Test Bank For Economics for Today 7th Edition by Irvin B. Tucker

Chapter 2—Production Possibilities, Opportunity Cost, and Economic Growth MULTIPLE CHOICE 1. 2. Which of the following correctly lists the three fundamental economic questions? a. If to produce? Why to produce? When to produce? b. If to produce? What to produce? How to produce? c. Why to produce? What to produce? How to produce? 3. 4. 5. Three basic decisions must be made by all economies. What are they? a. How much will be produced, when it will be produced, and how much it will cost. b. What the price of each good will be, who will produce each good, and who will consume each good. c. What will be produced, how goods will be produced, and for whom goods will be produced. d. How the opportunity cost principle will be applied, if and how the law of comparative advantage will be utilized, and whether the production possibilities constraint will apply. ANS: C PTS: 1 DIF: Easy REF: Full: 35 | Mic: 35 TOP: Three economic questions TYP: RE Because of the problem of scarcity, each economic system must make which of the following choices? a. How to produce? b. What to produce? c. For whom to produce? d. What to produce? How to produce? For whom to produce? ANS: D PTS: 1 DIF: Easy TOP: Three economic questions TYP: RE REF: Full: 35 | Mic: 35 d. All of these. ANS: D PTS: 1 TOP: Three economic questions DIF: Easy TYP: RE REF: Full: 35 | Mic: 35 Which fundamental economic question is most closely related to the issues of income distribution and poverty? a. The What to Produce question. b. The Why to Produce question. c. The How to Produce question. d. The For Whom to Produce question. ANS: D PTS: 1 TOP: Three economic questions DIF: Medium TYP: RE REF: Full: 35 | Mic: 35 Which fundamental economic question requires society to choose the technological and resource mix used to produce goods? a. The What to Produce question. b. The Why to Produce question. c. The How to Produce question. d. The For Whom to Produce question. ANS: C PTS: 1 TOP: Three economic questions DIF: Medium TYP: RE REF: Full: 35 | Mic: 35 6. The opportunity cost of an action is: 7. 8. 9. 10. 11. 12. ANS: C PTS: 1 DIF: Medium REF: Full: 36 | Mic: 36 TOP: Opportunity cost TYP: SA The highest valued alternative that must be given up in order to choose an option is called the: a. opportunity cost. b. utility cost. c. scarcity expense. a. the b. the c. the d. the monetary payment the action required. total time spent by all parties in carrying out the action. value of the best opportunity that must be sacrificed in order to take the action. cost of all alternative actions that could have been taken, added together. d. disutility option. ANS: A PTS: 1 TOP: Opportunity cost DIF: Easy TYP: RE REF: Full: 36 | Mic: 36 Which of the following sayings best reflects the concept of opportunity cost? a. "You can't teach an old dog new tricks." b. "There is no such thing as a free lunch." c. "I have a baker's dozen." d. "There's no business like show business." ANS: B PTS: 1 DIF: Medium TOP: Opportunity cost TYP: SA REF: Full: 36 | Mic: 36 The opportunity cost to a city for using local tax revenues to construct a new park is the: a. best alternative foregone by building the park. b. dollar cost of constructing the new park. c. dollar cost of the old park. d. increased taxes necessary to pay for maintenance of the new park. ANS: A PTS: 1 DIF: Easy REF: Full: 36 | Mic: 36 TOP: Opportunity cost TYP: SA A good or service that is forgone by choosing one alternative over another is called a(n): a. explicit cost. b. opportunity cost. c. historical cost. d. accounting cost. ANS: B PTS: 1 TOP: Opportunity cost DIF: Easy TYP: RE REF: Full: 36 | Mic: 36 Opportunity cost is the: a. cost incurred when one fails to take advantage of an opportunity. b. price paid for goods and services. c. cost of the best option forgone as a result of choosing an alternative option. d. undesirable aspects of an option. ANS: C PTS: 1 DIF: Easy REF: Full: 36 | Mic: 36 TOP: Opportunity cost TYP: RE The opportunity cost of a purchase is: a. the selling price of the good or service. 13. 14. 15. 16. 17. 18. ANS: C PTS: 1 DIF: Easy TOP: Opportunity cost TYP: RE REF: Full: 36 | Mic: 36 b. zero if the good or service satisfies a need. c. greater for persons who are rich. d. the good or service given up for the good or service purchased. ANS: D PTS: 1 DIF: Easy REF: TOP: Opportunity cost TYP: SA The opportunity cost of watching television is: a. all of the alternative programs that appear on other stations. b. zero because there is no money expenditure involved. c. the alternative use of the time foregone by watching the program. d. zero if it benefits you. Full: 36 | Mic: 36 Which of the following does not illustrate opportunity cost? a. If I study, I must give up going to the football game. b. If I buy a computer, I must do without a 35" television. c. More consumer spending now means more spending in the future. d. If I spend more on clothes, I must spend less on food. ANS: C PTS: 1 DIF: Easy TOP: Opportunity cost TYP: SA Which of the following does not illustrate opportunity cost? a. If I study, I must give up going to the football game. b. If I buy a computer, I must do without a 35" television. c. If I spend more on clothes, I must spend less on food. d. All of these illustrate opportunity cost. ANS: D PTS: 1 DIF: Easy TOP: Opportunity cost TYP: SA The opportunity cost of an economic decision is: a. the best alternative that was sacrificed. b. the amount of money needed to implement the decision. c. any land, labor, and capital that are wasted. d. all options that were lost due to scarcity. ANS: A PTS: 1 DIF: Easy TOP: Opportunity cost TYP: RE REF: Full: 36 | Mic: 36 REF: Full: 36 | Mic: 36 REF: Full: 36 | Mic: 36 Bill has $10 to spend on a Superman, Batman, or an X-Men T-shirt. Bill buys the Superman T-shirt and the Batman shirt was a close second choice. What is the opportunity cost? a. The amount he spent, $10. b. Nothing, since he got his preferred choice. c. The Batman T-shirt. d. The X-Men T-shirt. ANS: C PTS: 1 DIF: Medium TOP: Opportunity cost TYP: SA REF: Full: 36 | Mic: 36 On a production possibilities curve, the opportunity cost of good X, in terms of good Y, is represented by the: a. distance to the curve from the vertical axis. 19. Which of the following statements is true? a. An opportunity cost is what must be given up in order to get something else. b. The three fundamental economic questions refer to What to produce? How to produce? and When to produce? c. The term "investment" refers to the purchase of stocks and bonds and other financial securities. d. The law of increasing opportunity cost implies that as production of one type of good is expanded then fewer and fewer of other goods must be given up. ANS: A PTS: 1 DIF: Easy REF: Full: 36 | Mic: 36 TOP: Opportunity cost TYP: RE The amount of a good that must be given up to produce another good is the concept of: a. scarcity. b. specialization. c. trade. 20. 21. 22. 23. d. efficiency. e. opportunity cost. ANS: E PTS: 1 TOP: Opportunity cost DIF: Easy TYP: RE REF: Full: 36 | Mic: 36 b. distance to the curve from the horizontal axis. c. movement along the curve. d. all of these. ANS: C PTS: 1 DIF: Medium TOP: Opportunity cost TYP: SA REF: Full: 36 | Mic: 36 The opportunity cost of an activity means the: a. amount of money the activity costs. b. number of hours that is required to engage in this activity. c. expected gains by engaging in the activity. d. amount of other things that must be sacrificed in order to engage in the activity. e. expected gains minus the expected costs of engaging in the activity. ANS: D PTS: 1 DIF: Medium REF: Full: 36 | Mic: 36 TOP: Opportunity cost TYP: RE In the context of the production possibilities curve, opportunity cost is measured in: a. dollars paid for the goods. b. the quantity of other goods given up. c. the value of the resources used. d. changing technology. e. units of satisfaction. ANS: B PTS: 1 TOP: Opportunity cost DIF: Medium TYP: SA REF: Full: 36 | Mic: 36 Mikki decides to work five hours the night before her economics exam. She earns an extra $75, but her exam score is 10 points lower than it would have been had she stayed home and studied. Her opportunity cost is the: a. five hours she worked. b. $75 she earned. c. 10 points she lost on her exam. 24. 