Question 1

The process of accumulating capital is called:

Accepted Answer

A)  capitalisation. 
B)  loanable funds. 
C)  investment. 
D)  debt management. 
A)  capitalisation. 
B)  loanable funds. 
C)  investment. 
D)  debt management.

Question 2

Narrbegin Exhibit 2.2 Production possibilities frontier   Narrend
-In Exhibit 2.2, what is the maximum possible production of coffee if production of corn has decreased from 4 to 2 million bushels:

Accepted Answer

A)  0 millions of bushels. 
B)  2 millions of bushels. 
C)  5 millions of bushels. 
D)  4 millions of bushels. 
A)  0 millions of bushels. 
B)  2 millions of bushels. 
C)  5 millions of bushels. 
D)  4 millions of bushels.

Question 3

Narrabegin Exhibit 2.11 Production possibilities frontiers  
-In Exhibit 2.11, the production possibilities curves for a country are shown for the years 2002 and 2003. Suppose this country was located at point A in 2002 and point B in 2003. This economy:

Accepted Answer

A)  is worse off in 2003 than in 2002. 
B)  has stagnated production in this two-year period. 
C)  is more efficient in 2003 than in 2002. 
D)  has shown growth between these two years. 
E)  has higher unemployment in 2003 than in 2002. 
A)  is worse off in 2003 than in 2002. 
B)  has stagnated production in this two-year period. 
C)  is more efficient in 2003 than in 2002. 
D)  has shown growth between these two years. 
E)  has higher unemployment in 2003 than in 2002.

Question 4

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

Accepted Answer

A) True 
 B)False

Question 5

Economic growth:

Accepted Answer

A)  causes an inward shift in the production possibilities curve. 
B)  does not cause a shift in the production possibilities curve. 
C)  causes an outward shift in the production possibilities curve.
D
Causes a movement along the production possibilities curve. 
A)  causes an inward shift in the production possibilities curve. 
B)  does not cause a shift in the production possibilities curve. 
C)  causes an outward shift in the production possibilities curve.
D
Causes a movement along the production possibilities curve.

Question 6

An analysis of production possibilities curves indicates that the reason why underdeveloped nations have difficulties increasing their economic growth rates is because:

Accepted Answer

A)  low population growth rates mean fewer workers to produce food and other necessities. 
B)  their production possibilities curves shift in when resources are increased. 
C)  their production possibilities curves are positively sloped, unlike those in more developed economies. 
D)  they must cut back their already meagre consumption levels to increase capital
Production. 
A)  low population growth rates mean fewer workers to produce food and other necessities. 
B)  their production possibilities curves shift in when resources are increased. 
C)  their production possibilities curves are positively sloped, unlike those in more developed economies. 
D)  they must cut back their already meagre consumption levels to increase capital
Production.

Question 7

Narrbegin Exhibit 2.7 Production possibilities frontier   Narrend
-Movement along the production possibilities curve shown in Exhibit 2.7 indicates:

Accepted Answer

A)  The law of increasing opportunity costs. 
B)  The law of declining opportunity costs. 
C)  all inputs are homogeneous including labour. 
D)  that not all resources are utilised. 
A)  The law of increasing opportunity costs. 
B)  The law of declining opportunity costs. 
C)  all inputs are homogeneous including labour. 
D)  that not all resources are utilised.

Question 8

Narrbegin Exhibit 2.6 Production possibilities frontier data
 $$\begin{array} { | l | r | r | r | r | r | r | } 
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } & \text { F } \
\hline \text { Capital goods } & 15 & 14 & 12 & 5 & 5 & 0 \
\hline \text { Cansumer guods } & 0 & 2 & 4 & 6 & \mathbf { 0 } & 10\
\hline
\end{array}$$ Narrend
-As shown in Exhibit 2.6, if the economy reallocates resources from capital goods to consumer goods:

Accepted Answer

A)  it gains extra units of capital goods due to technological progress. 
B)  it is an inefficient way of using the economy's scarce resources. 
C)  it gains extra units of consumer goods but has to sacrifice units of capital goods. 
D)  it gains extra units of consumer goods without sacrificing units of capital goods. 
A)  it gains extra units of capital goods due to technological progress. 
B)  it is an inefficient way of using the economy's scarce resources. 
C)  it gains extra units of consumer goods but has to sacrifice units of capital goods. 
D)  it gains extra units of consumer goods without sacrificing units of capital goods.

Question 9

If more of one good can be produced without producing less of another output, the economy must have been operating efficiently.

Accepted Answer

A) True 
 B)False

Question 10

Which would be least likely to cause the production possibilities curve to shift to the right?

Accepted Answer

A)  An increase in the labour force. 
B)  Improved methods of production. 
C)  An increase in the education and training of the labour force. 
D)  A decrease in unemployment. 
A)  An increase in the labour force. 
B)  Improved methods of production. 
C)  An increase in the education and training of the labour force. 
D)  A decrease in unemployment.

