Question 1

Which of the following is TRUE regarding markets? I) Economists define a market as a geographic location where trade occurs.
II) A market enables buyers and sellers to get information about each other and to buy and sell from each other.
III) Markets coordinate decisions through prices.

Accepted Answer

A)  I only 
B)  I and III 
C)  II and III 
D)  I, II and III

Question 2

If a country must decrease current consumption to increase the amount of capital goods it produces today, then it must

Accepted Answer

A)  be using resources inefficiently today, but will be more efficient in the future. 
B)  be producing along the production possibilities frontier today and its production possibilities frontier will shift outward if it produces more capital goods. 
C)  must be producing outside the production possibilities frontier and will continue to do so in the future. 
D)  must not have private ownership of property and will have to follow planning authorities' decisions today and in the future.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

-Two countries, Alpha and Beta, have identical production possibilities frontiers illustrated above. If Alpha produces at point a and Beta produces at point b, then

Accepted Answer

A)  Beta's economic growth rate will exceed Alpha's. 
B)  Alpha consumes less than Beta today, but it will grow faster than Beta. 
C)  Alpha's and Beta's economic growth rates will be the same. 
D)  Beta's future consumption will be greater than Alpha's.

Question 5

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

Question 6

At the current point of production on a nation's production possibilities frontier, the marginal benefit of a slice of pizza is 500 tacos per slice of pizza while the marginal cost of producing a slice of pizza is 750 tacos per slice of pizza. To be allocatively efficient, what should be done?

Accepted Answer

The answer of At the current point of production on...

Question 7

A production point beyond the production possibilities frontier represents what?

Accepted Answer

The answer of A production point beyond the production possibilities...

Question 8

As we move along a bowed-out production possibility frontier, producing more tacos and less pizza, the opportunity cost of a pizza

Accepted Answer

A)  increases. 
B)  remains the same. 
C)  decreases. 
D)  increases and then decreases.

Question 9

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 10

-In the figure above, the marginal cost of the fifth computer is

Accepted Answer

A)  0 television sets per computer. 
B)  4 television sets per computer. 
C)  20 television sets per computer. 
D)  35 television sets per computer.

Question 11

-In the above figure, which point represents an attainable but inefficient production point?

Accepted Answer

A)  point C 
B)  point N 
C)  point L 
D)  point D

Question 12

If Hong Kong continues to devote more resources to accumulating capital than the United States, Hong Kong will continue to grow more rapidly than the United States.

Accepted Answer

A) True 
 B)False

Question 13

Specialization and trade allow countries to consume beyond their PPFs.

Accepted Answer

A) True 
 B)False

Question 14

Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal. Unusually good weather for growing corn shifts

Accepted Answer

A)  the horizontal intercept rightward and the vertical intercept upward. 
B)  the horizontal intercept rightward but does not shift the vertical intercept. 
C)  the vertical intercept upward but does not shift the horizontal intercept. 
D)  neither the horizontal intercept nor the vertical intercept.

Question 15

"If an economy is producing at a point on its PPF, it has achieved allocative efficiency." True or false? Explain.

Accepted Answer

The answer of "If an economy is producing at a...

Question 16

Each point on the production possibilities frontier achieves allocative efficiency.

Accepted Answer

A) True 
 B)False

Question 17

The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between

Accepted Answer

A)  the future production of capital goods and future consumption of goods. 
B)  economic growth and technological change. 
C)  satisfying today the needs of the poor and the wants of the wealthy. 
D)  current consumption and future consumption.

Question 18

-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

Question 19

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 20

Why does the marginal benefit curve have a negative slope?

Accepted Answer

The answer of Why does the marginal benefit curve have...

Exam 2: The Economic Problem

Which of the following is TRUE regarding markets? I) Economists define a market as a geographic location where trade occurs. II) A market enables buyers and sellers to get information about each other and to buy and sell from each other. III) Markets coordinate decisions through prices.

If a country must decrease current consumption to increase the amount of capital goods it produces today, then it must

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

-Two countries, Alpha and Beta, have identical production possibilities frontiers illustrated above. If Alpha produces at point a and Beta produces at point b, then

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.

At the current point of production on a nation's production possibilities frontier, the marginal benefit of a slice of pizza is 500 tacos per slice of pizza while the marginal cost of producing a slice of pizza is 750 tacos per slice of pizza. To be allocatively efficient, what should be done?

A production point beyond the production possibilities frontier represents what?

As we move along a bowed-out production possibility frontier, producing more tacos and less pizza, the opportunity cost of a pizza

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

-In the figure above, the marginal cost of the fifth computer is

-In the above figure, which point represents an attainable but inefficient production point?

If Hong Kong continues to devote more resources to accumulating capital than the United States, Hong Kong will continue to grow more rapidly than the United States.

Specialization and trade allow countries to consume beyond their PPFs.

Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal. Unusually good weather for growing corn shifts

"If an economy is producing at a point on its PPF, it has achieved allocative efficiency." True or false? Explain.

Each point on the production possibilities frontier achieves allocative efficiency.

The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between

-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?

Economic growth is shown on the production possibilities frontier as

Why does the marginal benefit curve have a negative slope?