25. 26. 27. d. time she could have spent watching television. e. guilt she feels about neglecting her economics studies. ANS: C PTS: 1 DIF: Medium REF: Full: 36 | Mic: 36 TOP: Opportunity cost TYP: SA When the opportunity cost of producing carrots increases as more carrots are produced, then: a. no more carrots will be produced. b. resources are equally suited to the production of carrots and to other goods. c. the production possibilities curve is a straight line. d. the production possibilities curve becomes positively sloped. e. the law of increasing costs is present. ANS: E PTS: 1 DIF: Difficult TOP: Opportunity cost TYP: CA REF: Full: 36 | Mic: 36 The opportunity cost of your college education is: a. candd. b. dande. c. the actual dollar cost of your college education. d. your best alternative use of the money you spend for a college education. e. money you could have earned working instead of going to college. ANS: B PTS: 1 DIF: Medium REF: Full: 36 | Mic: 36 TOP: Opportunity cost TYP: SA The law of increasing costs indicates that the opportunity cost of producing a good: a. is proportional to the production of the good. b. is constant to the production of the good. c. increases as more of the good is produced. d. decreases as more of the good is produced. e. increases as less of the good is produced. ANS: C PTS: 1 DIF: TOP: Opportunity cost TYP: CA Full: 36 | Mic: 36 Full: 36 | Mic: 36 Medium REF: The amount of a good that is given up to produce another good is: a. its b. its c. its relative cost. d. its absolute cost. e. all of these. dollar cost. opportunity cost. ANS: B PTS: 1 DIF: Easy REF: TYP: RE TOP: Opportunity cost Exhibit 2-1 Production possibilities curve data Consumption Goods Capital Goods 10 9 7 4 0 0 1 2 3 4 28. 29. In Exhibit 2-1, according to the information, the opportunity cost of producing 3 units of capital is: a. 3 units of consumption goods. b. 4 units of consumption goods. c. 6 units of consumption goods. 30. 31. In Exhibit 2-1, the opportunity cost of producing the fourth unit of capital is: a. 0. b. 1 unit of consumption goods. c. 2 units of consumption goods. d. 4 units of consumption goods. e. there is not enough information to estimate the opportunity cost. ANS: D PTS: 1 DIF: Medium REF: Full: 36 | Mic: 36 TOP: Opportunity cost TYP: SA Exhibit 2-2 Production possibilities curve The production possibilities in Exhibit 2-2 indicates that the opportunity cost of corn is: a. increasing. b. decreasing. c. zero. d. 7 units of consumption goods. ANS: A PTS: 1 TOP: Opportunity cost DIF: Medium TYP: SA REF: Full: 36 | Mic: 36 d. constant. e. indeterminate. ANS: D PTS: 1 TOP: Opportunity cost DIF: Difficult TYP: CA REF: Full: 36 | Mic: 36 In Exhibit 2-2, the slope of the production possibilities curve indicates that the opportunity cost of: a. coffee is constant. b. coffee is increasing. c. coffee is decreasing. d. corn is increasing. e. corn is decreasing, 32. 33. 34. ANS: A PTS: 1 DIF: Difficult REF: Full: 36 | Mic: 36 TOP: Opportunity cost TYP: CA In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is: a. 2 million bushels of corn. b. 6 million bushels of corn. c. 8 million bushels of corn. 35. 36. In economics, the term marginal refers to: a. the change or difference from a current situation. b. man-made resources as opposed to natural resources. c. the satisfaction a consumer receives from a good. d. holding everything else constant in the analysis. ANS: A PTS: 1 DIF: Easy TOP: Marginal analysis TYP: RE d. 14 million bushels of corn. e. it is not possible to determine. ANS: A PTS: 1 TOP: Opportunity cost DIF: Medium TYP: SA REF: Full: 36 | Mic: 36 In Exhibit 2-2, the opportunity cost of coffee when moving from A to B is: a. the same as moving from A to C. b. the same as moving from A to D. c. the same as moving from B to D. d. the same as moving from B to C. e. it is not possible to determine. ANS: D PTS: 1 TOP: Opportunity cost DIF: Difficult TYP: CA REF: Full: 36 | Mic: 36 A farmer is deciding whether or not to add fertilizer to his or her crops. If the farmer adds 1 pound of fertilizer per acre, the value of the resulting crops rises from $80 to $100 per acre. According to marginal analysis, the farmer should add fertilizer if it costs less than: a. $12.50 per pound. b. $20 per pound. c. $80 per pound. d. $100 per pound. ANS: B PTS: 1 TOP: Marginal analysis DIF: Medium TYP: SA REF: Full: 37 | Mic: 37 REF: Full: 37 | Mic: 37 When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the: a. benefits expected from two cars with the cost of both. b. additional benefits expected from a second car with the cost of the two cars. c. dollar cost of the two cars with the potential income that the cars will generate. d. additional benefits of the second car with the additional cost of the second car. ANS: D PTS: 1 DIF: Difficult REF: Full: 37 | Mic: 37 TOP: Marginal analysis TYP: CA 37. While waiting in line to buy two tacos at 80 cents each and a medium drink for 90 cents, Jordan notices that the restaurant has a value meal containing three tacos and a medium drink all for $3. For Jordan, the marginal cost of the third taco would be: a. zero. b. 50 cents. c. 80 cents. d. $1. ANS: B PTS: 1 TOP: Marginal analysis DIF: Difficult TYP: CA REF: Full: 37 | Mic: 37 38. While waiting in line to buy a cheeseburger for $2 and a drink for 75 cents, Aaron notices that the restaurant has a value meal containing a cheeseburger, drink, and French fries for $3. For Aaron, the marginal cost of purchasing the French fries: a. would be zero. b. would be 25 cents. c. would be 50 cents. d. cannot be determined because the information about the price of the French fries is not provided. ANS: B PTS: 1 DIF: Difficult REF: Full: 37 | Mic: 37 TOP: Marginal analysis TYP: CA 39. While waiting in line to buy one cheeseburger for $1.50 and a medium drink for $1.00, Sally notices that she could get a value meal that contains both the cheeseburger and medium drink and also a medium order of fries for $2.75. She thinks to herself, "Is it worth the extra 25 cents to get the medium fries?" To an economist, Sally's decision is an example of: a. marginal analysis. b. basing decisions on total, rather than marginal, value. c. an unintended consequence. d. the fallacy of composition. ANS: A PTS: 1 DIF: Medium TOP: Marginal analysis TYP: SA REF: Full: 37 | Mic: 37 40. Just before class, Jim tells Stuart, "Stuart, you shouldn't skip class today because you have paid tuition to enroll in the class." Stuart ignores Jim's advice, and instead makes the decision of whether to attend based on the importance to his grade that he feels he'd be missing that day in class relative to his value of the extra time he could have to finish the video game he is playing. To an economist, Stuart is: a. using marginal analysis. b. ignoring the total value of attending class. c. ignoring the concept of opportunity cost. d. irresponsible. ANS: A PTS: 1 DIF: TOP: Marginal analysis TYP: CA REF: Full: 37 | Mic: 37 41. Susan wishes to buy gasoline and have her car washed. She finds that if she buys 9 gallons of gasoline at $1.50 per gallon, the car wash costs $1, but if she buys 10 gallons of gasoline, the car wash is free. For Susan, the marginal cost of the tenth gallon of gasoline is: a. zero. b. 50 cents. c. $1. d. $1.50. Difficult 42. ANS: B PTS: 1 TOP: Marginal analysis Ralph wants to buy some milk box of cereal costs 75 cents. If Ralph, the marginal cost of the a. zero. b. 25 cents. c. 75 cents. d. $1. DIF: Difficult REF: Full: 37 | Mic: 37 TYP: CA and a box of cereal. If Ralph buys 2 quarts of milk at $1 per quart, the he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For 43. 