Question 1

The more we have of a good or service, the smaller is its marginal benefit and the less we are willing to pay for an additional unit of it.

Accepted Answer

A) True 
 B)False

Question 2

When a nation has a comparative advantage in the production of a particular good

Accepted Answer

A)  the nation tends to avoid specialization. 
B)  the comparative advantage encourages self-sufficiency. 
C)  the opportunity cost of producing that good is higher than that of other goods. 
D)  the nation can gain from trade.

Question 3

A point outside a production possibilities frontier indicates

Accepted Answer

A)  that resources are not being used efficiently. 
B)  an output combination that society cannot attain given its current level of resources and technology. 
C)  that resources are being used very efficiently. 
D)  that both goods are characterized by increasing costs.

Question 4

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 5

-The table above gives the production possibilities frontier for a nation that produces wheat and soybeans. Use the information in that table to complete the table below, which has in it the opportunity costs of moving from one production point to another. Do not forget to note the units of the opportunity costs.

Accepted Answer

The answer of 
-The table above gives the production possibilities...

Question 6

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

Accepted Answer

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

Question 7

-In the figure above, at the allocatively efficient level of computer production consumers are willing to give up

Accepted Answer

A)  0 televisions per computer. 
B)  between 0 and 3 televisions per computer. 
C)  3 televisions per computer. 
D)  more than 3 televisions per computer.

Question 8

Suppose the country of Popcorn produces only jets and corn. If Popcorn cannot produce any more jets without giving up corn, we say that Popcorn has achieved

Accepted Answer

A)  the highest marginal benefit. 
B)  production efficiency. 
C)  the lowest marginal cost. 
D)  the highest opportunity cost.

Question 9

A production point beyond the production possibilities frontier represents what?

Accepted Answer

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

Question 10

When producing goods and services along a PPF, tradeoffs exist because

Accepted Answer

A)  not all production is efficient. 
B)  society has only a limited amount of productive resources. 
C)  buyers and sellers often must negotiate prices. 
D)  human wants and needs are limited at a particular point in time.

Question 11

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)  a higher opportunity cost of producing pop culture. 
D)  a lower opportunity cost of producing pop culture.

Question 12

Generally, opportunity costs increase and the production possibilities frontier bows outward. Why?

Accepted Answer

A)  Unemployment is inevitable. 
B)  Resources are not equally useful in all activities. 
C)  Technology is slow to change. 
D)  Labor is scarcer than capital.

Question 13

The opportunity cost of more capital goods today is

Accepted Answer

A)  fewer capital goods in the future. 
B)  fewer consumer goods in the future. 
C)  fewer consumer goods today. 
D)  more unemployed resources in the future.

Question 14

When the opportunity cost of producing more of a good is increasing, the marginal cost of producing more of the good is

Accepted Answer

A)  decreasing. 
B)  constant. 
C)  increasing. 
D)  More information is needed to answer the question.

Question 15

-Harry usually spends 10 hours a week playing Quidditch. However, his Defense Against the Dark Arts exam is coming and he needs more time to study for the exam. If he does not study at all, the lowest grade he will receive is 55. But Harry realizes that this grade is unacceptable and so he has to give up some of his Quidditch time. But how much? He asks his friend Hermione, who is very good at Magical Economics, to help him figure this out. Together, they come up with the schedules of Harry's possibilities and values in the tables above. Then Hermione quickly finds the solution. But Harry still looks puzzled. Help Hermione to explain her solution to Harry.
a) Draw Harry's production possibilities frontier with the Quidditch hours on the horizontal axis and Harry's grade, starting at 55, on the vertical axis.
b) What is the opportunity cost of the first two hours of Quidditch? What is the marginal cost of the 5th hour?
c) What is Harry's opportunity cost of raising his grade from 82 points to 87 points?
d) Draw Harry's marginal cost of playing Quidditch curve. What happens to the marginal cost if Harry spends more time playing Quidditch?
e) Draw Harry's marginal benefit from playing Quidditch curve. Describe the relationship between Harry's time spent playing Quidditch and the marginal benefit from playing Quidditch.
f) For how many extra hours did Hermione recommend Harry to study? Why? If Harry follows her advice, what grade will he expect? What do you think Hermione said when Harry asked why he should not spend more time playing Quidditch?

Accepted Answer

The answer of  
 
-Harry usually spends 10 hours...

Question 16

Considering a PPF with health care services on the vertical axis and other goods and services on the horizontal axis, the increasing production of health care services in the United States as a result of the aging population represents

Accepted Answer

A)  a movement upward along the PPF. 
B)  an outward shift of the PPF from the vertical axis. 
C)  an outward shift of the PPF from the horizontal axis. 
D)  a movement downward along the PPF.

Question 17

Technological progress makes the production possibilities frontier

Accepted Answer

A)  shift inward toward the origin. 
B)  become more linear and less bowed. 
C)  shift outward from the origin. 
D)  become less linear and more bowed.

Question 18

If marginal benefit is greater than marginal cost for the production of cars, to reach the allocative efficient quantity of cars, the production of cars must be increased.

Accepted Answer