TEST BANK for Macroeconomics in Modules, 3rd Edition by Paul Krugman, Robin Wells. All Chapters (Complete download). 1248 Pages

TEST BANK for Macroeconomics in Modules, 3rd Edition by Paul Krugman, Robin Wells. All Chapters (Complete download). 1248 Pages Test Bank for Macroeconomics in Modules, 3e Paul Krugman, Robin Wells (All Chapters) Chapter 1 1. Scarcity in economics means: *a. we do not have sufficient resources to produce all the goods and services we want. b. the wants of people are limited. c. there must be poor people in rich countries. d. shortages exist in nearly all markets. 2. If resources are “scarce,” it means that they: *a. cannot provide enough goods or services to satisfy all human material wants and needs. b. have no opportunity cost. c. are probably not valued by consumers. d. have an unlimited supply. 3. A key theme fundamental to all of economics is that: a. there are limited wants. b. we are a rich country but are simply not aware of it. *c. people have unlimited wants but face limited means to satisfy them. d. there are unlimited resources. 4. The problem of scarcity is confronted by: a. industrialized societies only. b. preindustrialized societies only. c. societies governed by communist philosophies only. *d. all societies. 5. When we are forced to make choices, we are facing the concept of: a. human capital. b. inflation. *c. scarcity. d. economic aggregates. 6. We are forced to make choices because of:a. exploitation. b. efficiency. *c. scarcity. d. the margin. 7. Scarcity exists when: a. making choices among two or more alternatives is not necessary. b. individuals can have more of any good without giving up anything. *c. individuals can have more of one good but only by giving up something else. d. resources are unlimited. 8. Scarcity in economics means: *a. we do not have sufficient resources to produce all of the goods and services we want. b. the wants of people are limited. c. there must be poor people in rich countries. d. economists are clearly not doing their jobs. 9. Although fresh water is very abundant in most places, it is scarce because: a. it has no alternative uses. *b. there is not enough of it to meet all needs. c. it is a free good. d. scarce goods in general are not all that costly. 10. Fresh water is considered a scarce good because: *a. not enough of it is available for all needs. b. it does not have any uses. c. scarce goods are less expensive. d. not enough of it is available for all needs and because it is less expensive. 11. The problem of determining what goods and services society should produce: a. exists because we can produce more than we need or want. *b. exists because there are not enough resources to provide all of the goods and services that people want to purchase. c. would not exist if all goods and services were scarce. d. would not exist if government owned all of the resources.12. In China, which would NOT be a resource in the production of rice? a. fertile land b. labor c. capital equipment *d. money 13. A resource is anything that: *a. can be used in production. b. for which you pay. c. is in scarce supply. d. can be consumed. 14. We have to make choices because: a. we have unlimited income. *b. resources are scarce. c. resources are infinite. d. with good planning, trade-offs can be avoided. 15. When a chef creates a dinner plate of food for a customer, which represents physical capital? a. the chef *b. the oven c. the food ingredients d. the chef's training and experience I think this may be a redundant answer to “A” 16. Manny is attending college and majoring in economics. By doing so, Manny is primarily improving his: a. land. b. labor. c. capital. *d. human capital. 17. Which is not an example of a resource? a. land b. labor c. capital *d. production18. Which can best be considered the resources used in the production of computers? a. money from investors b. wages of computer engineers *c. computer engineers d. taxes paid on the profits from the sale of the computers 19. Corner offices in high-rise office buildings usually cost more to rent than other offices. This best illustrates the economic principle of: a. normative economics. *b. scarce resources. c. resources being used as efficiently as possible to achieve society's goals. d. opportunity costs. 20. In Ventura County, California, strawberry production is limited by the number of acres available for agriculture production. The statement that best represents this economic concept is: *a. resources are scarce. b. the cost of something is what you give up to get it. c. normative economics describes how the economy should work. d. resources should be used as efficiently as possible to achieve society's goals. 21. You like to read Vogue and Sports Illustrated. You have only $5 to spend, so you only buy Sports Illustrated. The statement that best represents this economic concept is: *a. resources are scarce. b. the real cost of something is what you must give up to get it. c. positive economics explains how the economy actually works. d. economic models are used to answer “what if” questions. 22. Intel finds it difficult to hire enough skilled computer engineers. The statement that best represents this economic concept is: *a. resources are scarce. b. the real cost of something is what you must give up to get it. c. economists may disagree due to differences in their political views. d. economic models are simplified representations of reality.23. In Colorado, there has been a drought, and rural communities are fighting with urban areas over water. The statement that best represents this economic concept is: *a. resources are scarce. b. resources should be used as efficiently as possible to achieve society's goals. c. the real cost of something is what you must give up to get it. d. economic models are used to answer “what if” questions. 24. Opportunity cost is: a. about half of the monetary cost of a product. b. the dollar payment for a product. c. the benefit derived from a product. *d. the value of the best alternative forgone in making any choice. 25. The opportunity cost of something is: a. greater during periods of rising prices. b. equal to the money cost. c. less during periods of falling prices. *d. what is given up to acquire it. 26. Whenever a choice is made: *a. the cost of that choice could be referred to as opportunity cost. b. the cost is easy to measure in dollar terms. c. efficiency is improved. d. scarcity is not the problem. 27. You can spend $100 on either a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is: a. $100. *b. your enjoyment of the new CD player. c. both the $100 and your enjoyment of the new CD player. d. impossible to determine. 28. Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is: a. $10,000. b. whatever she would have purchased with the $10,000 instead. c. whatever she would have earned had she not been in college.