44. 45. 46. A local restaurant offers an "all you can eat" Sunday brunch for $12. Susan eats four servings, but leaves half of a fifth helping uneaten. Why? a. Her marginal value of a serving of brunch has fallen below $12. b. Her marginal value of a serving has fallen below $2.36 ($12 divided by 5 servings). c. Her marginal value of food has fallen to zero. d. The total value she places on brunch today exactly equals $12. ANS: C PTS: 1 DIF: Difficult REF: Full: 37 | Mic: 37 TOP: Marginal analysis TYP: CA According to marginal analysis, you should spend more time studying economics if the extra benefit ANS: B PTS: 1 DIF: TOP: Marginal analysis from an additional hour of study: a. is positive. b. outweighs the extra cost. c. exceeds the benefits of the previous hour of study. d. will raise your exam score. ANS: B PTS: 1 DIF: Easy TOP: Marginal analysis TYP: RE REF: Full: 37 | Mic: 37 third quart of milk is: Difficult TYP: CA REF: Full: 37 | Mic: 37 If an economy is operating at a point inside the production possibilities curve, a. its resources are not being used efficiently. b. the curve will begin to shift inward. c. the curve will begin to shift outward. d. This is a trick question because an economy cannot produce at a point inside the curve. ANS: A PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA Which of the following most accurately indicates the implications of an economy's production possibilities curve? a. If all the resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. b. If all the resources of an economy are being used efficiently, it is generally possible to produce more of one good without having to sacrifice the production of other goods. c. Over time, it is generally impossible for a country to expand its production of goods. d. An economy will automatically move toward a point that lies outside of the production possibilities constraint unless proper government policy constrains production. ANS: A PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA 47. 48. Which of the following is true of the production possibilities curve? a. It assumes a fixed level of technology. b. It assumes resources are fixed. c. It assumes resources are fully employed. 49. 50. 51. After the terrorist attacks on September 11, 2001, the United States began devoting substantial resources toward the War on Terrorism, homeland security, and relief efforts. As long as our resources were being used efficiently, the production possibilities curve would suggest that: a. we will have to give up the production of other goods that could have been produced with these resources. b. we will be able to produce the same amount of other goods as before. c. the military spending will result in an outward shift in the production possibilities curve but that the relief effort will result in an offsetting inward shift. d. we will be unable to devote the resources necessary toward these efforts unless there is an improvement in technology. ANS: A PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA A point outside the production possibilities curve represents a combination of goods that is: a. inefficient. b. efficient. c. unattainable. d. All of these are correct. ANS: D PTS: 1 TOP: Production possibilities curve DIF: Easy TYP: RE REF: Full: 38 | Mic: 38 d. attainable. ANS: C PTS: 1 TOP: Production possibilities curve DIF: Easy TYP: RE REF: Full: 38 | Mic: 38 Which of the following will be most likely to cause the production possibilities curve for a country to shift inward? a. an increase in the labor force b. an increase in unemployment c. development of an improved technological method of production d. a decrease in the stock of physical capital ANS: D PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA In Europe during the 14th century, the Black Plague killed 24 million people or close to 37 percent of the population. How would this affect the production possibilities curves for the countries of Europe at that time? a. The production possibilities curves for these countries would have shifted outward. b. The production possibilities curves for these countries would have shifted inward. c. The production possibilities curves for these countries would have been unaffected. d. This would have been illustrated by a movement along the production possibilities curves for these countries, but it would not have shifted them. ANS: B PTS: 1 DIF: Easy REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA 52. Which of the following would be least likely to cause the production possibilities curve to shift outward? a. a decreased desire for leisure by workers in the economy. b. an invention that requires fewer resources to produce a good. c. a shift in consumer preferences that causes expansion in the output of one product and a decline in output of other products. d. an expansion in the man-made productive resources available to the economy as the result of a high rate of investment. ANS: C PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA Using a production possibilities curve, a technological advance that increases the amount of output for the same amount of inputs would be illustrated as a(n): a. flattening of the curve. b. movement from one point to another point along the curve. c. outward shift of the curve. d. movement from a point on the curve to a point inside the curve. ANS: C PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA The production possibilities curve shows that: a. some of one good must be given up to get more of another good in an economy that is operating efficiently. b. no output combination is impossible. c. an economy that is operating efficiently can have more of one good without giving up 53. 54. 55. 56. 57. some of another good. d. scarcity can be eliminated. ANS: A PTS: 1 DIF: Easy TOP: Production possibilities curve TYP: RE Any point on the production possibilities curve illustrates: a. minimum production combinations. b. maximum production combinations. c. economic growth. REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 d. a nonfeasible production combination. ANS: B PTS: 1 TOP: Production possibilities curve DIF: Medium TYP: SA Production possibilities curve analysis includes the idea of: a. opportunity cost. b. scarcity. c. maximum production choices. d. all of these. ANS: D PTS: 1 TOP: Production possibilities curve DIF: Easy TYP: RE An efficient economy: a. uses available resources fully. b. uses the best division of labor. c. produces an output combination at some point along the production possibility curve. 58. 59. 60. d. all of these. ANS: D PTS: 1 DIF: Easy TOP: Production possibilities curve TYP: SA A production possibility graph slopes down because of: a. the law of increasing costs. b. nonhomogeneous resources. c. inefficiency. REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 61. 