Question 11

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specialises and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

Accepted Answer

A)  people in Portugal will not want to buy as many hats. 
B)  Spain no longer has a comparative advantage in hats. 
C)  Portugal is flooding the market with too many doormats. 
D)  some of the gains from trade shift to Portugal. 
A)  people in Portugal will not want to buy as many hats. 
B)  Spain no longer has a comparative advantage in hats. 
C)  Portugal is flooding the market with too many doormats. 
D)  some of the gains from trade shift to Portugal.

Question 12

Increased productivity leads to:

Accepted Answer

A)  less efficient use of resources. 
B)  greater variety of goods and services at lower prices. 
C)  decreased standard of living for the population. 
D)  less variety of goods and services at higher prices. 
A)  less efficient use of resources. 
B)  greater variety of goods and services at lower prices. 
C)  decreased standard of living for the population. 
D)  less variety of goods and services at higher prices.

Question 13

One of the assumptions underlying the production possibilities frontier or curve for any given economy is that:

Accepted Answer

A)  the state of technology changes. 
B)  there is an unlimited supply of resources. 
C)  there is full employment of resources when the economy is on the curve. 
D)  goods can be produced outside the curve. 
A)  the state of technology changes. 
B)  there is an unlimited supply of resources. 
C)  there is full employment of resources when the economy is on the curve. 
D)  goods can be produced outside the curve.

Question 14

Other things being equal, a decreased supply of natural resources would be represented on a production possibilities curve by a/an:

Accepted Answer

A)  movement off the curve to a point inside the curve. 
B)  movement down along the curve. 
C)  movement up along the curve. 
D)  inward shift of the entire curve. 
A)  movement off the curve to a point inside the curve. 
B)  movement down along the curve. 
C)  movement up along the curve. 
D)  inward shift of the entire curve.

Question 15

The theory of comparative advantage suggests:

Accepted Answer

A)  that an industrialised country should only export. 
B)  that a country that is not competitive should import everything. 
C)  that a country should trade based on its comparative advantage. 
D)  that one country exploits another country. 
A)  that an industrialised country should only export. 
B)  that a country that is not competitive should import everything. 
C)  that a country should trade based on its comparative advantage. 
D)  that one country exploits another country.

Question 16

Narrbegin Exhibit 2.8 Production possibilities frontier data
 $\begin{array}{|l|r|r|r|r|r|}
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \
\hline \text { Capital goods } & 0 & 1 & 2 & 3 & 4 \
\hline \text { Consumption goods } & 25 & 23 & 19 & 13 & 0 \
\hline
\end{array}$ Narrend
-Suppose an economy is faced with the production possibilities table shown in Exhibit 2.8. As additional units of capital goods are produced, the opportunity cost in terms of sacrificed units of consumption goods _____ because of _____.

Accepted Answer

A)  decreases; greater efficiency in production 
B)  increases; decreasing opportunity cost 
C)  increases; the law of increasing costs 
D)  increases; greater efficiency in production 
A)  decreases; greater efficiency in production 
B)  increases; decreasing opportunity cost 
C)  increases; the law of increasing costs 
D)  increases; greater efficiency in production

Question 17

The production possibilities curve for the nation of Economagic shifts to the left. This could have been caused by:

Accepted Answer

A)  an increase in Economagic's labour supply. 
B)  innovation in the production of goods in Economagic. 
C)  a war that destroyed some of Economagic's resource base. 
D)  unemployment among Economagic's workers. 
A)  an increase in Economagic's labour supply. 
B)  innovation in the production of goods in Economagic. 
C)  a war that destroyed some of Economagic's resource base. 
D)  unemployment among Economagic's workers.

Question 18

Narrbegin Exhibit 2.6 Production possibilities frontier data
 $$\begin{array} { | l | r | r | r | r | r | r | } 
\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } & \text { F } \
\hline \text { Capital goods } & 15 & 14 & 12 & 5 & 5 & 0 \
\hline \text { Cansumer guods } & 0 & 2 & 4 & 6 & \mathbf { 0 } & 10\
\hline
\end{array}$$ Narrend
-As shown in Exhibit 2.6, a total output of six units of consumer goods and five units of capital goods is:

Accepted Answer

A)  the result of maximum use of the economy's labour force. 
B)  an efficient way of using the economy's scarce resources. 
C)  unobtainable in this economy. 
D)  an inefficient way of using the economy's scarce resources. 
A)  the result of maximum use of the economy's labour force. 
B)  an efficient way of using the economy's scarce resources. 
C)  unobtainable in this economy. 
D)  an inefficient way of using the economy's scarce resources.

Question 19

Narrbegin Exhibit 2.5 Production possibilities frontier   Narrend
-For the economy shown in Exhibit 2.5 to operate at point C, it must:

Accepted Answer

A)  be willing to lower the price of grain. 
B)  use its given resources more efficiently than it would at point A 
C)  experience underemployment. 
D)  experience an increase in its resources and/or an improvement in its technology. 
A)  be willing to lower the price of grain. 
B)  use its given resources more efficiently than it would at point A 
C)  experience underemployment. 
D)  experience an increase in its resources and/or an improvement in its technology.