*d. whatever she would have purchased with the $10,000 and whatever she would have earned had she not been in college. 29. If the state government allocates additional spending on education, the opportunity cost is: a. zero. b. the dollar amount of the additional spending. c. considered only if additional taxes need to be raised to fund the spending. *d. measured in terms of the best alternative use for that money. 30. Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is: a. zero—the tickets were free. b. the price listed on the ticket. *c. whatever Khalil would have done had he not gone to the opera. d. the price listed on the ticket or whatever Khalil would have done had he not gone to the opera. 31. The cost of leaving the skating championship before it ends is ________, while the cost of staying for the entire match is ________. a. the opportunity cost of not seeing the perfect “10” performance that happens; zero—the ticket to the championship is already paid, so there is no cost *b. the opportunity cost of not seeing the perfect “10” performance that happens; the opportunity cost of what else you could have done during that time c. zero—you don't have to pay to leave; zero—the ticket to the match is already paid so there is no cost d. the cost of the ticket; the cost of the ticket 32. A new fast-food restaurant offered a free meal (valued at $5) a week for a year to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers. The cost of the free meal a week for a year for Ramona was: a. zero. b. $260. *c. whatever she would have done with those 48 hours. d. The cost is impossible to determine. 33. The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had notpurchased the taco, you would have purchased the burrito. The opportunity cost of the taco is: a. the $3. *b. your enjoyment of the burrito. c. the $3 and your enjoyment of the burrito. d. the $3, your enjoyment of the burrito, and your enjoyment of the nachos. 34. For an economist, the cost of something is: a. the amount of money you paid for it. *b. what you gave up to get it. c. always equal to its market value. d. the quantity of resources used to produce it. 35. The best measure of the opportunity cost of any choice is: a. the monetary cost of that choice. *b. whatever you have given up to make that choice, even if no monetary costs are involved. c. the cost associated with not taking full advantage of the opportunity offered by that choice. d. your hourly wage. 36. While buying refreshments for an upcoming party, you notice that a six-pack of Americana Beer costs $2 and a six-pack of Bavarian Beer costs $4. You buy the sixpack of Bavarian Beer, although you wonder if maybe two six-packs of Americana Beer would have been a better choice. The opportunity cost of the Bavarian Beer is: a. the $4. b. a six-pack of Americana Beer. *c. two six-packs of Americana Beer. d. the $4 and the six-pack of Americana Beer. 37. Your elderly grandma tells you: “I haven't been taking my beloved walks because I'm concerned about falling and getting hurt. See, there is always a cost to doing something. But if you don't do anything, then there is no cost.” Your grandma does not understand the concept of: a. scarcity in economics. b. efficiency in economics. *c. opportunity cost in economics. d. models in economics. 38. The cost of leaving a championship soccer match before it ends is ________, while the cost of staying for the entire match is ________.a. the opportunity cost of not seeing the winning goal with two minutes to go; zero—the ticket to the match is already paid so there is no cost *b. the opportunity cost of not seeing the winning goal with two minutes to go; the opportunity cost of what else you could have done during that time c. zero—you don't have to pay to leave; zero—the ticket to the match is already paid so there is no cost d. the cost of the ticket; also the cost of the ticket 39. Zoe's grandparents are excited about finally paying off their mortgage, because they say, “Our cost of housing is now zero.” Zoe should explain to them the economic principle of: a. scarcity: resources are limited. *b. opportunity cost: by living in the house, they are giving up the opportunity to sell the house, buy a smaller one, and pocket the difference. c. normative economics, which explains how the economy should work. d. equity: it is unfair that some people are still paying off their mortgage. 40. The university recently inherited a large mansion from a wealthy alumnus. The university plans to use the mansion for faculty parties and to house distinguished guests. The opportunity cost of the mansion to the university is: a. zero, because it was a gift. b. the original cost of building the mansion. *c. the amount the university would receive if it sold the mansion. d. the cost of catering the parties at the mansion. 41. A new startup airline is offering free round-trip tickets to anywhere to the first 600 people who enter the office on the airline's first day of business. You arrive 24 hours before they are scheduled to open to be sure to get the free tickets, and you buy food from vendors while waiting in line. The cost of the tickets to you is: a. zero. b. just the cost of food while you wait in line. *c. the cost of food while you wait in line and the opportunity cost of your time spent in line. d. the actual value of the ticket. 42. A friend comes up to you and offers to give you a free ticket to the local professional team's baseball game that night. You decide to attend the game. The game takes five hours and costs you $15 for transportation. If you had not attendedthe game, you would have worked at your part-time job for $8 an hour. What is the cost to you of attending the game? a. The cost is zero—the ticket is free. b. $65 c. $40 *d. $55 43. For a student that owns his or her own home and doesn't plan to live in the dorm the cost of going to college is: a. tuition and the cost of housing. b. tuition, the cost of housing, and the cost of books. *c. tuition, the cost of books, and forgone income. d. forgone income only. 44. You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and the candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is: a. $1 plus the enjoyment you would have received from the candy bar. b. $2 minus the enjoyment you received from the bag of chips. c. $1. *d. the enjoyment you would have received from the candy bar. 45. A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7, she could work at the college library at a wage of $6, or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to: *a. $7. b. $6. c. $13. d. $0. 