62. ANS: C PTS: 1 DIF: Difficult REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA A production possibilities curve has "good X" on the horizontal axis and "good Y" on the vertical axis. On this diagram, the opportunity cost of good X, in terms of good Y, is represented by the: a. distance to the curve from the horizontal axis. b. distance to the curve from the vertical axis. c. distance from the origin to the curve. d. improper output mix. e. unemployment. ANS: B PTS: 1 TOP: Production possibilities curve DIF: Difficult TYP: CA The production possibility curve is bowed outward from the origin because of: a. the law of increasing opportunity costs. b. the finite nature of the resource base. c. inefficiency. d. improper output mix. e. unemployment. ANS: A PTS: 1 TOP: Production possibilities curve DIF: Difficult TYP: CA REF: Full: 38 | Mic: 38 The production possibilities curve demonstrates the basic economic principle that: a. market-based economies are more efficient. b. supply will determine demand in the economy. c. the production of more capital goods this year will cause the economy to produce less consumption goods next year. d. to produce more of any one thing, assuming full employment, the economy must produce less of something else. e. to produce more consumption goods this year requires the production of more capital goods this year. ANS: D PTS: 1 DIF: Medium REF: TOP: Production possibilities curve TYP: SA A production possibilities curve shows the various: a. prices that can be charged for capital and consumption goods. b. combinations of prices and outputs that can be produced. c. combinations of goods the economy has the capacity to produce. d. combinations of resources and prices that the economy can produce. Full: 38 | Mic: 38 d. change in Y for each change in X along the curve. ANS: D PTS: 1 DIF: Difficult TOP: Production possibilities curve TYP: SA REF: Full: 38 | Mic: 38 63. 64. Of factors which affect any economy's production potential, the best two listed below are: a. resources and technology. b. prices and outputs. c. wages and prices. 65. 66. 67. 68. A production possibilities curve shows the: a. dollar costs of producing two different goods. b. amounts of labor and capital needed to produce one good. c. various combinations of goods that can be produced. d. prices of different goods that are produced in an economy. e. inefficient use of available resources and technology. ANS: C PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: RE d. taxes and prices. e. resources and prices. ANS: A PTS: 1 TOP: Production possibilities curve DIF: Medium TYP: SA REF: Full: 38 | Mic: 38 The various combinations of goods and services that can be produced, when an economy uses its available resources and technology efficiently, is called: a. scarcity. b. opportunity cost. c. unlimited production. d. capital accumulation. e. production possibilities. ANS: E PTS: 1 TOP: Production possibilities curve DIF: Difficult TYP: CA REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 What shape is the production possibilities curve usually expected to exhibit? a. Upward-sloping. b. Bowed out. c. Bowed in. d. Straight line. e. U-shaped. ANS: B TOP: Production possibilities curve DIF: Medium REF: TYP: RE Full: 38 | Mic: 38 PTS: 1 When the production possibilities curve is bowed out, resources are: a. equally well-suited to production of both goods. b. not being used efficiently. c. not equally suited to the production of both types of goods. d. increasing as more of one good is produced. e. of an inferior quality. ANS: C PTS: 1 DIF: Difficult TOP: Production possibilities curve TYP: CA When an economy's resources are not fully employed, then it must be true that the: a. production point is located outside and to the right of the production possibilities curve. b. production point is located along the production possibilities curve. REF: Full: 38 | Mic: 38 69. 70. 71. 72. 73. c. production point is located inside and to the left of the production possibilities curve. d. production possibilities curve shifts to the right. e. production possibilities curve shifts to the left. ANS: C PTS: 1 DIF: Difficult REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA The production possibilities curve shows different combinations of goods that: a. can be consumed by households. b. can be consumed by firms. c. can be produced with the available technology. d. are produced and consumed by firms. e. are bought and sold in the market. ANS: C PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: SA REF: Full: 38 | Mic: 38 The production possibilities curve illustrates all of the following concepts except: a. the law of increasing costs. b. unlimited wants. c. scarcity. d. opportunity cost. e. availability of resources. ANS: B PTS: 1 TOP: Production possibilities curve DIF: Difficult TYP: CA REF: Full: 38 | Mic: 38 The production possibilities curve depicts the various combinations of two goods that can be: a. interchanged among two countries. b. produced with a given technology. c. consumed with a given quantity of resources. d. produced with increments in resources and changes in technology. e. consumed as the resources increase. ANS: B PTS: 1 DIF: Medium REF: TOP: Production possibilities curve TYP: SA Efficient production means producing: a. less than feasible output for a given amount of resources. b. more than feasible output for a given amount of resources. c. the maximum feasible output for a given amount of resources. d. no more than what is needed. e. in excess of what is needed. ANS: C PTS: 1 DIF: Easy REF: TOP: Production possibilities curve TYP: SA The law of increasing costs holds that the opportunity cost: a. of a good decreases as the quantity of the good produced increases. b. of a good is proportional to the resources used in its production. c. of a good increases as more of the good is produced. d. of a good does not change with the resources used its production. e. changes as more of the good is produced. Full: 38 | Mic: 38 Full: 38 | Mic: 38 ANS: C PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA 74. If an economy is producing at full employment, it means that: a. there are idle resources in this economy. b. the production is not efficient. c. the economy is producing along its production possibilities curve. d. the economy is producing at a point that is to the left of the production possibilities curve. e. the economy is producing at a point that is to the right of the production possibilities curve. ANS: C PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA Which of the following is not true about a production possibilities curve? The curve: a. indicates the combinations of goods and services that can be produced with given technology. b. indicates the efficient production points. c. indicates the non-efficient production points. d. indicates the feasible (attainable) and non-feasible production points. e. indicates which production point will be chosen. ANS: E PTS: 1 DIF: Difficult REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA Which of the following is true about the production possibilities curve when a technological progress 75. 76. 77. 78. 79. occurs? The curve: a. shifts inwards to the left. b. becomes flatter at one end and steeper at the other end. c. becomes steeper. d. shifts outward to the right. e. does not change. ANS: D PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: SA A point inside a production possibilities curve reflects: a. the law of increasing costs. b. technological innovation. c. less than full use of resources and technology. d. economic efficiency. e. a way to increase future economic growth. ANS: C PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: SA A point outside a production possibilities curve reflects: a. efficiency. b. specialization. c. inefficiency. REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 d. unemployment. e. an impossible choice. ANS: E PTS: 1 TOP: Production possibilities curve DIF: Medium TYP: SA Any point inside the production possibility curve is: 80. Using a production possibilities curve, an economy that produces an output combination less than the 81. 82. 83. 