Question 20

Which of the following would be most likely to cause the production possibilities frontier for trucks and movies to shift outward?

Accepted Answer

A)  A choice of more trucks and less movies. 
B)  A choice of more movies and fewer trucks. 
C)  A reduction in the labour force. 
D)  An increase in the quantity of resources. 
A)  A choice of more trucks and less movies. 
B)  A choice of more movies and fewer trucks. 
C)  A reduction in the labour force. 
D)  An increase in the quantity of resources.

The process of accumulating capital is called:

Narrbegin Exhibit 2.2 Production possibilities frontier Narrend -In Exhibit 2.2, what is the maximum possible production of coffee if production of corn has decreased from 4 to 2 million bushels:

Narrabegin Exhibit 2.11 Production possibilities frontiers -In Exhibit 2.11, the production possibilities curves for a country are shown for the years 2002 and 2003. Suppose this country was located at point A in 2002 and point B in 2003. This economy:

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

Economic growth:

An analysis of production possibilities curves indicates that the reason why underdeveloped nations have difficulties increasing their economic growth rates is because:

Narrbegin Exhibit 2.7 Production possibilities frontier Narrend -Movement along the production possibilities curve shown in Exhibit 2.7 indicates:

Narrbegin Exhibit 2.6 Production possibilities frontier data A B C D E F Capital goods 15 14 12 5 5 0 Cansumer guods 0 2 4 6 10 Narrend -As shown in Exhibit 2.6, if the economy reallocates resources from capital goods to consumer goods:

If more of one good can be produced without producing less of another output, the economy must have been operating efficiently.

Which would be least likely to cause the production possibilities curve to shift to the right?

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specialises and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

Increased productivity leads to:

One of the assumptions underlying the production possibilities frontier or curve for any given economy is that:

Other things being equal, a decreased supply of natural resources would be represented on a production possibilities curve by a/an:

The theory of comparative advantage suggests:

The production possibilities curve for the nation of Economagic shifts to the left. This could have been caused by:

Narrbegin Exhibit 2.6 Production possibilities frontier data A B C D E F Capital goods 15 14 12 5 5 0 Cansumer guods 0 2 4 6 10 Narrend -As shown in Exhibit 2.6, a total output of six units of consumer goods and five units of capital goods is:

Narrbegin Exhibit 2.5 Production possibilities frontier Narrend -For the economy shown in Exhibit 2.5 to operate at point C, it must:

Which of the following would be most likely to cause the production possibilities frontier for trucks and movies to shift outward?

Thinking Like an Economist

Applying Graphs to Economics

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Exam 3: Production Possibilities and Opportunity Cost

The process of accumulating capital is called:

Narrbegin Exhibit 2.2 Production possibilities frontier Narrend -In Exhibit 2.2, what is the maximum possible production of coffee if production of corn has decreased from 4 to 2 million bushels:

Narrabegin Exhibit 2.11 Production possibilities frontiers -In Exhibit 2.11, the production possibilities curves for a country are shown for the years 2002 and 2003. Suppose this country was located at point A in 2002 and point B in 2003. This economy:

Opening trade between nations enables each nation's consumption possibilities to go beyond the confines of its own production possibilities curve.

Economic growth:

An analysis of production possibilities curves indicates that the reason why underdeveloped nations have difficulties increasing their economic growth rates is because:

Narrbegin Exhibit 2.7 Production possibilities frontier Narrend -Movement along the production possibilities curve shown in Exhibit 2.7 indicates:

Narrbegin Exhibit 2.6 Production possibilities frontier data A B C D E F Capital goods 15 14 12 5 5 0 Cansumer guods 0 2 4 6 10 Narrend -As shown in Exhibit 2.6, if the economy reallocates resources from capital goods to consumer goods:

If more of one good can be produced without producing less of another output, the economy must have been operating efficiently.

Which would be least likely to cause the production possibilities curve to shift to the right?

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specialises and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

Increased productivity leads to:

One of the assumptions underlying the production possibilities frontier or curve for any given economy is that:

Other things being equal, a decreased supply of natural resources would be represented on a production possibilities curve by a/an:

The theory of comparative advantage suggests:

The production possibilities curve for the nation of Economagic shifts to the left. This could have been caused by:

Narrbegin Exhibit 2.6 Production possibilities frontier data A B C D E F Capital goods 15 14 12 5 5 0 Cansumer guods 0 2 4 6 10 Narrend -As shown in Exhibit 2.6, a total output of six units of consumer goods and five units of capital goods is:

Narrbegin Exhibit 2.5 Production possibilities frontier Narrend -For the economy shown in Exhibit 2.5 to operate at point C, it must:

Which of the following would be most likely to cause the production possibilities frontier for trucks and movies to shift outward?

Thinking Like an Economist

Applying Graphs to Economics

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters