Question 1

-As Rainclouds Inc. moves downward along its production possibilities frontier, illustrated in the figure above, the opportunity cost of a raincoat ________.

Accepted Answer

A)  decreases 
B)  depends on the initial quantity produced 
C)  increases 
D)  remains the same

Question 2

Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or one computer in an hour. If Germany produces one less computer and switches resources to cameras, and the United States produces one more computer and takes resources out of cameras, then the net change in camera production in both countries taken together is

Accepted Answer

A)  0. 
B)  minus 10 cameras. 
C)  plus 10 cameras. 
D)  plus 20 cameras.

Question 3

Some time ago the government of China required many highly skilled technicians and scientists to engage in unskilled agricultural labor in order to develop "proper social attitudes." This policy probably caused China to produce

Accepted Answer

A)  at an inappropriate point along its production possibilities frontier. 
B)  outside its production possibilities frontier with respect to food, but inside with respect to high-technology goods. 
C)  inside its production possibilities frontier with respect to food, but outside with respect to high-technology goods. 
D)  inside its production possibilities frontier.

Question 4

The production possibilities frontier represents

Accepted Answer

A)  the maximum amount of labor and capital available to society. 
B)  combinations of goods and services among which consumers are indifferent. 
C)  the maximum levels of production that can be attained. 
D)  the maximum rate of growth of capital and labor in a country.

Question 5

Marginal benefit curves slope ________ and marginal cost curves slope ________.

Accepted Answer

A)  upward; upward 
B)  upward; downward 
C)  downward; downward 
D)  downward; upward

Question 6

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is true?

Accepted Answer

A)  Missouri would specialize in pear production and trade pears to Washington pecans. 
B)  Missouri would specialize in pecan production and trade pecans to Washington for pears. 
C)  Washington would produce both pears and pecans and Missouri would produce neither. 
D)  Half of both Washington's and Missouri's resources would be devoted to pears and the other half to pecans because that is the comparative advantage.

Question 7

-Employees at Bank of America are good at providing banking services and workers at Ben & Jerry's are good at making ice cream. The figure above shows the marginal cost and marginal benefit curves for ice cream. As Ben & Jerry's increases production from 1 to 2 million gallons of ice cream, the

Accepted Answer

A)  marginal cost curve shifts downward. 
B)  marginal cost curve shifts upward. 
C)  opportunity cost of ice cream decreases. 
D)  opportunity cost of ice cream increases to 2 banking services per gallon.

Question 8

At one point along a PPF 40 tons of wheat are produced while 80 tons of rice are produced. At another point along the same PPF, 41 tons of wheat are produced while 70 tons of rice are produced. The opportunity cost of producing a ton of wheat between these points is ________ per ton of wheat.

Accepted Answer

A)  1/2 ton of rice 
B)  10 tons of rice 
C)  1/10 ton of rice 
D)  4/7 ton of rice

Question 9

A person has a comparative advantage in producing a particular good if that person

Accepted Answer

A)  has higher productivity in producing it than anyone else has. 
B)  can produce it at lower opportunity cost than anyone else can. 
C)  has less desire to consume that good than anyone else has. 
D)  has more human capital related to that good than anyone else has.

Question 10

Country A Country B 
-A person who has an absolute advantage in the production of all goods will

Accepted Answer

A)  also have a comparative advantage in the production of all goods. 
B)  not be able to gain from specialization and exchange. 
C)  have a production possibilities frontier with a constant slope. 
D)  have a comparative advantage in the production of some goods but not in the production of others.

Question 11

-The table above lists six points on the production possibilities frontier for grain and cars. Given this information, which of the following combinations is unattainable?

Accepted Answer

A)  6 tons of grain and 18 cars 
B)  4 tons of grain and 26 cars 
C)  2 tons of grain and 27 cars 
D)  7 tons of grain and 10 cars

Question 12

-In the above table, the production of 3 pizzas and 80 cases of soda is

Accepted Answer

A)  impossible unless more resources become available or technology improves. 
B)  feasible but would involve unemployed or misallocated resources. 
C)  possible only if the economy produces with maximum efficiency. 
D)  possible only if there is inflation.

Question 13

One of the opportunity costs of economic growth is

Accepted Answer

A)  capital accumulation. 
B)  technological change. 
C)  reduced current consumption. 
D)  the gain in future consumption.

Question 14

-Refer to the production possibilities frontier figure above. Which of the following movements requires the largest opportunity cost, in terms of good X forgone, per extra unit of good Y?

Accepted Answer

A)  from point e to point d 
B)  from point d to point c 
C)  from point c to point b 
D)  from point b to point a

Question 15

Are all points inside the production possibilities frontier unattainable?

Accepted Answer

The answer of Are all points inside the production possibilities...

Question 16

Economic growth is the result of all of the following except

Accepted Answer

A)  technological change. 
B)  capital accumulation. 
C)  opportunity cost. 
D)  investment in human capital.

Question 17

Which of the following is NOT true concerning a society's production possibilities frontier (PPF)?

Accepted Answer

A)  It reveals the maximum amount of any two goods that can be produced from a given quantity of resources. 
B)  Tradeoffs occur when moving along a PPF. 
C)  Production efficiency occurs when production is on the frontier itself. 
D)  Consumers will receive equal benefits from the two goods illustrated in the PPF.

Question 18

President Obama has proposed a goal that everyone complete at least one year of formal education or training beyond high school. This policy would

Accepted Answer

A)  increase human capital and increase economic growth. 
B)  increase physical capital and increase economic growth. 
C)  increase financial capital and increase economic growth. 
D)  eliminate opportunity costs and increase economic growth.

Question 19

A production possibilities frontier figure does NOT illustrate

Accepted Answer

A)  the limits on production imposed by our limited resources and technology. 
B)  the exchange of one good or service for another. 
C)  opportunity cost. 
D)  attainable and unattainable points.

Question 20

-In the figure above, suppose that Mac and Izzie specialize and trade to reach point c. Mac sends Izzie

Accepted Answer

A)  12 computers in exchange for 12 TVs. 
B)  12 computers in exchange for 6 TVs. 
C)  6 computers in exchange for 12 TVs. 
D)  6 computers in exchange for 6 TVs.

Exam 2: The Economic Problem