84. One of the assumptions underlying the production possibilities curve for any given economy is that: a. the state of technology changes. b. there is an unlimited supply of resources. c. there is full employment of resources when the economy is on the curve. d. goods can be produced outside the curve. ANS: C PTS: 1 DIF: Difficult REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA Which of the following would be most likely to cause the production possibilities curve for computers a. efficient. b. nonfeasible. c. inefficient. d. optimal. ANS: C PTS: 1 TOP: Production possibilities curve DIF: Medium TYP: SA REF: Full: 38 | Mic: 38 maximum possible is depicted by a point located: a. at the top corner of the curve. b. near the middle of the curve. c. at the bottom corner of the curve. d. outside the curve. e. inside the curve. ANS: E PTS: 1 TOP: Production possibilities curve DIF: Easy TYP: SA REF: Full: 38 | Mic: 38 and education to shift outward? a. A choice of more computers and less education. b. A choice of more education and less computers. c. A reduction in the labor force. d. An increase in the quantity of resources. ANS: D PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: SA Given a production possibilities curve, a point: a. inside the curve represents unemployment. b. on the curve represents full employment. c. outside the curve is currently unattainable. d. all of these. ANS: D PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: SA All points on the production possibilities curve are: a. unattainable. b. fair. c. efficient. REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 d. optimal. ANS: C PTS: 1 TOP: Production possibilities curve DIF: Easy TYP: RE 85. 86. 87. 88. As production of a good increases, opportunity costs rise because: a. there will be more inefficiency. b. people always prefer having more goods. c. of inflationary pressures. d. workers are not equally suited to all tasks. ANS: D PTS: 1 DIF: Difficult TOP: Production possibilities curve TYP: CA REF: Full: 38 | Mic: 38 If society leaves some of its resources unemployed, then it will be operating at a point: a. beneath its production possibilities curve. b. at a corner of its production possibilities curve. c. anywhere along its production possibilities curve. d. outside of its production possibilities curve. ANS: A PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: SA REF: Full: 38 | Mic: 38 The law of increasing opportunity costs causes the production possibilities curve to: a. be a straight line. b. slope upwards. c. have a bowed-out shape. A B C D E Capital goods Consumer goods 0 20 1 18 2 14 3 8 4 0 89. Along a production possibilities curve showing capital and consumption goods production, which of the following pairs are being held fixed? a. Unemployment and capital goods production. b. Number of resources and consumption goods production. c. Composition of the economy's output and number of resources. d. Capital and consumption goods production. e. Technology and number of resources. ANS: E PTS: 1 DIF: Difficult REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA Exhibit 2-3 Production possibilities curve data According to the data given in Exhibit 2-3, the production of 1 unit of capital goods and 14 units of d. shift inward. ANS: C PTS: 1 TOP: Production possibilities curve DIF: Medium TYP: SA REF: Full: 38 | Mic: 38 consumer goods: a. is possible but would be inefficient. b. may be a result of unemployment. c. may be a result of unused natural resources. d. all of these. ANS: D PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: CA Exhibit 2-4 Production possibilities curve data REF: Full: 38 | Mic: 38 A B C D E Capital goods Consumer goods 0 200 10 180 20 140 30 80 40 0 90. According to the data given in Exhibit 2-4, the production of 140 units of consumer goods and 10 units 91. According to the data in Exhibit 2-4, a total output of 140 units of consumer goods and 10 units of 92. In Exhibit 2-5, movement between which of the following points represents an increase in economic of capital goods: a. is possible but would be inefficient. b. may be a result of unemployment. c. may be a result of unused natural resources. d. all of the above. e. none of the above. ANS: D PTS: 1 DIF: Difficult TOP: Production possibilities curve TYP: CA REF: Full: 38 | Mic: 38 capital goods would: a. be unobtainable in this economy. b. be an efficient way of using the economy's scarce resources. c. result in the maximum use of the economy's labor force. d. result in a less than maximum rate of growth for this economy. ANS: D PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: SA Exhibit 2-5 Production possibilities curve REF: Full: 38 | Mic: 38 efficiency? a. AtoC. b. CtoD. c. DtoB. d. AtoB. e. AtoD. ANS: B TOP: Production possibilities curve DIF: Difficult TYP: CA REF: Full: 38 | Mic: 38 PTS: 1 Exhibit 2-6 Production possibilities curve data A B C D E F Capital goods Consumer goods 150 0 140 20 120 40 90 60 50 80 0 100 93. In Exhibit 2-6, the concept of increasing opportunity costs is represented by the fact that: a. the quantity of capital goods produced must be less than 150. b. the quantity of consumer goods is constant for each change in the quantity of capital goods produced. c. greater amounts of capital goods must be sacrificed to produce each additional unit of consumer goods. d. the amount of consumer goods produced must be greater than zero. ANS: C PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA Exhibit 2-7 Production possibilities curve For the economy shown in Exhibit 2-7, which of the following is true when the economy is at point A? a. More cars are being produced than are needed. b. There must be resources that are not being used fully. c. Some car production must be forgone in order to produce more grain in the same period. d. Increased grain production would be impossible. ANS: C PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA For the economy shown in Exhibit 2-7 to operate at point C, it must: a. be willing to lower the price of grain. b. use its given resources more efficiently than it would at point A. c. experience resource unemployment. d. experience an increase in its resources and/or an improvement in its technology. ANS: D PTS: 1 DIF: Easy REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA 94. 95. Exhibit 2-8 Production possibilities curve data A B C D E F Capital goods Consumer goods 15 0 14 2 12 4 9 6 5 8 0 10 96. 97. 98. As shown in Exhibit 2-8, the concept of increasing opportunity costs is reflected in the fact that: a. the quantity of consumer goods produced can never be zero. b. the labor force in the economy is homogeneous. c. greater amounts of capital goods must be sacrificed to produce an additional 2 units of consumer goods. d. a graph of the production data is a downward-sloping straight line. ANS: C PTS: 1 DIF: Difficult REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA As shown in Exhibit 2-8, a total output of 0 units of capital goods and 10 units of consumer goods is: a. the maximum rate of output for this economy. b. an inefficient way of using the economy's scarce resources. c. the result of maximum use of the economy's labor force. d. unobtainable in this economy. ANS: C PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: SA REF: Full: 38 | Mic: 38 As shown in Exhibit 2-8, a total output of 14 units of consumer goods and 1 unit of capital goods is: a. the result of maximum use of the economy's labor force. b. an efficient way of using the economy's scarce resources. c. unobtainable in this economy. d. less than the maximum rate of output for this economy. ANS: D PTS: 1 DIF: Medium TOP: Production possibilities curve TYP: SA Exhibit 2-9 Production possibilities curve If the economy represented in Exhibit 2-9 is operating at Point W: REF: Full: 38 | Mic: 38 99. 100. 101. a. no tractor product must be forgone to produce more food in the current period. b. resources are not fully used. c. some tractor production must be forgone to produce more food in the current period. d. increased food production would be impossible. ANS: C PTS: 1 DIF: Easy REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA Which of the following moves from one point to another in Exhibit 2-9 would represent an increase in economic efficiency? a. ZtoW. b. WtoY. c. WtoX. d. XtoY. ANS: D TOP: Production possibilities curve DIF: Difficult TYP: CA REF: Full: 38 | Mic: 38 PTS: 1 Movement along this production possibilities curve shown in Exhibit 2-9 indicates: a. that labor is not equally productive or homogeneous (nonhomogeneous). b. decreasing opportunity costs. c. all inputs are homogeneous. d. all of these. ANS: A PTS: 1 DIF: Difficult TOP: Production possibilities curve TYP: CA Exhibit 2-10 Production possibilities curve data REF: Full: 38 | Mic: 38 A B C D E Capital goods Consumption goods 0 25 1 23 2 19 3 13 4 0 102. Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. If this economy chooses the combination of goods at point A, a. only capital goods are being produced. b. every resource in the economy is utilized in the production of capital goods. c. no capital goods are being used as factors of production. d. every resource in the economy is being used in the production of consumption goods. e. no consumption goods are being produced. ANS: D PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. The first unit of capital goods will cost the economy ____ units of consumption goods. a. 25 b. 2 c. 1 103. d. 23 e. 11 ANS: B TOP: Production possibilities curve DIF: Medium TYP: SA REF: Full: 38 | Mic: 38 PTS: 1 104. Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. As additional units of capital goods are being produced, the number of consumption goods produced must ____, because ____. a. increase; the production possibility table shows only the maximum efficiency points b. increase; of the law of increasing costs c. decrease; of the law of increasing costs d. decrease; of the finite nature of the resource base e. increase; capital goods will assist in the production of consumer goods ANS: D PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA 105. Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. The second unit of capital goods production will cost ____ units of consumption goods, and the third unit of capital goods production will cost ____ units of consumption goods. a. 4;6 b. 25; 23 c. 23; 19 d. 1;23 e. 2;19 ANS: A TOP: Production possibilities curve DIF: Medium TYP: CA REF: Full: 38 | Mic: 38 PTS: 1 106. Suppose an economy is faced with the production possibilities table shown in Exhibit 2-10. As additional units of capital goods are produced, the opportunity cost in terms of sacrificed units of consumption goods ____ because of ____. a. decreases; greater efficiency in production b. increases; decreasing opportunity cost c. increases; the law of increasing costs d. increases; greater efficiency in production e. decreases; the law of increasing costs ANS: C PTS: 1 DIF: Difficult TOP: Production possibilities curve TYP: CA Exhibit 2-11 Production possibilities curves REF: Full: 38 | Mic: 38 107. In Exhibit 2-11, which of the following could have caused the production possibilities curve of an economy to shift from the one labeled A to the one labeled B? a. A major natural disaster 108. In Exhibit 2-11, which of the following could have caused the production possibilities curve to shift b. An increase in consumption goods production this year c. An advance in technology d. An increase in unemployment e. A decrease in consumption goods production this year ANS: C PTS: 1 DIF: Difficult TOP: Economic growth TYP: SA REF: Full: 38 | Mic: 38 from the one labeled B to the one labeled A? a. A major natural disaster. b. An increase in resources. c. An advance in technology. d. A decrease in unemployment. e. An improvement in literacy. ANS: A PTS: 1 TOP: Production possibilities curve DIF: Difficult TYP: SA REF: Full: 38 | Mic: 38 Exhibit 2-12 Production possibilities curve 109. In Exhibit 2-12, suppose an economy with the given production possibilities curve is currently located at point A in the figure. Which of the following statements is false? a. This economy could produce more of both capital and consumption goods. b. This economy is experiencing full employment. c. This economy could produce more capital goods while holding fixed the number of consumption goods produced. d. This economy could produce more consumption goods while holding fixed the number of capital goods produced. e. Not every resource in this economy is being utilized ANS: B PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA Exhibit 2-13 Production possibilities curve 110. 111. 112. 113. 114. In Exhibit 2-13, in terms of efficiency: a. point A is preferred to point B. b. point A is preferred to point E. c. point A is preferred to point D. d. point B is preferred to point A. e. point B is preferred to point C. ANS: C PTS: 1 TOP: Production possibilities curve DIF: Difficult REF: TYP: CA Full: 38 | Mic: 38 Full: 38 | Mic: 38 In Exhibit 2-13, if the economy decides to locate at point E, then: a. this is the best choice for this economy. b. the c. the d. the e. the maximum number of consumption goods is being produced. economy has not achieved full employment. economy could not survive because no food is being produced. economy has not achieved maximum efficiency. ANS: D PTS: 1 DIF: Medium REF: TOP: Production possibilities curve TYP: CA In Exhibit 2-13, the combination of goods given by point H could: a. never be achieved by this economy. b. be achieved today if the economy achieved full employment. c. be achieved today if the economy achieved maximum efficiency. d. not be achieved today. e. be achieved today with the proper allocation of resources. ANS: D PTS: 1 DIF: Difficult REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA In Exhibit 2-13, which of the following is not true regarding point H? Point H: a. cannot be achieved by this economy today. b. could be achieved today if the economy only achieved full employment. c. could be achieved in the future by an enlargement of the economy's resource base. d. could be achieved in the future by an advancement in technology. e. could be achieved in the future by growth in the economy. ANS: B PTS: 1 DIF: Difficult REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA In Exhibit 2-13, point H is: a. achievable with today's resource base. 115. b. not achievable today because the economy has not achieved full employment. c. not achievable today because the economy is not at its maximum point of efficiency. d. not achievable today because of waste. e. not achievable today because of inadequate production capacity. ANS: E PTS: 1 DIF: Difficult REF: TOP: Production possibilities curve TYP: CA In Exhibit 2-13, point D: a. is preferred to point A. b. is a point of maximum production for this economy this year. c. is not achievable this year because of limited resources. d. could result from some degree of unemployment of inefficiency. e. is preferred to point H. Full: 38 | Mic: 38 116. ANS: D PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA Exhibit 2-14 Production possibilities curve In Exhibit 2-14, this economy was located at point E but has now moved to point F. a. This would be an impossible move because the economy does not have sufficient resources. b. The rate of unemployment in this economy would have increased. c. Consumption goods production has increased, but capital goods production has decreased. d. The economy has decreased unemployment, but some degree of unemployment still exists. e. This economy has achieved full employment. ANS: E PTS: 1 DIF: Difficult REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: CA Exhibit 2-15 Production possibilities curve 117. In Exhibit 2-15, if the economy moves from point L to point M, the opportunity cost of producing 10 118. In Exhibit 2-15, if the economy produces no capital goods, what is the maximum number of consumer 119. 120. In Exhibit 2-15, the production possibilities curve demonstrates: a. changing prices. b. economic growth. c. decreases in resources. more capital goods is: a. 40 less consumer goods. b. 25 less consumer goods. c. 15 less consumer goods. d. 15 more consumer goods. e. 25 more consumer goods. ANS: C PTS: 1 TOP: Opportunity cost DIF: Medium TYP: SA REF: Full: 36 | Mic: 36 goods that can be produced? a. 50. b. 48. c. 40. d. 25. e. 0. ANS: A TOP: Production possibilities curve DIF: Easy TYP: RE REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 d. the law of increasing opportunity costs. e. changing technology. ANS: D PTS: 1 TOP: Production possibilities curve DIF: Difficult TYP: CA PTS: 1 In Exhibit 2-15, the economy will experience the most future economic growth if it chooses what point now? a. J. b. K. c. M. d. N. e. P. 121. 122. ANS: D PTS: 1 DIF: Medium REF: Full: 38 | Mic: 38 TOP: Production possibilities curve TYP: SA In Exhibit 2-15, inefficient resource use is shown by which of the following points? a. N. b. J. c. Q. 124. In Exhibit 2-16, which of the following points on the production possibilities curve are unattainable with the resources and technology currently available? d. L. e. P. ANS: E TOP: Production possibilities curve DIF: Medium TYP: SA REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 PTS: 1 In Exhibit 2-15, what can we conclude about point Q? a. It is efficient. b. It is inefficient. c. It is unattainable. d. It gives maximum future growth. e. It shows underemployed resources. ANS: C PTS: 1 TOP: Production possibilities curve DIF: Medium TYP: SA Exhibit 2-16 Production possibilities curve 123. From the information in Exhibit 2-16, which of the following points on the production possibilities curve are attainable with the resources and technology currently available? a. A,B,C,E,U b. A,B,C,D,W c. E,U,W d. B,C,D,U e. A,B,C,E ANS: D TOP: Production possibilities curve DIF: Difficult TYP: CA REF: Full: 38 | Mic: 38 PTS: 1 125. In Exhibit 2-16, which of the following points on the production possibilities curve are efficient 126. 127. In Exhibit 2-16, to move from U to B, the opportunity cost: a. would be 4 units of consumption goods. b. would be 2 units of capital goods. c. would be zero. 128. 129. Over time, an increase in a nation's stock of physical capital will: a. shift the production possibilities curve inward. b. cause an economy to operate inside its production possibilities curve. c. shift the production possibilities curve outward. d. eliminate the basic economic problem of scarcity. a. A,B,C,U b. A,B,C,D,U c. EandW d. B,C,D,U e. A,B,C,D ANS: C TOP: Production possibilities curve DIF: Easy TYP: SA REF: Full: 38 | Mic: 38 production points? a. A,B,C,U b. A,B,C,D,U c. E,U,W d. B,C,D,U e. A,B,C,D ANS: E TOP: Production possibilities curve DIF: Easy TYP: SA REF: Full: 38 | Mic: 38 REF: Full: 38 | Mic: 38 d. would be 5 units of capital goods. e. cannot be estimated. ANS: C PTS: 1 TOP: Production possibilities curve DIF: Difficult TYP: CA PTS: 1 PTS: 1 In Exhibit 2-16, which of the following points on the production possibilities curve are full- employment production points? a. A,B,C,D b. A,B,C,D,U c. E,U,W d. B,C,D,U e. A,B,C,U ANS: A TOP: Production possibilities curve DIF: Difficult REF: TYP: CA Full: 38 | Mic: 38 PTS: 1 ANS: C PTS: 1 DIF: Easy REF: Full: 42 | Mic: 42 TOP: Economic growth TYP: RE Which of the following would not lead to a shift in an economy's production possibilities curve? a. Change in technology. b. Change in the number of resources. c. An earthquake. d. Improvement in the education level. 130. 131. 132. e. Change in the composition of current output. ANS: E PTS: 1 DIF: Medium TOP: Economic growth TYP: SA Adding more resources causes: a. downward movement along a production possibilities curve. b. the production possibilities curve to shift in. c. upward movement along a production possibilities curve. d. the production possibilities curve to shift out. e. the production possibilities curve to become positively sloped. ANS: D PTS: 1 DIF: Difficult TOP: Economic growth TYP: CA REF: Full: 42 | Mic: 42 REF: Full: 42 | Mic: 42 133. An analysis of production possibilities curves indicates that the reason why underdeveloped nations have difficulties increasing their economic growth rates is because: a. low population growth rates mean fewer workers to produce food and other necessities. b. their production possibilities curves shift in when resources are increased. c. their production possibilities curves are positively sloped, unlike those in more developed economies. d. they must cut back their already meager consumption levels to increase capital production. e. the opportunity cost of shifting resources from consumption goods to capital goods is relatively low. ANS: D PTS: 1 DIF: Difficult REF: Full: 42 | Mic: 42 TOP: Economic growth TYP: CA People in poor countries may have difficulties achieving economic growth because: a. their production possibilities curves slope upward instead of downward. b. they must cut back on current consumption to increase capital goods. c. they have a solid consumption base already in place. 134. If an economy keeps increasing its capital stock, then over time its production possibilities curve will: a. not move. b. shift to the left. c. shift to the right. d. disappear because scarcity ceases to exist. e. demonstrate massive job loss for workers. ANS: C PTS: 1 DIF: Difficult TOP: Economic growth TYP: SA REF: Full: 42 | Mic: 42 Compare two economies A and B that start out with identical production possibilities curves. Economy A chooses an efficient point with 6 consumption goods and 3 capital goods, while economy B also chooses an efficient point, but with 4 consumption goods and 5 capital goods. In the future we can predict: a. economy A will operate inefficiently. b. economy B will operate inefficiently. c. economy A and economy B will grow equally fast. d. economy A will grow faster than economy B. e. economy B will grow faster than economy A. ANS: E PTS: 1 DIF: Difficult TOP: Economic growth TYP: CA REF: Full: 42 | Mic: 42 135. 136. 137. d. their resource bases are fully developed. e. the law of increasing costs makes it hard to produce more goods. ANS: B PTS: 1 DIF: Difficult REF: TOP: Economic growth TYP: CA Technological innovations will cause: a. the production possibilities curve to stay the same. b. the production possibilities curve to shift to the left. c. the production possibilities curve to shift to the right. d. an economy to operate below its production possibilities curve. e. the production possibilities curve to increase or decrease. ANS: C PTS: 1 DIF: Medium REF: TOP: Economic growth TYP: SA Full: 42 | Mic: 42 Full: 42 | Mic: 42 138. 139. A major technological advance would be represented on a production possibilities curve by a(n): a. movement off the production possibilities curve toward a point outside the curve. b. movement toward the curve from a point inside the curve. c. outward shift of the entire curve. d. movement to the left along the curve to a higher point. ANS: C PTS: 1 DIF: Easy REF: Full: 42 | Mic: 42 TOP: Economic growth TYP: SA Other things being equal, a decreased supply of natural resources would be represented on a Which of the following causes the production possibilities curve to shift to the right? a. dande. b. cande. c. A war. d. The development of a new technology that improves productivity. e. The discovery of oil reserves. ANS: A PTS: 1 DIF: Medium REF: Full: 42 | Mic: 42 TOP: Economic growth TYP: SA Robinson Crusoe's decision to produce more capital goods and fewer consumer goods in a given period causes: a. a decrease in the resources available in its economy. b. an increase in economic growth in future periods. c. a decrease in economic growth in future periods. d. no change in the availability of resources in its economy. e. a decrease in the ability to produce goods in the next period. ANS: B PTS: 1 DIF: Medium TOP: Economic growth TYP: SA REF: Full: 42 | Mic: 42 production possibilities curve by a(n): a. movement off the curve to a point inside the curve. b. movement down along the curve. c. movement up along the curve. d. inward shift of the entire curve. ANS: D PTS: 1 TOP: Economic growth DIF: Medium TYP: SA REF: Full: 42 | Mic: 42 140. 