Question 1

The production possibilities curve demonstrate which of the following concepts?

Accepted Answer

A)  scarcity 
B)  choice 
C)  trade-offs 
D)  all of the above 
A)  scarcity 
B)  choice 
C)  trade-offs 
D)  all of the above

Question 2

Capital goods

Accepted Answer

A)  are a special type of consumption goods. 
B)  are consumed because they enhance the enjoyment consumers obtain from other goods and services. 
C)  are goods used to make consumer goods and services. 
D)  refer to the expenses that a company incur for producing other types of goods. 
A)  are a special type of consumption goods. 
B)  are consumed because they enhance the enjoyment consumers obtain from other goods and services. 
C)  are goods used to make consumer goods and services. 
D)  refer to the expenses that a company incur for producing other types of goods.

Question 3

When nations specialize in their areas of comparative advantage and then trade with the rest of the world, the result is that

Accepted Answer

A)  the average standard of living in the world will go down. 
B)  the average standard of living in the world will go up. 
C)  the world will move from a point on the production possibilities curve to a point inside the curve. 
D)  worldwide economic efficiency will decrease. 
A)  the average standard of living in the world will go down. 
B)  the average standard of living in the world will go up. 
C)  the world will move from a point on the production possibilities curve to a point inside the curve. 
D)  worldwide economic efficiency will decrease.

Question 4

Steve and Karen decide to watch a movie on Netflix using a promotion code so they do not need to pay for that movie. We know that

Accepted Answer

A)  both bear the same opportunity cost because they are seeing the same thing. 
B)  both bear the same opportunity cost because the tickets have the same face value. 
C)  both bear an opportunity cost that depends on what each person is giving up to watch the movie. 
D)  neither bears an opportunity cost since neither needs to pay for the movie. 
A)  both bear the same opportunity cost because they are seeing the same thing. 
B)  both bear the same opportunity cost because the tickets have the same face value. 
C)  both bear an opportunity cost that depends on what each person is giving up to watch the movie. 
D)  neither bears an opportunity cost since neither needs to pay for the movie.

Question 5

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)  Starting from point A, this economy does not incur any opportunity cost in producing more bread. 
B)  Starting from point A, this economy does not incur any opportunity cost in producing more wool. 
C)  In moving from point A to point B, the economy produces 30 additional bales of wool at an opportunity cost of 250 loaves of bread. 
D)  In moving from point A to point B, the economy is experiencing economic growth. 
A)  Starting from point A, this economy does not incur any opportunity cost in producing more bread. 
B)  Starting from point A, this economy does not incur any opportunity cost in producing more wool. 
C)  In moving from point A to point B, the economy produces 30 additional bales of wool at an opportunity cost of 250 loaves of bread. 
D)  In moving from point A to point B, the economy is experiencing economic growth.

Question 6

The concept of opportunity cost exists because

Accepted Answer

A)  resources are scarce. 
B)  goods have different prices. 
C)  shortages occur. 
D)  the value of services is hard to determine. 
A)  resources are scarce. 
B)  goods have different prices. 
C)  shortages occur. 
D)  the value of services is hard to determine.

Question 7

When Adam Smith's ten pin workers specialized, they were able to increase output of pins in a day from 200 to 48,000. One reason for the increase in pin output was due to

Accepted Answer

A)  the time saved when workers do not need to shift from one task to another. 
B)  the boredom the workers suffered when they stopped making a whole pin and only concentrated on one task such as painting the heads white. 
C)  new machinery. 
D)  the bonus they received when they produced more pins. 
A)  the time saved when workers do not need to shift from one task to another. 
B)  the boredom the workers suffered when they stopped making a whole pin and only concentrated on one task such as painting the heads white. 
C)  new machinery. 
D)  the bonus they received when they produced more pins.

Question 8

Which is the best example of an intangible good?

Accepted Answer

A)  the car you dream of owning but cannot afford 
B)  the suit you hope will make a good impression when you go on job interviews 
C)  the textbook study guide you hope will prepare you to perform well on examinations 
D)  the advice and expertise provided by the music store clerk who sold you that CD 
A)  the car you dream of owning but cannot afford 
B)  the suit you hope will make a good impression when you go on job interviews 
C)  the textbook study guide you hope will prepare you to perform well on examinations 
D)  the advice and expertise provided by the music store clerk who sold you that CD

Question 9

Whenever the economy is producing the maximum amount of goods given the level of technology and the amount of resources

Accepted Answer

A)  the number of resources used should be decreased since society must protect its scarce resources. 
B)  the concept of opportunity costs does not exist. 
C)  more goods will be available than customers want to buy. 
D)  the economy is producing efficiently. 
A)  the number of resources used should be decreased since society must protect its scarce resources. 
B)  the concept of opportunity costs does not exist. 
C)  more goods will be available than customers want to buy. 
D)  the economy is producing efficiently.

Question 10

Division of labor increases the output of society by

Accepted Answer

A)  eliminating scarcity. 
B)  reducing the choices people have to make to a more manageable number. 
C)  ensuring that people are happier in performing their work. 
D)  allowing resources to specialize in the tasks for which they have a comparative advantage. 
A)  eliminating scarcity. 
B)  reducing the choices people have to make to a more manageable number. 
C)  ensuring that people are happier in performing their work. 
D)  allowing resources to specialize in the tasks for which they have a comparative advantage.

Question 11

-Refer to the above figure. Which of the following would allow society to move to point d?

