good increases. 
B)  opportunity costs are increasing as the production of a good increases. 
C)  opportunity costs are fixed as the production of a good increases. 
D)  resources are of uniform quality. 
A)  opportunity costs are decreasing as the production of a good increases. 
B)  opportunity costs are increasing as the production of a good increases. 
C)  opportunity costs are fixed as the production of a good increases. 
D)  resources are of uniform quality.

Question 12

Assume that Economy A and Economy B have the same resources, but that individuals in Economy A have specialized whereas individuals in Economy B have not. Given this information, you can determine that

Accepted Answer

A)  Economy A will have a higher output than Economy B. 
B)  Economy A will have a lower output than Economy B. 
C)  Economy A and Economy B will have identical outputs. 
D)  Individuals in Economy A will have lower incomes than individuals in Economy B. 
A)  Economy A will have a higher output than Economy B. 
B)  Economy A will have a lower output than Economy B. 
C)  Economy A and Economy B will have identical outputs. 
D)  Individuals in Economy A will have lower incomes than individuals in Economy B.

Question 13

A straight-line production possibilities curve has

Accepted Answer

A)  an increasing opportunity cost between the two goods. 
B)  a decreasing opportunity cost between the two goods. 
C)  a constant opportunity cost between the two goods. 
D)  no opportunity cost between the two goods. 
A)  an increasing opportunity cost between the two goods. 
B)  a decreasing opportunity cost between the two goods. 
C)  a constant opportunity cost between the two goods. 
D)  no opportunity cost between the two goods.

Question 14

Suppose the current unemployment rate is 15 percent. If it rises to 20 percent,

Accepted Answer

A)  the economy will move up along the production possibilities curve. 
B)  the economy will move closer to the production possibilities curve. 
C)  the production possibilities curve will shift inward. 
D)  the economy will operate farther inside the production possibilities curve. 
A)  the economy will move up along the production possibilities curve. 
B)  the economy will move closer to the production possibilities curve. 
C)  the production possibilities curve will shift inward. 
D)  the economy will operate farther inside the production possibilities curve.

Question 15

A movement along the production possibilities curve would imply that

Accepted Answer

A)  the labor force has grown. 
B)  productivity has increased. 
C)  society has chosen a different set of outputs. 
D)  productivity has declined because workers are demanding more leisure. 
A)  the labor force has grown. 
B)  productivity has increased. 
C)  society has chosen a different set of outputs. 
D)  productivity has declined because workers are demanding more leisure.

Question 16

In every economic system, choices must be made because resources

Accepted Answer

A)  are unlimited, but human desires and wants are limited. 
B)  are limited, but human desires and wants are unlimited. 
C)  are unlimited, and so are human desires and wants. 
D)  are limited, and so are human desires and wants. 
A)  are unlimited, but human desires and wants are limited. 
B)  are limited, but human desires and wants are unlimited. 
C)  are unlimited, and so are human desires and wants. 
D)  are limited, and so are human desires and wants.

Question 17

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 18

Which of the following activities are production?

Accepted Answer

A)  Combining flour, milk, and eggs to make cookies. 
B)  Moving coal from southern Illinois to an electrical power plant in northern Illinois. 
C)  Taking ice cubes from a tray to put in a drink. 
D)  All of the above are production. 
A)  Combining flour, milk, and eggs to make cookies. 
B)  Moving coal from southern Illinois to an electrical power plant in northern Illinois. 
C)  Taking ice cubes from a tray to put in a drink. 
D)  All of the above are production.

Question 19

Efficiency can correctly be defined as

Accepted Answer

A)  producing outside the production possibilities boundary. 
B)  minimizing opportunity cost. 
C)  producing the maximum output with given technology and resources. 
D)  providing for the immediate needs of the greatest proportion of the population. 
A)  producing outside the production possibilities boundary. 
B)  minimizing opportunity cost. 
C)  producing the maximum output with given technology and resources. 
D)  providing for the immediate needs of the greatest proportion of the population.

Question 20

An efficient point of production is

Accepted Answer

A)  a point on the production possibilities curve. 
B)  a point inside the production possibilities curve. 
C)  the point where scarcity no longer exists. 
D)  the point where we are currently producing. 
A)  a point on the production possibilities curve. 
B)  a point inside the production possibilities curve. 
C)  the point where scarcity no longer exists. 
D)  the point where we are currently producing.

Exam 2: Scarcity and the World of Trade-Offs

-In the above figure, the opportunity cost of moving from producing 75 guitars and 25 ukuleles to producing 50 guitars and 50 ukuleles is

Explain why even the most affluent people, businesses and counties never solve the problem of scarcity.

A production point that lies outside the Production Possibilities Curve (PPC)

Entrepreneurs are important to market economies because

Explain what will happen to the production possibilities curve over time if society gives up some consumption goods in favor of more capital goods.

Opportunity costs arise from

Which of the following is NOT an example of investment in human capital?

-In the above figure, the opportunity cost of moving from point A to point C is

Why do most people choose to specialize in a narrow set of skills for their work, rather than to learn a little bit about several varied fields of endeavor?

If an economy is operating at a point inside the production possibilities curve, then

The production possibilities curve bows outward because

Assume that Economy A and Economy B have the same resources, but that individuals in Economy A have specialized whereas individuals in Economy B have not. Given this information, you can determine that

A straight-line production possibilities curve has

Suppose the current unemployment rate is 15 percent. If it rises to 20 percent,

A movement along the production possibilities curve would imply that

In every economic system, choices must be made because resources

When deriving the production possibilities curve, it is assumed that

Which of the following activities are production?

Efficiency can correctly be defined as

An efficient point of production is

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

Measuring the Economys Performance

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

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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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

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Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

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