Question 1

Which of the following ideas is illustrated by the production possibilities curve [PPC]?

Accepted Answer

A) There are no limits on the total feasible production attainable in an economy. 
B) An economy need not decrease the production of one commodity to increase the production of another. 
C) It is possible to satisfy unlimited wants in an economy through proper investment in research and development. 
D) When an economy chooses to produce a combination of goods and services,other combinations of goods and services are sacrificed. 
E) An economy can specialize in the production of only one good.

Question 2

A person has a comparative advantage in producing a good if:

Accepted Answer

A) that person can produce the good at a lower absolute cost than anyone else. 
B) that person can produce the good at a lower opportunity cost than anyone else. 
C) that person can do a better job than anyone else. 
D) that person spends less money in out-of-pocket expenses than anybody else. 
E) that person can produce the good at a higher opportunity cost than anyone else.

Question 3

Consider the production possibilities curve [PPC] for a country producing only cheese and wine.The first few resources transferred from cheese to wine production are:

Accepted Answer

A) those that are most specialized in cheese production. 
B) those that are most specialized in wine production. 
C) those that are least specialized in cheese production. 
D) those that are neither specialized in cheese nor wine production. 
E) those that are highly specialized in both cheese and wine production.

Question 4

The figure given below represents an economy producing corn and planes under different economic situations. 
Figure 2.2

-Refer to Figure 2.2.Assume that the economy experiences a 20% drop in the work force.Which of the following graph(s) in the figure describe(s) the change in the economy's production possibilities curve [PPC]?

Accepted Answer

A) Graph A 
B) Graph B 
C) Graph C 
D) Graph B and C 
E) Graph A and C

Question 5

Which of the following is an example of opportunity cost?

Accepted Answer

A) The Chinese food that you gave up when you chose to eat Italian food. 
B) The tuition that you pay to attend college. 
C) For a professor of economics,the pleasure that he or she derives from teaching economics. 
D) Sweets given up by a person who would never eat them even if he or she could. 
E) The price paid for a ticket when you go to the movies.

Question 6

The concept of comparative advantage applies to:

Accepted Answer

A) only people with at least a high school diploma. 
B) only people who are currently employed. 
C) situations in which you have information about the salary levels of those with whom you are competing for a job. 
D) every case of trade or exchange. 
E) about half of all cases of trade or exchange.

Question 7

While constructing a production possibilities frontier [PPF],we assume:

Accepted Answer

A) dynamic technological know-how. 
B) flexible resource quality. 
C) fixed resource quantity. 
D) full and efficient use of resources. 
E) flexible money supply.

Question 8

Specialization and trade do not allow individuals,firms,or even nations to acquire goods that lie beyond their production capabilities.

Accepted Answer

A) True 
 B)False

Question 9

Betty goes out to enjoy a bouffe with her friend instead of practicing calculus problems for her maths examination that is due the following day.This implies that the opportunity cost of the bouffe to Betty is zero.

Accepted Answer

A) True 
 B)False

Question 10

Economists refer to the ability of one person or nation to do something with a lower opportunity cost than another as _____.

Accepted Answer

A) voluntary trade 
B) specialization 
C) gains from trade 
D) absolute advantage 
E) comparative advantage

Question 11

If the general education level within a country rises significantly over time,it is likely that:

Accepted Answer

A) the country will move to a different point along its current production possibilities curve. 
B) the country's production possibilities curve will not change in any way. 
C) the country's production possibilities curve will shift in. 
D) the country's production possibilities curve will shift out. 
E) the country's production possibilities curve will become convex to the origin.

Question 12

Consider a PPC with automobiles on the vertical axis and cotton on the horizontal axis.The discovery of a new fertilizer that improves crop yield will shift:

Accepted Answer

A) the vertical intercept up but will not shift the horizontal intercept. 
B) the horizontal intercept to the right but will not shift the vertical intercept. 
C) the horizontal intercept to the left and the vertical intercept upward. 
D) the vertical intercept downward and the horizontal intercept to the right. 
E) neither the horizontal intercept nor the vertical intercept.

Question 13

Economic growth can be illustrated by an outward shift of the PPC.

Accepted Answer

A) True 
 B)False

Question 14

The figure given below represents an economy producing corn and planes under different economic situations.
Figure 2.2

-Refer to Figure 2.2.If there is an increase in the effectiveness of pesticides,which of the following graph(s) will represent(s) the resulting shift in the production possibilities curve [PPC]?