141. 142. 143. 144. 145. 146. Which would be least likely to cause the production possibilities curve to shift to the right? a. An increase in the labor force. b. Improved methods of production. c. An increase in the education and training of the labor force. d. A decrease in unemployment. ANS: D PTS: 1 DIF: Difficult TOP: Economic growth TYP: CA REF: Full: 42 | Mic: 42 Which of the following would most likely cause the production possibilities curve for DVDs and food to shift outward? a. A choice of more food and more DVDs. b. A choice of more food and less DVDs. c. A choice of more DVDs and less food. d. An increase in the quantity of natural resources. ANS: D PTS: 1 DIF: Difficult REF: TOP: Economic growth TYP: CA On a production possibilities curve diagram, greater entrepreneurship: a. causes the curve to shift outward. b. keeps the economy on the curve. c. prevents movement along the curve. d. keeps the economy at the corners of the curve. ANS: A PTS: 1 DIF: Easy TOP: Economic growth TYP: SA Full: 42 | Mic: 42 In order for an economy to shift its production possibilities curve rightward, it must: a. suffer resource unemployment. b. experience an increase in its resources and/or an improvement in its technology. c. use its resources more efficiently than at points along the curve. d. all of these. ANS: B PTS: 1 DIF: Difficult REF: Full: 42 | Mic: 42 TOP: Economic growth TYP: CA Reductions in available resources will cause the production possibilities curve to: a. expand. b. disappear. c. become vertical. d. shift inward. ANS: D PTS: 1 TOP: Economic growth DIF: Medium TYP: SA REF: Full: 42 | Mic: 42 A rightward (an outward) shift of a nation's production possibilities curve could be caused by: a. a decrease in technology. b. an increase in resources. c. producing more consumer and fewer capital goods. d. a decline in the labor force's level of education and skills. ANS: B PTS: 1 DIF: Medium TOP: Economic growth TYP: CA REF: Full: 42 | Mic: 42 An outward shift of an economy's production possibilities curve is caused by: REF: Full: 42 | Mic: 42 147. The production possibilities curve for the nation of Economania shifts to the right. This could have been caused by: a. a decrease in Economania's capital stock. b. a decrease in the Economania's labor supply. c. high unemployment in Economania the previous time period. d. Economania producing all consumer goods in the previous period. e. technological innovation in the production of Economania goods. ANS: E PTS: 1 DIF: Difficult REF: Full: 42 | Mic: 42 TOP: Economic growth TYP: CA The production possibilities curve for the nation of Economagic shifts to the left. This could have been caused by: a. an increase in Economagic's labor supply. b. innovation in the production of goods in Economagic. c. a war that destroyed some of Economagic's resource base. d. unemployment among Economagic's workers. e. Economagic's choice of more consumption and less capital last period. 148. 149. 150. 151. ANS: C PTS: 1 DIF: Difficult TOP: Economic growth TYP: CA Which of the following cause(s) economic growth? a. candd. b. dande. c. The production of more scarce goods REF: Full: 42 | Mic: 42 REF: Full: 42 | Mic: 42 REF: Full: 42 | Mic: 42 REF: Full: 42 | Mic: 42 a. an increase in capital. b. an increase in labor. c. an advance in technology. d. all of these. ANS: D PTS: 1 TOP: Economic growth DIF: Easy TYP: RE REF: Full: 42 | Mic: 42 d. A technological improvement e. The production of more capital goods ANS: B PTS: 1 TOP: Economic growth DIF: Medium TYP: SA Economic growth may be represented by a(n): a. leftward shift of a production possibilities curve. b. outward shift of a production possibilities curve. c. movement along a production possibilities curve. d. production possibilities curve that remains fixed. ANS: B PTS: 1 TOP: Economic growth A source of economic growth is: a. unemployment. b. inefficiency. c. less resources. d. greater entrepreneurship. ANS: D PTS: 1 DIF: Easy TYP: SA DIF: Easy 152. 153. One source of economic growth is: a. producing inside the production possibilities curve. b. producing outside the production possibilities curve. c. increasing capital. d. discouraging profit-seeking entrepreneurs. ANS: C PTS: 1 DIF: Medium TOP: Economic growth TYP: RE REF: Full: 42 | Mic: 42 TOP: Economic growth TYP: RE 154. Which of the following statements is false? a. Marginal analysis is an examination of the effects of additions or subtractions from a current situation. b. The production possibilities curve shows the maximum combination of two outputs that an economy can produce, given its available resources and technology. c. Technology is the body of knowledge and skills applied to how goods are produced. d. Economic growth is illustrated as an inward shift of the production possibilities curve. ANS: D PTS: 1 DIF: Easy REF: Full: 42 | Mic: 42 TOP: Economic growth TYP: SA Exhibit 2-17 Production possibilities curve In Exhibit 2-17, if countries A and B currently have the same production possibilities curve (PPC) as given in the figure, but this year country A locates at point A on its PPC and country B locates at point B on its PPC, then country A: a. is better off than country B. b. will grow at a faster rate than country B. c. will grow at a slower rate than country B. d. is producing more capital goods than country B. e. is more efficient than country B. ANS: C PTS: 1 DIF: Difficult TOP: Economic growth TYP: SA Exhibit 2-18 Production possibilities curves REF: Full: 42 | Mic: 42 155. In Exhibit 2-18, a country is located at point A on its Year X production possibilities curve. In Year Y this same country is located at point B on its Year Y production possibilities curve. Which of the following could have brought about this outward shift in production possibilities curves? a. More efficient production in Year X. b. A natural disaster in Year X which leads to a destruction of resources. c. Higher unemployment in Year X. d. An advance in technology occurred in Year X. ANS: D PTS: 1 DIF: Difficult REF: Full: 42 | Mic: 42 TOP: Economic growth TYP: CA In Exhibit 2-18, the production possibilities curves for a country are shown for the years Year X and Year Y. Suppose this country was located at point A in Year X and point B in Year Y. This country: a. is producing the same number of capital goods in both years. b. is producing the same number of consumption goods in both years. c. has shown no growth between Year X and Year Y. d. has higher unemployment in Year X than in Year Y. e. has higher unemployment in Year Y than in Year X. ANS: B PTS: 1 DIF: Medium REF: Full: 42 | Mic: 42 TOP: Economic growth TYP: CA In Exhibit 2-18, the production possibilities curves for a country are shown for the years Year X and Year Y. Suppose this country was located at point A in Year X and point B in Year Y. This economy: a. is worse off in Year Y than in Year X. b. has stagnated production in this two year period. c. is more efficient in Year Y than in Year X. 156. 157. d. has shown growth between these two years. e. has higher unemployment in Year Y than in Year X. ANS: D PTS: 1 DIF: Difficult TOP: Economic growth TYP: CA Exhibit 2-19 Production po