46. If you decide to go to Cancún with your friends during spring break, you realize you cannot go to Paris with your sister in the summer. The statement that best represents this economic concept is: *a. the real cost of something is what you must give up to get it. b. positive economics explains how the economy actually works. c. normative economics describes how the economy should work. d. there are gains from trade.47. You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. The statement that best represents this economic concept is: *a. the real cost of something is what you must give up to get it. b. economic models are used to answer “what if” questions. c. people usually avoid opportunity costs. d. there are gains from trade. 48. The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of buying a burger is your: a. enjoyment of the burger. *b. enjoyment of the bagel. c. enjoyment of the burrito. d. enjoyment of the bagel and burrito. 49. When the San Francisco city manager faces a complaint that the city council chamber podium is not accessible to individuals with disabilities, he responds that the $1 million improvement will not happen because “that money could be spent building 70 curb ramps.” The statement that best represents this economic concept is: a. resources are scarce. *b. the real cost of something is what you must give up to get it. c. economic models are simplified representations of reality. d. when markets don't achieve efficiency, government intervention can improve society's welfare. 50. The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You love burgers and bagels, but you decide to have a burger today. If they were out of burgers, you would have bought a bagel. The statement that best represents this economic concept is: *a. the real cost of something is what you must give up to get it. b. physical capital is a factor of production. c. resources are used to produce something else. d. normative economics describes how the economy should work. 51. Microeconomics deals with:a. the working of the entire economy or large sectors of it. b. economic growth. *c. individual decision makers in the economy. d. gross domestic product. 52. The study of a single firm and how it determines prices would fall under the study of: a. macroeconomics. *b. microeconomics. c. economic growth. d. fiscal policy. 53. Macroeconomics deals with: a. bits and pieces of the economy. b. the question of how a business unit should operate profitably. *c. the working of the entire economy or large sectors of it. d. how individuals make decisions. 54. The primary emphasis in macroeconomics is on: a. how firms set prices. *b. the national economy. c. marginal analysis. d. bits and pieces of the economy. 55. Which would be studied in macroeconomics? a. the change in automobile sales due to a change in the price of automobiles b. the impact of a tax reduction on the profits of an individual business *c. recessions d. the unemployment of workers displaced by technological change in the typesetting industry 56. The basic concern of microeconomics is: a. to keep business firms from losing money. b. to prove that capitalism is better than socialism. *c. to study the choices people make. d. to use unlimited resources to produce goods and services to satisfy limited wants. 57. How people choose among the alternatives available to them is:a. not part of the study of economics. b. impossible to describe. *c. the study of microeconomics. d. the emphasis in the study of macroeconomics. 58. In contrast to the conclusions drawn from microeconomics, many economists would argue that in macroeconomics, government: a. control of rent prices increases overall economic activity. b. intervention in markets usually leaves society as a whole worse off. c. taxation of goods and services does not create a deadweight loss of economic welfare. *d. intervention in markets can prevent or reduce the effects of adverse events on the macroeconomy. 59. Which area suggests a limited role for government? *a. microeconomics b. macroeconomics c. microeconomics and macroeconomics d. government policy 60. The widely held view that the government should take an active role in the macroeconomy dates to: a. the Civil War. b. World War I. *c. the Great Depression. d. the Vietnam War. 61. Changing the level of government spending is an example of: *a. fiscal policy. b. interest rate policy. c. monetary policy. d. exchange rate policy. 62. The modern tools of macroeconomic policy are: a. tax policy and antitrust policy. *b. fiscal policy and monetary policy. c. monetary policy and exchange rate policy. d. capital policy and labor policy.63. Controlling interest rates is an example of: a. fiscal policy. b. tax policy. *c. monetary policy. d. exchange rate policy. 64. Fiscal policy refers to the: a. control of interest rates. *b. control of government spending and taxation. c. control of the quantity of money. d. control of interest rates and of government spending. 65. The economist whose writings in the 1930s concluded that the cause of an economic depression is inadequate spending was: a. Herbert Hoover. *b. John Maynard Keynes. c. Andrew Mellon. d. Joseph Schumpeter. 66. One role for government policy is to: a. provide insurance to cover damages from macroeconomic fluctuations. *b. attempt to manage short-run macroeconomic fluctuations. c. subsidize private insurance for businesses to cover harm from macroeconomic fluctuations. d. avoid Keynesian economics. 67. Among the tools available to macroeconomic policymakers is: *a. fiscal policy, for use in controlling government spending and taxation. b. antitrust policy, to break up monopolies. c. environmental policy, to clean up the economy. d. improving FDA standards for food and drugs. 68. Economic theory in 1936 changed dramatically with the publication of: *a. The General Theory of Employment, Interest and Money, by John Maynard Keynes. b. An Inquiry into the Nature and Causes of the Wealth of Nations, by Adam Smith. c. The Road to Serfdom, by F. A. Hayek. d. Principles of Economics, by Paul Samuelson.69. The central mission of modern macroeconomics is to prevent: a. shortages. b. surpluses. c. high gas prices. *d. a deep recession like the Great Depression. 70. Which are considered to be the two types of macroeconomic policies? *a. monetary and fiscal policy b. monetary and regulation policy c. fiscal and regulation policy d. fiscal policy and price controls 71. Fiscal policy attempts to affect the level of overall spending in the economy by making changes in: a. the interest rate. b. the money supply. c. banking regulations. *d. taxes and spending. 72. Monetary policy attempts to affect the overall level of spending in the economy by making changes in: a. taxes. b. taxes and spending. c. taxes and interest rates. *d. interest rates and the quantity of money. 73. Monetary policy attempts to affect the overall level of spending in the economy through: a. changes in the inflation rate. *b. changes in the quantity of money or the interest rate. c. changes in tax policy or government spending. d. discretionary regulation of profits and wages. 