Question 1

In the United States, the government coordinates most of the economic activity.

Accepted Answer

A) True 
 B)False

Question 2

When economic growth occurs, the

Accepted Answer

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

Question 3

Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A

Accepted Answer

A)  can produce X using newer technology than can B. 
B)  has a lower opportunity cost of producing good X than has B. 
C)  has a lower opportunity cost of producing good X than of producing good Y. 
D)  can produce more units of X in a given time period than can B.

Question 4

Japan can use all of its resources to produce 100 videos or 400 shoes. China can use all of its resources to produce 25 videos or 200 shoes. Which nation has the comparative advantage in shoes and which nation has the comparative advantage in videos?

Accepted Answer

The answer of Japan can use all of its resources...

Question 5

The fact of increasing opportunity costs means that a production possibilities frontier will

Accepted Answer

A)  bow outward. 
B)  be a straight line. 
C)  reach a maximum and then gradually decrease. 
D)  shift outward over time.

Question 6

The United States uses tax funds to build and repair the interstate highway system and to provide health care services via Medicare. Suppose Medicare services are on the horizontal axis and highway miles are on the vertical axis of a PPF. If the government decides to reduce funding to Medicare, this change would be shown as

Accepted Answer

A)  the PPF becoming flatter. 
B)  a shift out of the PPF. 
C)  a movement up along the PPF. 
D)  a movement down along the PPF.

Question 7

-The figure above shows a nation's production possibilities frontier for apples and oranges.
a) What combination of goods is represented by point A?
b) What combination of goods is represented by point B?
c) Which point represents an unattainable combination of goods?

Accepted Answer

The answer of 
-The figure above shows a nation's production...

Question 8

Resource use is allocatively efficient if the

Accepted Answer

A)  marginal cost of what the resource produces is equal to the marginal benefit of what is produced. 
B)  total cost of what the resource produces is less than the total benefit of what is produced. 
C)  total cost of what the resource produces is equal to the total benefit of what is produced. 
D)  marginal benefit of what the resource produces has diminished to zero.

Question 9

The state of Georgia offers free college tuition to high school students with a "B" average. In 2007, the state raised the requirement so that fewer students qualified for the scholarship. At the same time, Georgia increased state spending on health care. Suppose that college education is on the vertical axis and health care is on the horizontal axis of a PPF. These changes

Accepted Answer

A)  will cause a shift out of the PPF. 
B)  will cause a shift in the of the PPF. 
C)  are an example of incentives 
D)  are example of a tradeoff.

Question 10

Claire and Dag are farmers who produce beef and corn. In a year, Claire can produce 16 tons of beef or 40 bushels of corn, while Dag can produce 5 tons of beef or 25 bushels of corn. The opportunity cost of producing a ton of beef is

Accepted Answer

A)  5 bushels of corn for Dag and 2.5 bushels of corn for Claire. 
B)  36.5 days for Dag and 45.6 days for Claire. 
C)  10 bushels of corn for Dag and 8 bushels of corn for Claire. 
D)  20 bushels of corn for Dag and 50 bushels of corn for Claire.

Question 11

An economy produces only food and shelter. There are two individuals in the economy: Bill and Mary. Mary's opportunity cost of producing 1 unit of shelter is 2 units of food. Bill's opportunity cost of producing 1 unit of shelter is 4 units of food.

Accepted Answer

A)  Mary has a comparative advantage over Bill in the production of food. 
B)  Mary has a comparative advantage over Bill in the production of shelter. 
C)  Bill has a comparative advantage over Mary in the production of shelter. 
D)  Bill has an absolute advantage over Mary in the production of shelter.

Question 12

In an eight- hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight- hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter. Andy has a comparative advantage in the production of

Accepted Answer

A)  butter, while Bob has a comparative advantage in the production of bread. 
B)  bread and neither has a comparative advantage in the production of butter. 
C)  bread, while Bob has a comparative advantage in the production of butter. 
D)  both bread and butter.

Question 13

-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. If 1 million gallons of ice cream are being produced,

Accepted Answer

A)  people value an additional gallon of ice cream more highly than its cost of production. 
B)  the cost an additional gallon of ice cream is more than people think it is worth. 
C)  more banking services should be produced. 
D)  the marginal cost of an additional gallon of ice cream is greater the value people place on it.

Question 14

-In the figure above, the marginal cost of producing a computer

Accepted Answer

A)  rises as more computers are produced. 
B)  falls as more computers are produced. 
C)  stays the same as more computers are produced. 
D)  is the same as the marginal cost of producing a television set.

Question 15

The marginal benefit of a good or service usually

Accepted Answer

A)  stays constant as we consume more of it. 
B)  decreases as we consume more of it. 
C)  increases as we consume more of it. 
D)  decreases as we consume less of it.

Question 16

-The table above lists seven points on the production possibilities frontier for pizza and CDs. Graph the PPF. What is the opportunity cost of producing the first four pizzas? What is the opportunity cost of producing the 10th pizza. What is the opportunity cost of producing the first 12 CDs? What is the opportunity cost of producing the 26th CD?

Accepted Answer

The answer of 
-The table above lists seven points on...

Question 17

Increasing opportunity cost implies that

Accepted Answer

A)  the production possibilities frontier will be a straight line. 
B)  producing additional units of one good results in increasing amounts of lost output of the other good. 
C)  the society will be producing inside its production possibilities frontier. 
D)  producing additional units of one good results in proportionately smaller reductions in the output of the other good.

Question 18

When the production possibilities frontier is bowed outwards, the opportunity cost of producing more of one good

Accepted Answer

A)  cannot be determined. 
B)  remains constant. 
C)  decreases in terms of the amount foregone of the other good. 
D)  increases in terms of the amount foregone of the other good.

Question 19

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)  inside its production possibilities frontier. 
C)  outside its production possibilities frontier with respect to food, but inside with respect to high- technology goods. 
D)  inside its production possibilities frontier with respect to food, but outside with respect to high- technology goods.

Question 20

The production possibilities frontier shifts as

Accepted Answer

A)  the money supply grows or shrinks. 
B)  the unemployment rate changes. 
C)  technology changes. 
D)  tastes and preferences change.

Exam 2: The Economic Problem