Question 1

The points outside the production possibilities frontier are

Accepted Answer

A) efficient. 
B) attainable. 
C) inefficient. 
D) unattainable.

Question 2

A production possibilities frontier with a bowed outward shape indicates

Accepted Answer

A) the possibility of inefficient production. 
B) constant opportunity costs as more and more of one good is produced. 
C) increasing opportunity costs as more and more of one good is produced. 
D) decreasing opportunity costs as more and more of one good is produced.

Question 3

Table 2-2
 
-Refer to Table 2-2.The Fruit Farm produces only apples and pears.The table above shows the maximum possible output combinations of the two fruits using all resources and currently available technology.
a.Graph The Fruit Farm's production possibilities frontier.Put apples on the horizontal axis and pears on the vertical axis.Be sure to identify the output combination points on your diagram.
b.Suppose The Fruit Farm is currently producing at point D.What is the opportunity cost of producing an additional 8,000 pounds of pears?
c.Suppose The Fruit Farm is currently producing at point D.What happens to the opportunity cost of producing more and more pears? Does it increase,decrease or remain constant? Explain your answer.
d.Suppose The Fruit Farm is currently producing at point G.What happens to the opportunity cost of producing more and more apples? Does it increase,decrease or remain constant? Explain your answer.
e.Suppose The Fruit Farm is plagued by the apple maggot infestation which destroys apple trees but not pears.Show in a graph what happens to its PPF.

Accepted Answer

The answer of Table 2-2
 
-Refer to Table 2-2.The Fruit...

Question 4

Table 2-4
  Table 2-4 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea.
-Refer to Table 2-4.If the two countries specialize and trade,who should export wheat?

Accepted Answer

A) There is no basis for trade between the two countries. 
B) China 
C) South Korea 
D) They should both be exporting wheat.

Question 5

The primary purpose of ________ is to encourage the expenditure of funds on research and development to create new products.

Accepted Answer

A) centrally planned economies 
B) government-run health care 
C) nationalizing oil companies 
D) patents and copyrights

Question 6

If a commercial dairy farm wants to raise funds to purchase feeding troughs,it does so in the

Accepted Answer

A) output market. 
B) product market. 
C) factor market. 
D) dairy products market.

Question 7

________ marginal opportunity cost implies that the more resources already devoted to any activity,the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

Accepted Answer

A) Increasing 
B) Decreasing 
C) Constant 
D) Negative

Question 8

Figure 2-2  Figure 2-2 above shows the production possibilities frontier for Mendonca,an agrarian nation that produces two goods,meat and vegetables.
-Refer to Figure 2-2.What is the opportunity cost of one pound of vegetables?

Accepted Answer

A)   pound of meat 
B) 1.2 pounds of meat 
C) 1  pounds of meat 
D) 12 pounds of meat

Question 9

Figure 2-6  General Motors recently approved for production the Cadillac Converj,an electric car based on its Chevy Volt.The Converj will feature a "Generation 1.5 Voltec" powertrain,with a hybrid engine that runs on a combination of electricity and gasoline.Assume GM chooses to produce both hybrid-engine vehicles and gasoline-engine vehicles for its Cadillac brand.Figure 2-6 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions.
-Refer to Figure 2-6.Assume a technological advancement greatly reduces the cost to produce hybrid-engine vehicles.This is best represented by the

Accepted Answer

A) movement from E to F in Graph A. 
B) movement from G to H in Graph B. 
C) movement from K to L in Graph C. 
D) movement from H to J in Graph B.

Question 10

What is the difference between product markets and factor markets?

Accepted Answer

The answer of What is the difference between product markets...

Question 11

In a production possibilities frontier model,a point ________ the frontier is productively inefficient.

Accepted Answer

A) along 
B) inside 
C) outside 
D) at either intercept of

Question 12

Rayburn Reed is a highly talented photographer.He has chosen to specialize in photography because of all of the following except

Accepted Answer

A) he obviously has a comparative advantage in photography. 
B) his opportunity cost of pursuing another career is very low. 
C) for him,this is the most lucrative way to purchase the products that he wants to consume. 
D) his photographs are highly esteemed by art lovers who are willing to pay very high prices.

Question 13

Consider a country that produces only two goods: kayaks and coconuts.Suppose it is possible for this country to increase its production of kayaks without producing fewer coconuts.In this case,its current output combination is efficient.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements about a simple circular flow model is false?

Accepted Answer

A) Producers are buyers in the factor market and sellers in the product market. 
B) Households are neither buyers nor sellers in the input market. 
C) Producers are buyers in the factor market. 
D) Households are sellers in the product market.

Question 15

Is it possible for a firm to have an absolute advantage in producing something without having a comparative advantage? Why or why not?

Accepted Answer

The answer of Is it possible for a firm to...

Question 16

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves.If she now produces 60 silk roses and 80 silk leaves,what is the opportunity cost of producing an additional 10 silk roses?

Accepted Answer

A) 2.5 silk leaves 
B) 10 silk leaves 
C) 25 silk leaves 
D) 55 silk leaves

Question 17

Figure 2-11 
-Refer to Figure 2-11.Which two arrows in the diagram depict the following transaction: LaDonna sells 20 pairs of sunglasses at the Oakley store.

Accepted Answer

A) J and M 
B) J and G 
C) K and M 
D) K and G

Question 18

Table 2-4
  Table 2-4 shows the number of labor hours required to produce a digital camera and a pound of wheat in China and South Korea.
-Refer to Table 2-4.South Korea has a comparative advantage in the production of

Accepted Answer

A) wheat. 
B) digital cameras. 
C) both products. 
D) neither product.

Question 19

What is comparative advantage? What is absolute advantage?

Accepted Answer

The answer of What is comparative advantage? What is absolute...

Question 20

Entrepreneurs bring together the factors of production to produce goods and services.

Accepted Answer