Question 1

-Moving along a bowed-out PPF between milk and cotton, as more milk is produced the marginal cost of an additional gallon of milk

Accepted Answer

A)  rises. 
B)  does not change. 
C)  falls. 
D)  probably changes, but in an ambiguous direction.

Question 2

-In the figure above, the curve is known as the

Accepted Answer

A)  production possibilities frontier. 
B)  substitution options frontier. 
C)  production function. 
D)  opportunity cost curve.

Question 3

Suppose that the government is trying to decide between allocating its resources to build more dams or to build more freeways. In terms of forgone dams, as more freeways are constructed, the marginal benefit of additional freeways ________ and the marginal cost of additional freeways ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 4

-In one day, Brandon can either plow 10 acres or plant 20 acres. In one day, Christopher can either plow 14 acres or plant 14 acres. Brandon and Christopher can

Accepted Answer

A)  gain from exchange if Brandon specializes in planting and Christopher specializes in plowing. 
B)  gain from exchange if Brandon specializes in plowing and Christopher specializes in planting. 
C)  exchange, but only Brandon will gain from the exchange. 
D)  exchange, but only Christopher will gain from the exchange.

Question 5

Economic growth is shown on the production possibilities frontier as

Accepted Answer

A)  a movement from one point on the PPF to another. 
B)  an outward shift in the PPF. 
C)  an inward shift in the PPF. 
D)  the curvature of the PPF.

Question 6

Opportunity cost is represented on the production possibilities frontier by

Accepted Answer

A)  attainable and unattainable points. 
B)  efficient and inefficient points. 
C)  the amount of good Y forgone when more of good X is produced. 
D)  technological progress.

Question 7

-In the figure above, point A is undesirable because

Accepted Answer

A)  there is an inefficient use of resources. 
B)  too much health care is being produced. 
C)  the opportunity costs of health care is too high. 
D)  point E is a more realistic option in this economy.

Question 8

Technological change

Accepted Answer

A)  generates economic growth. 
B)  shifts the PPF leftward. 
C)  creates inefficiency. 
D)  Both answers A and C are correct.

Question 9

One of the largest categories of exports from the United States is now pop culture: movies, music, TV programming, and videos. A direct conclusion from this information is that, compared to other countries, the United States has

Accepted Answer

A)  lower wages for producers of pop culture. 
B)  higher wages for producers of pop culture. 
C)  an absolute advantage in producing pop culture. 
D)  a comparative advantage in producing pop culture.

Question 10

When economic growth occurs, the

Accepted Answer

A)  economy moves along its production possibilities frontier. 
B)  production possibilities frontier shifts outward. 
C)  production possibilities frontier becomes steeper. 
D)  production possibilities frontier shifts outward but no longer limits the amount that can be produced.

Question 11

Draw a production possibilities frontier between beans and peas. Label the unattainable points, the attainable points with fully employed resources, and the attainable points with unemployed resources.

Accepted Answer

The answer of Draw a production possibilities frontier between beans...

Question 12

An increase in the nation's capital stock will

Accepted Answer

A)  shift the PPF outward. 
B)  cause a movement along the PPF upward and leftward. 
C)  cause a movement along the PPF downward and rightward. 
D)  move the nation from producing within the PPF to producing at a point closer to the PPF.

Question 13

Country A Country B 
-In the table above, country B is producing 4 units of X and 6 units of Y. For country B, the opportunity cost of producing an additional unit of Y is

Accepted Answer

A)  1/2 unit of X per unit of Y. 
B)  2/3 unit of X per unit of Y. 
C)  2 units of X per unit of Y. 
D)  3 units of X per unit of Y.

Question 14

Points outside the production possibilities frontier illustrate production points that cannot be attained.

Accepted Answer

A) True 
 B)False

Question 15

Suppose a scientific breakthrough made free solar power available in unlimited quantities in the United States. The effect of this invention would be to move the

Accepted Answer

A)  United States beyond its production possibilities frontier. 
B)  United States inside its production possibilities frontier. 
C)  U.S. production possibilities frontier outward. 
D)  U.S. production possibilities frontier inward.

Question 16

The production possibilities frontier itself shows

Accepted Answer

A)  the maximum amount of resources available at any given time. 
B)  combinations of goods and services that do not fully use available resources. 
C)  the maximum rate of growth of output possible for an economy. 
D)  the maximum levels of production that can be attained.

Question 17

-Anna and Maria produce shirts and ties. The figure above shows Anna's PPF and Maria's PPF. Anna and Maria can achieve the gains from trade if Anna produces ________ and Maria produces ________.

Accepted Answer

A)  ties; shirts 
B)  shirts and ties; only ties 
C)  only ties; shirts and ties 
D)  shirts; ties

Question 18

As a person consumes more of a good, the

Accepted Answer

A)  marginal benefit increases. 
B)  marginal benefit decreases. 
C)  marginal benefit increases or decreases depending whether or not the economy is on the PPF. 
D)  price of the good falls.

Question 19

A point inside a production possibilities frontier

Accepted Answer

A)  could indicate that resources are misallocated. 
B)  is more efficient than a point on the production possibilities frontier. 
C)  reflects the fact that more technology needs to be developed to fully employ all resources. 
D)  implies that too much labor and not enough capital is being used.

Question 20

-The table above represents the marginal cost and marginal benefit associated with pizza (in terms of movies). What quantity of pizza should be produced if resources are to be used efficiently?

Accepted Answer

A)  5 pizzas 
B)  6 pizzas 
C)  7 pizzas 
D)  8 pizzas

Exam 2: The Economic Problem