74. Fiscal policy attempts to affect the overall level of spending in the economy through: a. changes in the inflation rate. b. changes in the quantity of money or the interest rate. *c. changes in tax policy or government spending. d. discretionary regulation of profits and wages.75. If macroeconomic policy has been successful over time, it is likely that the economy has not seen: a. any inflation. *b. any severe recessions. c. any unemployment. d. a business cycle. 76. Monetary policy involves: a. changes in government spending. b. changes in government tax receipts. *c. changes in the quantity of money. d. changes in tax rates. 77. Fiscal policy involves: a. changes in interest rates. *b. changes in government spending. c. changes in the quantity of money. d. changes in the quantity of money and interest rates. 78. The onset of the Great Depression: a. was not a shock to anyone, since most economists predicted the roaring '20s were bound to end in disaster. b. created a disagreement between the Hoover administration and conventional economists because Hoover wanted the government to intervene much more quickly than most others. *c. came as a considerable shock to the conventional wisdom of economics at that time and opened the door for critiques of mainstream thought by economists like John Maynard Keynes. d. was in 1918 at the end of World War I. 79. The General Theory of Employment, Interest, and Money, written by _______ and published in _______, transformed the way economists thought about macroeconomics. a. Milton Friedman; 1946 b. Paul Samuelson; 1940 *c. John Maynard Keynes; 1936 d. Paul Lucas; 1966 80. The General Theory of Employment, Interest, and Money, was written by:a. Robert Lucas. b. David Ricardo. *c. John Maynard Keynes. d. Thomas Malthus. 81. Keynesian economics stressed: *a. the importance of total spending. b. the self-correcting power of free markets. c. the long run. d. that the Depression should run its course to bring down the high cost of living. 82. In recent times, the U.S. government has been trying to help the economy through one of the worst economic slumps ever. The policies used are based on: *a. Keynesian theory. b. classical theory. c. supply-side theory. d. trickle-down theory. 83. Keynesian economics promotes the economic idea that: a. government intervention in the economy can be destabilizing. *b. the government can help a depressed economy via fiscal and monetary policies. c. the private sector is perfectly capable to regulate itself. d. the free market system will always prevail. 84. The economic policy of changing the quantity of money, hence the interest rate, hence overall spending in the economy, is known as: *a. monetary policy. b. fiscal policy. c. free-market policy. d. trickle-down policy. 85. The economic policy that uses changes in government spending and taxes to affect the overall spending in the economy is known as: a. a tax-and-spend policy. b. monetary policy. *c. fiscal policy. d. free-trade policy. 86. John Maynard Keynes believed that the government:*a. should actively try to mitigate the effects of recessions by using fiscal and monetary policies. b. should not interfere with the economy and should let the economy self-correct. c. should intervene only when there is a boom but let the recession run its course. d. should not use fiscal and monetary policies, as these policies have long-term adverse effects on the economy. 87. A simplified representation that is used to study a real situation is called: *a. a model. b. a production possibility frontier. c. an assumption. d. a trade-off. 88. The models that economists construct: *a. usually make simplifying assumptions. b. often rely on physical constructs, such as those used by architects. c. rarely use mathematical equations or graphs. d. attempt to replicate the real world. 89. When building a model, economists: *a. simplify reality in order to highlight what really matters. b. attempt to duplicate reality in all of its complexity. c. ignore the facts and instead try to determine what the facts should be. d. are careful to avoid the scientific method. 90. The models used in economics: a. are usually limited to variables that are directly related. b. are essentially not reliable because they are not testable in the real world. c. are of necessity unrealistic and not related to the real world. *d. emphasize basic relationships by abstracting from complexities in the everyday world. 91. Economic models are: a. created and used to duplicate reality. b. useless if they are simple. c. made generally of wood, plastic, and/or metal.*d. often useful in forming economic policy. 92. The importance of an economic model is that it allows us to: a. build a complex and accurate model of the economy. b. build an accurate mathematical model of the economy. *c. focus on the effects of only one change at a time. d. avoid opportunity costs. 93. Which two statements is a positive statement? Which is a normative statement? X. The federal minimum wage is increasing to $7.50 an hour. Y. The minimum wage should be high enough that families will not live in poverty. *a. X is positive; Y is normative. b. X is positive; Y is positive. c. X is normative; Y is positive. d. X is normative; Y is normative. 94. Which is a normative statement? a. Women's labor force participation rate has increased during the past 100 years. b. The federal minimum wage is higher today than it was in 1990. c. Children in the United States are required to go to school until they reach a certain age. *d. The best way to encourage growth in the economy is through government spending. 95. Which is a normative statement? a. The minimum wage has not kept pace with inflation. *b. The minimum wage is an important tool in fighting poverty and should be increased. c. The minimum wage can create higher unemployment for teens and unskilled workers. d. A higher minimum wage is expected to increase the price of a fast-food cheeseburger. 96. Which is a normative statement? a. International trade leads to expanded consumption opportunities. b. Higher expenditures on health care will reduce infant mortality rates. *c. To improve our economic security, we should reduce our dependence on oil imports. d. Increased defense spending will lead to higher budget deficits.97. Which is a positive economic statement? a. Government has grown too large and should be reduced. *b. There has been an increase in the rate of inflation. c. Government should be subject to the same rules as all other institutions. d. Women should be paid as much as men for the same work. 98. An example of a positive statement is: *a. the rate of unemployment is 4%. b. a high rate of economic growth is the most important goal for the country. c. everyone in the country should be covered by national health insurance. d. baseball players should not be paid higher salaries than the president of the United States. 