Accepted Answer

A) Graph A 
B) Graph B 
C) Graph C 
D) Graph A and B 
E) Graph B and C

Question 15

The table given below represents butter and ham production by two countries Norway and Sweden. Table 2.5

-Refer to Table 2.5 and identify the correct statement.

Accepted Answer

A) Norway has an absolute advantage in butter production. 
B) Sweden has a comparative advantage in ham production. 
C) Norway has an absolute advantage in ham production. 
D) Trade is not possible between these two nations. 
E) It would be advantageous for Sweden to trade with Norway.

Question 16

It has been generally observed that most trade in the world occurs between a developed and a less-developed nation rather than between industrial or developed nations.

Accepted Answer

A) True 
 B)False

Question 17

The figure given below represents the production possibilities curve for goods and services in an economy. 
Figure 2.3

-Refer to Figure 2.3.The movement from Curve X to Curve Y indicates:

Accepted Answer

A) contraction in the production of goods. 
B) contraction in the production of services. 
C) expansion in the ability to produce both goods and services. 
D) expansion in the ability to produce goods. 
E) expansion in the ability to produce services.

Question 18

The figure given below represents an economy producing corn and planes under different economic situations.
Figure 2.2

-Refer to Figure 2.2.If there is an increase in the education level of the population,graph(s) _____ best illustrate(s) what will happen to the production possibilities curve [PPC].

Accepted Answer

A) A 
B) B 
C) C 
D) A and C 
E) A and B

Question 19

Consider the production possibilities curve for an economy producing only two commodities wheat (represented on the X axis) and wine (represented on the Y axis).A movement up along the production possibilities curve [PPC] will imply:

Accepted Answer

A) an increase in wheat production. 
B) an increase in both wheat and wine production. 
C) a decline in both wheat and wine production. 
D) an increase in wine production. 
E) no change in either wheat or wine production.

Question 20

Which of the following conditions will be true for a nation operating at a point lying inside its production possibilities curve?

Accepted Answer

A) The nation has experienced a technological breakthrough in one of its key industries. 
B) The nation is clearly utilizing its resources efficiently. 
C) The nation is producing the maximum output that can be produced with a limited quantity of resources. 
D) The nation is not utilizing its resources efficiently. 
E) The nation is producing the maximum output that can be produced with its unlimited quantity of resources.

Exam 2: Choice, opportunity Costs, and Specialization

Which of the following ideas is illustrated by the production possibilities curve [PPC]?

A person has a comparative advantage in producing a good if:

Consider the production possibilities curve [PPC] for a country producing only cheese and wine.The first few resources transferred from cheese to wine production are:

Which of the following is an example of opportunity cost?

The concept of comparative advantage applies to:

While constructing a production possibilities frontier [PPF],we assume:

Specialization and trade do not allow individuals,firms,or even nations to acquire goods that lie beyond their production capabilities.

Betty goes out to enjoy a bouffe with her friend instead of practicing calculus problems for her maths examination that is due the following day.This implies that the opportunity cost of the bouffe to Betty is zero.

Economists refer to the ability of one person or nation to do something with a lower opportunity cost than another as _____.

If the general education level within a country rises significantly over time,it is likely that:

Consider a PPC with automobiles on the vertical axis and cotton on the horizontal axis.The discovery of a new fertilizer that improves crop yield will shift:

Economic growth can be illustrated by an outward shift of the PPC.

The table given below represents butter and ham production by two countries Norway and Sweden. Table 2.5 -Refer to Table 2.5 and identify the correct statement.

It has been generally observed that most trade in the world occurs between a developed and a less-developed nation rather than between industrial or developed nations.

The figure given below represents the production possibilities curve for goods and services in an economy. Figure 2.3 -Refer to Figure 2.3.The movement from Curve X to Curve Y indicates:

The figure given below represents an economy producing corn and planes under different economic situations. Figure 2.2 -Refer to Figure 2.2.If there is an increase in the education level of the population,graph(s) _____ best illustrate(s) what will happen to the production possibilities curve [PPC].

Consider the production possibilities curve for an economy producing only two commodities wheat (represented on the X axis) and wine (represented on the Y axis) .A movement up along the production possibilities curve [PPC] will imply:

Which of the following conditions will be true for a nation operating at a point lying inside its production possibilities curve?