Question 1

-A PPF, such as the one above, that bows outward illustrates

Accepted Answer

A)  that productivity is falling. 
B)  that technology is improving. 
C)  increasing opportunity cost. 
D)  decreasing opportunity cost.

Question 2

When moving along the production possibilities frontier, opportunity cost is measured as the

Accepted Answer

A)  decrease in the quantity produced of one good divided by the increase in the quantity produced of another good. 
B)  quantity produced of one good divided by the quantity produced of another good. 
C)  quantity produced of one good multiplied by the quantity produced of another good. 
D)  increase in the quantity produced of one good divided by the decrease in the quantity produced of another good.

Question 3

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

Question 4

-In the figure above,

Accepted Answer

A)  moving from point a to point b would require new technology. 
B)  opportunity costs are decreasing. 
C)  production at point b is efficient whereas production at point a is not efficient. 
D)  some resources must be unemployed at point c.

Question 5

The production possibilities frontier

Accepted Answer

A)  depicts the boundary between those combinations of goods and services that can be produced and those that cannot given resources and the current state of technology. 
B)  is a model that assumes there is no scarcity and no opportunity cost. 
C)  shows how many goods and services are consumed by each person in a country. 
D)  is a graph with price on the vertical axis and income on the horizontal axis.

Question 6

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue's opportunity cost of changing oil is
Than Fred's and her opportunity cost for changing tires is than Fred's.

Accepted Answer

A)  greater; greater 
B)  less; greater 
C)  less; less 
D)  greater; less

Question 7

The United States can use all of its resources to produce 50 computers or 4,000 shoes. Suppose that at world market prices, one computer exchanges for 100 shoes. Explain how the United States can gain from trade.

Accepted Answer

The answer of The United States can use all of...

Question 8

-The figure above represents the production possibilities frontier for a country.
a) The nation is currently producing at point B and wants to move to point C. What is the opportunity cost of th move?
b) The nation is currently producing at point B and wants to move to point A. What is the opportunity cost of t move?

Accepted Answer

The answer of 
-The figure above represents the production possibilities...

Question 9

Marginal cost curves generally slope

Accepted Answer

A)  upward because of increasing opportunity cost. 
B)  downward because of increasing opportunity cost. 
C)  downward because of decreasing opportunity cost. 
D)  upward because of decreasing opportunity cost.

Question 10

In order to achieve the maximum gains from trade, people should specialize according to

Accepted Answer

A)  comparative advantage. 
B)  property rights. 
C)  absolute advantage. 
D)  PPF.

Question 11

Marginal benefit typically

Accepted Answer

A)  remains constant as more is consumed. 
B)  increases as marginal costs increase. 
C)  increases as more is consumed. 
D)  decreases as more is consumed.

Question 12

Property rights facilitate the development of trade.

Accepted Answer

A) True 
 B)False

Question 13

The principle of decreasing marginal benefit indicates that as the consumption of magazines increases, a person

Accepted Answer

A)  is willing to forego more of other goods or services to acquire another magazine. 
B)  willing to pay less for another magazine. 
C)  obtains less satisfaction than if he or she had fewer magazines. 
D)  is willing to pay increasingly more for another magazine.

Question 14

A nation can produce at a point outside its PPF

Accepted Answer

A)  when it trades with other nations. 
B)  when its PPF is bowed out. 
C)  when it produces inefficiently. 
D)  never.

Question 15

A representative from Russia's Ministry of Economic Development voiced concern over the fall in oil prices. The resulting decrease in state revenue would negatively affect social spending and state investment in new capital. In 2008, Russia's economic growth rate was 8.1% and might reach 3% in 2009.
BarentsObserver.com October 20, 2008
Suppose Russia's PPF has capital goods on the vertical axis while consumption goods are on the horizontal axis. Which of the following would describe the outcome described above?

Accepted Answer

A)  Russia's PPF would become steeper 
B)  Russia's PPF would become flatter. 
C)  There would be an inward shift of Russia's PPF. 
D)  Russia's PPF would shift outward more slowly over the next several years.

Question 16

Abe can catch 15 pounds of fish an hour or pick 30 pounds of fruit an hour. He works an 8- hour day, spending 5 hours picking fruit and 3 hours catching fish. Calculate Abe's opportunity cost of a pound of fruit.

Accepted Answer

A)  0.5 pounds of fish 
B)  6 minutes 
C)  3 hours a day 
D)  2 pounds of fish

Question 17

The bowed- outward shape of a PPF

Accepted Answer

A)  reflects the unequal application of technology in production. 
B)  is due to the existence of increasing opportunity cost. 
C)  is due to capital accumulation. 
D)  illustrates the fact that no opportunity cost is incurred for increasing the production of the good measured on the horizontal axis but it is incurred to increase production of the good measured along the vertical axis.

Question 18

-In the figure above, point A is undesirable because

Accepted Answer

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

Question 19

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)  a higher opportunity cost of producing pop culture. 
C)  a lower opportunity cost of producing pop culture. 
D)  higher wages for producers of pop culture.

Question 20

-In the figure above, what can be said about point B?

Accepted Answer

A)  It represents all resources being devoted to the production of oranges. 
B)  It can be reached only after economic growth occurs. 
C)  It can be attained only if some resources are left unused. 
D)  It represents all resources being devoted to the production of apples.

Exam 2: The Economic Problem