99. An example of a positive statement is: a. the rate of unemployment should be 4%. b. a high rate of economic growth is more important than a low rate of inflation. *c. the federal government spends half of its budget on national defense. d. everyone in the country should be covered by national health insurance. 100. Unemployment of 5% is too high. This is an example of a(n): *a. normative statement. b. positive statement. c. economic model. d. opportunity cost. 101. Which is a normative economic statement? *a. Government has grown too large and should be reduced. b. There has been an increase in the rate of inflation. c. Government is subject to the same rules as all other institutions. d. The money supply grew by 3% last year. 102. Which is an example of a positive statement?*a. The poverty rate is 14%. b. A high rate of inflation is good for the country. c. Everyone in the country needs to save money for retirement. d. Basketball players should not be paid higher salaries than teachers. 103. Which is an example of a positive statement? a. The poverty rate should be 4%. b. A high rate of economic growth is a more important economic goal than a low rate of unemployment. *c. The federal government pays for 46% of U.S. health care costs. d. Everyone in the country should be covered by national health insurance. 104. Statements that make value judgments are: a. pecuniary. b. positive. c. nominal. *d. normative. 105. Which is an example of a normative statement? a. The rate of unemployment is 9%. *b. The price of gasoline should be less than $4 per gallon. c. The federal government spends half of its budget on national defense. d. Millions of Americans lack health insurance. 106. Which is an example of a normative statement? a. The rate of unemployment is 9%. b. A high rate of economic growth creates more jobs for the country. c. The federal government spends half of its budget on national defense. *d. Everyone in America deserves to be covered by national health insurance. 107. The current rate of unemployment of 9% is too high. This is a ________ statement. *a. normative b. ceteris paribus c. positive d. marginal108. The current rate of unemployment is 9%. This statement: *a. is positive. b. is normative. c. involves a value judgment. d. is a personal reflection and has no value in economics. 109. Unemployment decreased to its lowest level in 10 years last month. This statement is an example of a(n): a. opportunity cost. *b. positive economic statement. c. normative economic statement. d. value judgment. 110. A statement that says that the minimum wage should be increased is a(n): a. positive statement. *b. normative statement. c. example of an economic model. d. illustration of opportunity costs. 111. A normative statement deals with: a. the facts. b. what was, is, or will be. *c. what ought to be. d. the scientific method. 112. Economists who are asked to choose between two different government policies may disagree because: a. they make the same value judgments about the desirability of the policies. *b. they base their conclusions on models that make different assumptions. c. as a matter of course, economists often take opposing points of view so that all sides of a question may be discussed. d. economists are trained ignore facts and focus on theory. 113. Economists may disagree about policies because they: a. may approach the issue using the same sets of values. *b. may use different economic models. c. enjoy disagreeing with each other.d. only consider issues in positive economics. 114. Because the United States is a rich nation, free health care can be provided for all citizens without considering the issue of scarcity. a. True *b. False 115. The study of economics arises because of the necessity for choice, and the necessity for choice arises because of the fundamental problem of scarcity of resources. *a. True b. False 116. Opportunity cost means that if the United States spends $87 billion in the rebuilding of Iraq, we have to forgo the opportunity to spend $87 billion on some other program. *a. True b. False 117. In 2003, Congress passed a tax cut. Since taxes were reduced, the country did not incur any opportunity cost from this decision. a. True *b. False 118. Fiscal policy involves changes in the quantity of money or the interest rate. a. True *b. False 119. Monetary and fiscal policy are undertaken to reduce the severity of recessions. *a. True b. False 120. One type of macroeconomic policy is antitrust enforcement. a. True *b. False 121. Fiscal policy can be used to reduce the severity of recessions.*a. True b. False 122. Economic models that make unrealistic assumptions may be useful in analyzing some economic problems. *a. True b. False 123. “Teachers in northern New Hampshire should earn more money” is a normative statement. *a. True b. False 124. Positive economics is the branch of economics that makes prescriptions about the way the economy should work. a. True *b. False 125. “Steel tariffs will prevent job losses in the steel industry” is a positive statement. *a. True b. False 126. “The unemployment rate should be higher” is a normative statement. *a. True b. False 127. “Many economists agree that income taxes should be increased for rich people” is a positive statement. a. True *b. False 128. Economists disagree more over normative economics than positive economics. *a. True b. False129. A college student stays up late writing a history paper and as a result sleeps through her morning economics class. What is the cost of sleeping through the class? Correct Answer: There is no monetary price, but there is most certainly a cost. She might have missed some very important information that was presented or discussed in the economics class. Failure to be present for this information might create difficulties for her on the next economics exam. Maybe the professor gave a pop quiz during the economics class and thus this sleepy student failed to earn any points on the quiz. Every decision has a cost, even if there is no money actually paid. 130. A college student waits in line for hours to purchase a ticket to the Rose Bowl, but an attorney does not. Rather than spend hours in line, he purchases a much more expensive ticket through a ticket broker. Why? Correct Answer: For the attorney, the opportunity cost of waiting in line for a ticket is time that could be used to work for a client and earn maybe several hundred dollars for each hour of legal work. Because he worked during those hours, he was able to afford the higher price. The opportunity cost of the student's time is much lower. 