Accepted Answer

A)  producing efficiently 
B)  concentrating production in wheat 
C)  increasing the quantity of labor 
D)  using the best land to produce wheat and the lower quality land to produce beans 
A)  producing efficiently 
B)  concentrating production in wheat 
C)  increasing the quantity of labor 
D)  using the best land to produce wheat and the lower quality land to produce beans

Question 12

-Which of the following statements about a movement along the production possibilities curve in the above figure is FALSE?

Accepted Answer

A)  An additional computer can be produced only if fewer televisions are produced. 
B)  The trade-off between computers and televisions is not constant. 
C)  Society cannot have more of both goods at the same time. 
D)  There are no opportunity costs involved in choosing one point on the curve over all other points. 
A)  An additional computer can be produced only if fewer televisions are produced. 
B)  The trade-off between computers and televisions is not constant. 
C)  Society cannot have more of both goods at the same time. 
D)  There are no opportunity costs involved in choosing one point on the curve over all other points.

Question 13

Specialization occurs because

Accepted Answer

A)  society trades current consumption for future consumption. 
B)  the production possibilities curve tends to be linear. 
C)  people have different skills. 
D)  society produces at the production possibilities curve. 
A)  society trades current consumption for future consumption. 
B)  the production possibilities curve tends to be linear. 
C)  people have different skills. 
D)  society produces at the production possibilities curve.

Question 14

Briefly explain the difference between the concepts of scarcity and shortage.

Accepted Answer

Scarcity is not a shortage. Scarcity occ

Question 15

In the above figure, as more ukuleles are produced, the opportunity cost in terms of guitars is

Accepted Answer

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

Question 16

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

Accepted Answer

A)  The economy has acquired new resources that are well suited for producing wool. 
B)  Land that was once used to grow wheat is now being used to graze sheep. 
C)  The economy is producing more bread by choosing to produce less wool. 
D)  The technology for growing wheat has improved. 
A)  The economy has acquired new resources that are well suited for producing wool. 
B)  Land that was once used to grow wheat is now being used to graze sheep. 
C)  The economy is producing more bread by choosing to produce less wool. 
D)  The technology for growing wheat has improved.

Question 17

If an economy produces only steel and wheat, a new fertilizer will

Accepted Answer

A)  cause the production of wheat to increase at every point on a production possibilities curve but not affect the production of steel, that is the curve moves outward on the wheat axis only. 
B)  cause the production of both wheat and steel to increase at every point along the production possibilities curve, that is the curve moves outward on both the wheat axis and the steel axis. 
C)  not affect the production of either wheat or steel. 
D)  cause the production of steel to increase at every point along the production possibilities curve but not affect the production of wheat, that is the curve moves outward on the steel axis only. 
A)  cause the production of wheat to increase at every point on a production possibilities curve but not affect the production of steel, that is the curve moves outward on the wheat axis only. 
B)  cause the production of both wheat and steel to increase at every point along the production possibilities curve, that is the curve moves outward on both the wheat axis and the steel axis. 
C)  not affect the production of either wheat or steel. 
D)  cause the production of steel to increase at every point along the production possibilities curve but not affect the production of wheat, that is the curve moves outward on the steel axis only.

Question 18

During periods of unemployment

Accepted Answer

A)  the economy operates at a point inside the production possibilities curve. 
B)  the economy operates at a point outside the production possibilities curve. 
C)  the production possibilities curve shifts inward. 
D)  the production possibilities curve shifts outward. 
A)  the economy operates at a point inside the production possibilities curve. 
B)  the economy operates at a point outside the production possibilities curve. 
C)  the production possibilities curve shifts inward. 
D)  the production possibilities curve shifts outward.

Question 19

Briefly explain how specialization and trade can benefit nations.

Accepted Answer

When nations specialize in what they hav

Question 20

Given the production possibilities schedule in the above table, a combination of 60 televisions and 40 portable devices

Accepted Answer

A)  is attainable but involves an inefficient use of society's resources. 
B)  would be attainable only if a new technology of producing televisions or portable devices were introduced. 
C)  is not attainable because it is not listed in the schedule. 
D)  is not attainable because society does not have enough resources to produce this combination. 
A)  is attainable but involves an inefficient use of society's resources. 
B)  would be attainable only if a new technology of producing televisions or portable devices were introduced. 
C)  is not attainable because it is not listed in the schedule. 
D)  is not attainable because society does not have enough resources to produce this combination.

Exam 2: Scarcity and the World of Trade-Offs

The production possibilities curve demonstrate which of the following concepts?

Capital goods

When nations specialize in their areas of comparative advantage and then trade with the rest of the world, the result is that

Steve and Karen decide to watch a movie on Netflix using a promotion code so they do not need to pay for that movie. We know that

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

The concept of opportunity cost exists because

When Adam Smith's ten pin workers specialized, they were able to increase output of pins in a day from 200 to 48,000. One reason for the increase in pin output was due to

Which is the best example of an intangible good?

Whenever the economy is producing the maximum amount of goods given the level of technology and the amount of resources

Division of labor increases the output of society by

-Refer to the above figure. Which of the following would allow society to move to point d?

-Which of the following statements about a movement along the production possibilities curve in the above figure is FALSE?

Specialization occurs because

Briefly explain the difference between the concepts of scarcity and shortage.

In the above figure, as more ukuleles are produced, the opportunity cost in terms of guitars is

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

If an economy produces only steel and wheat, a new fertilizer will

During periods of unemployment

Briefly explain how specialization and trade can benefit nations.

Given the production possibilities schedule in the above table, a combination of 60 televisions and 40 portable devices

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