131. What do economists mean by “Keynesian” policies? Correct Answer: John Maynard Keynes advocated an active role for the government when the economy was in recession. He believed that economists and policy makers should engage in fiscal and monetary policy to stimulate a weak economy, rather than standing by and allowing the economy to self-correct. 132. You are reading an editorial in your local newspaper. The editorial says: “The United States had a trade deficit of $18.4 billion in February 2008. This is a clear indication to our leaders that we must renegotiate our trade agreements with China to make them fairer for the American worker.” What parts of this editorial are positive and what parts are normative economics? Correct Answer: The statement of historical fact “trade deficit of $18.4 billion” is positive economics. It does not imply any value judgment. The second statement, “our leaders must renegotiate . . .” is normative economics. The editorial board is prescribing the way the economy, in this case trade with China, should work. There is a very clear value judgment that the trade deficit is unfair to American workers and we should therefore work to remedy the deficit. 133. When someone says resources are scarce, this suggests that:a. lower-income individuals must be especially careful about the choices they make. *b. choices need to be made in order to utilize resources in the best manner possible. c. additional resources could be found if there were additional funds allocated to the effort. d. we have enough resources to meet all of our needs and wants. 134. One day, Martha wakes up and in frustration yells, “Decisions, decisions, decisions! Why do I have to make decisions about everything?” Martha's frustrations stem from the fact that: *a. like all economic beings, she faces constraints and cannot have everything she wants. b. she doesn't realize she can have everything she wants. c. she is the only one who faces constraints in life. d. she really doesn't want anything. 135. Alison is offered two jobs: one pays a salary of $45,000 per year and offers three weeks of vacation, while the other offer provides two weeks of vacation and a salary of $54,000. What is the opportunity cost for Alison if she chooses the job offer of $54,000? a. $45,000 plus the three weeks of vacation b. $45,000 per year *c. one week of vacation d. two weeks of vacation 136. Katherine has a physics exam tomorrow. However, a free lecture by one of her favorite authors is taking place this evening. Katherine decides to attend the lecture instead of studying for her exam. Which is a correct statement? a. Katherine's opportunity cost is the time spent listening to the lecture. b. Katherine's opportunity cost is not relevant, since no money is involved. *c. Katherine's opportunity cost is the cost of getting to the lecture event itself plus the reduction in her physics exam grade by not studying tonight. d. Katherine's opportunity cost is the time spent getting to the lecture. 137. Fiscal and monetary policies: a. have no role in macroeconomic policies. b. have been used by the government for over 250 years. c. are most effective in microeconomic settings. *d. are used to correct for short-term economic fluctuations.138. Fiscal policy involves: a. deliberate changes in the money supply. *b. deliberate changes in taxation and/or government spending. c. changes in interest rates in specific markets. d. changes which correct only recessionary problems. 139. Keynesians argue that low levels of spending: a. are irrelevant in an economy. *b. can lead to prolonged recessions. c. are not helped by monetary or fiscal policy efforts. d. are evident only during expansions. 140. Setting interest rates and the money supply in an effort to change overall spending in an economy is called: a. fiscal policy. *b. monetary policy. c. investment. d. the stock market. 141. Setting government spending and taxes in an effort to change overall spending in an economy is called: *a. fiscal policy. b. monetary policy. c. investment. d. the stock market. 142. During the Great Depression, unemployment rates reached as high as: *a. 25%. b. 50%. c. 10%. d. 60%. 143. Economists use models to explain real-life situations because: a. such models tend to be exactly what is occurring in each situation. b. assumptions found in such models tend to make the problem more difficult. *c. simplifications and assumptions often yield answers that can help to explain the more difficult real-life situations.d. real-life situations are not relevant to the building of models. 144. Economic models often: *a. vary greatly in assumptions and simplifications. b. are correct. c. provide similar answers. d. fail to explain any of the real-life scenarios they are supposed to help solve. 145. “All other relevant factors remain unchanged” is another way of saying: *a. all other things equal. b. allow several variables to change in order to understand how those variables affect one variable held constant. c. allow all variables to change and attempt to understand how the variables interact with each other. d. no variables change. 146. Positive economics: a. describes opinions and perspectives on how the world should work. b. is based on opinion polls. *c. describes how the world does work. d. is the same as normative economics. 147. Of these statements, which reflect(s) a normative view? I. The United States should increase the minimum wage to $10 per hour. II. There is a federal minimum wage in the United States. III. The federal minimum wage in the United States is less than $10 per hour. a. All are normative. b. None are normative. c. Statements I and II reflect a normative view. *d. Statement I reflects a normative view.1. The production possibility frontier illustrates that: a. the economy will automatically end up at full employment. b. an economy's productive capacity increases proportionally with its population. *c. if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced. d. economic production possibilities have no limit. 2. A production possibility frontier illustrates the ________ facing an economy that ________ only two goods. a. prices; sells *b. trade-offs; produces c. trade-offs; consumes d. shortages; produces 3. Suppose the state of Oklahoma decides to produce only two goods, oil and football helmets. According to the production possibility frontier, as oil production increases, the production of football helmets will: a. increase. b. not change. c. decrease at a decreasing rate. *d. decrease. 4. Consider a production possibility frontier for Iraq. If in 2014 Iraq's resources are not being fully utilized, Iraq will be somewhere ________ of its production possibility frontier. *a. inside b. outside c. near the bottom d. near the top 5. All points inside the production possibility frontier represent: a. efficient production points. *b. inefficient production points. c. infeasible production points. d. economic growth. 6. The ________ illustrates the trade-offs facing an economy that produces only two goods. *a. production possibility frontierb. circular-flow diagram c. all else equal assumption d. income distribution 7. The production possibility frontier illustrates: *a. the maximum quantity of one good that can be produced given the quantity of the other good produced. b. that when markets don't achieve efficiency, government intervention can improve society's welfare. c. the inverse relation between price and quantity of a particular good. d. that people usually exploit opportunities to make themselves better off. 8. Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods: a. will increase too. b. will not change. *c. must decrease. d. may increase or decrease. 9. An economy is efficient if it is: a. possible to produce more of all goods and services. b. possible to produce more of one good without producing less of another. *c. not possible to produce more of one good without producing less of another good. d. producing a combination of goods. 10. If all of the opportunities to make someone better off (without making someone else worse off) have been exploited, an economy is a. equitable. b. inefficient. c. marginally optimal. *d. efficient. 11. Economists say an economy is efficient when: a. the problem of scarcity is eliminated. b. output is distributed equitably. *c. all opportunities to make some people better off without making other people worse off have been taken.d. all opportunities to make some people worse off without making other people better off have been taken. 12. If an economy has NOT achieved efficiency, there must exist ways to: a. increase opportunity costs. b. eliminate inequity. *c. make some people better off without making others worse off. d. increase the incentives for its citizens to follow their own self-interest. 13. Resources are being used efficiently when: a. scarcity is no longer an issue. b. they are also used equitably. *c. every opportunity to make people better off has been utilized. d. there are still gains from trade available. 14. An increase in efficiency means that an economy has: a. reduced its opportunity costs. b. increased the equity of its distribution of goods and services. *c. made some people better off without making others worse off. d. increased the incentives for its citizens to follow their own self-interest. 15. Economists define an efficient use of resources as a situation where: *a. one person can be made better off but only by making another person worse off. b. all persons can be made better off without making anyone worse off. c. all persons receive an equal share of the resources. d. all persons are made worse off when one person is made better off. 16. It is cheaper to produce corn in Kansas than in Death Valley, California because corn needs a lot of water and moderate temperatures. This statement best represents this economic concept: a. Resources are scarce. b. Markets move toward equilibrium. *c. Resources should be used as efficiently as possible to achieve society's goals. d. Markets usually lead to efficiency.17. In Thailand, the land, labor, and capital in society are all used to exploit all opportunities to make everyone better off. This statement best represents this economic concept: a. Markets move toward equilibrium. *b. Resources should be used as efficiently as possible to achieve society's goals. c. Markets usually lead to efficiency. d. When markets don't achieve efficiency, government intervention can improve society's welfare. 18. If an economy is producing a level of output that is on its production possibility frontier, the economy has: a. idle resources. b. idle resources but is using resources efficiently. c. no idle resources but is using resources inefficiently. *d. no idle resources and is using resources efficiently. 19. One of the controversies surrounding America's energy markets is the trade-off between energy production and clean air. Assuming clean air has value, the United States will be on its production possibility frontier if and only if: a. resources used to produce clean air and energy are not being fully utilized. b. pollution is eliminated. c. the price of energy is relatively low. *d. resources used to produce clean air and energy are being fully utilized. 20. If an economy is producing at a point on its production possibilities frontier: a. it is efficient in production and allocation. *b. it is efficient in production but not necessarily in allocation. c. it is efficient in allocation but not necessarily in production. d. it is not necessarily efficient in production or allocation. 21. All points on the production possibility frontier are: *a. efficient production points. b. inefficient production points. c. infeasible production points. d. economic growth.22. All points outside the production possibility frontier are: a. efficient production points. b. inefficient production points. *c. infeasible production points. d. economic growth. 23. In terms of the production possibility frontier, inefficient use of available resources is shown by a(n): a. increase in the labor force growth rate. b. movement from one point to another along the production possibility frontier. c. inward shift of the production possibility frontier due to the lack of opportunity. *d. point inside the production possibility frontier. 24. Efficient production exists when the economy is: a. operating underneath its production possibility frontier. *b. operating on its production possibility frontier. c. operating outside its production possibility frontier. d. moving beyond its production possibility frontier. 25. If an economy has to sacrifice only one unit of good X for each unit of good Y produced throughout the relevant range, then its production possibility frontier has a(n): a. zero slope. *b. constant, negative slope. c. increasing, negative slope. d. decreasing, negative slope. 26. A production possibility frontier that is a straight line sloping down from left to right would suggest that: a. more of both goods could be produced moving along the frontier. b. the two products must have the same price. *c. the opportunity costs of the products are constant. d. there are no opportunity costs. 27. In movement along a production possibility frontier, the opportunity cost to society of getting more of one good: a. is constant. b. is measured in dollar terms.*c. is measured by the amount of the other good that must be given up. d. usually decreases. 28. If an economy has to sacrifice increasing amounts of good X for each unit of good Y produced, then its production possibility frontier is: *a. bowed out from the origin. b. bowed in toward the origin. c. a straight line. d. a vertical line. 29. The fact that a society's production possibility frontier is bowed out or concave to the origin of a graph demonstrates the law of: *a. increasing opportunity cost. b. decreasing opportunity cost. c. constant opportunity cost. d. concave opportunity cost. 30. The economy's factors of production are not equally suitable for producing different types of goods. This principle generates: a. economic growth. b. technical efficiency. c. underuse of resources. *d. the law of increasing opportunity cost. 31. The production possibility frontier is bowed out from the origin because: *a. resources are not equally suited for the production of both goods. b. resources are scarce. c. economic growth leads to inefficiency. d. resources are inefficiently used. 32. The opportunity cost of production: a. is the price of a good. *b. is what you give up to produce the good. c. decreases as production increases. d. is what you gain by producing the good. 33. If Poland decides to increase the production of steel—and decrease the production of vodka—the bowed-out production possibility frontier would suggest that there will be a(n) ________ opportunity cost of producing more steel.*a. increasing b. decreasing c. nonexistent d. unchanged 34. Economists usually make the assumption that production is subject to increasing opportunity costs because: a. higher production usually results in more inflation. *b. not all resources are equally suited to producing every good. c. individuals desire constantly increasing opportunities to make themselves better off. d. if production is efficient, it is not possible to increase the production of all goods simultaneously. 35. If the production possibility frontier is a straight line, which statement is true? *a. Opportunity costs are constant. b. The firm faces increasing costs. c. The firm faces decreasing costs. d. There is no trade-off between the two goods represented. 36. Reference: Ref 2-1 (Table: Trade-off of Study Time and Leisure Time) Look at the Table: Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study time and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. If a student decides to consume one additional hour of leisure time, how many hours of study time must be given up? a. 4 b. 0.25 *c. 1 d. 16 37. Reference: Ref 2-1 (Table: Trade-off of Study Time and Leisure Time) Look at the Table: Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides theremaining time between study and leisure time. Suppose this student is studying 4 hours and spending 10 hours doing leisure activities. What is true about this allocation of his scarce resources? a. This point is outside the production possibility frontier. *b. This point is inside the production possibility frontier. c. This point is on the production possibility frontier. d. This point is both efficient and feasible. 38. Reference: Ref 2-1 (Table: Trade-off of Study Time and Leisure Time) Look at the Table: Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study time and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. Suppose the student completes a speed-reading course that allows him to do the same amount of studying in half as many hours. Which of the following is now true of his opportunity costs? a. The opportunity cost of leisure has increased. b. The opportunity cost of studying has increased. *c. The opportunity cost of leisure has decreased. d. There is no change in the opportunity costs. 39. If a production possibility frontier is a straight line, it tells us that the opportunity cost of producing one more unit of good X is a(n): a. increasing amount of good Y. b. decreasing amount of good Y. c. equal to the inverse of the amount of good Y. *d. a constant amount of good Y. 40. If Farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes, or no cabbages and 100 pounds of potatoes, and if he faces a linear production possibility frontier for his farm, the opportunity cost of producing an additional pound of potatoes is ________ pound(s) of cabbage. a. 1/2 *b. 2 c. 100 d. 200 41. If Farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes, or no cabbages and 100 pounds of potatoes, and if he faces a linear production possibility frontier for his farm, the opportunity cost of producing an additional pound of cabbage is ________ pound(s) of potatoes. *a. 1/2b. 2 c. 100 d. 200 42. The slope of a typical production possibility frontier is: a. 0. b. vertical. c. positive. *d. negative. 43. Figure: Sugar and Freight Trains Reference: Ref 2-2 (Figure: Sugar and Freight Trains) Look at the Figure: Sugar and Freight Trains. Suppose the economy is operating at point B. The opportunity cost of producing the third freight train would be: a. 6 tons of sugar. b. 19 tons of sugar. *c. 45 tons of sugar. d. 80 tons of sugar. 44. Figure: Sugar and Freight Trains Reference: Ref 2-2 (Figure: Sugar and Freight Trains) Look at the Figure: Sugar and Freight Trains. Suppose the economy is operating at point C. The opportunity cost of producing the fourth freight train would be: a. 19 tons of sugar. b. 45 tons of sugar. *c. 80 tons of sugar. d. 3 freight trains.45. Figure: Consumer and Capital Goods Reference: Ref 2-3 (Figure: Consumer and Capital Goods) Look at the Figure: Consumer and Capital Goods. The movement from Curve 1 to Curve 2 indicates: *a. economic growth. b. a change from unemployment to full employment. c. a decrease in the level of technology. d. instability. 46. Figure: Consumer and Capital Goods Reference: Ref 2-3 (Figure: Consumer and Capital Goods) Look at the Figure: Consumer and Capital Goods. Point Z: *a. is unattainable, all other things unchanged. b. is attainable if the economy is able to reach full employment. c. is attainable if the quantity and/or quality of factors decreases. d. will be attained as soon as the economy becomes efficient and moves to curve 2. 47. Technological improvements will: a. leave the production possibility frontier unchanged. b. shift the production possibility frontier inward. *c. shift the production possibility frontier outward. d. necessarily lead to increased unemployment. 48. The production possibility frontier will shift outward for which reason? a. a decrease in the labor force b. an upgrade of capital to the best available technology *c. better technology that improves worker productivity d. a decrease in the unemployment rate 49. The production possibility frontier will shift outward for all of the following reasons EXCEPT an:*a. increase in the unemployment rate. b. increase in the labor force. c. improvement in technology. d. increase in worker productivity. 50. The effect of an increase in productive inputs such as labor and capital can be shown by a(n): a. point inside of the production possibility frontier. *b. outward shift of the production possibility frontier. c. movement from one point to another along the production possibility frontier. d. inward shift of the production possibility frontier. 51. The effect of a tremendous natural disaster can be shown by a(n): a. point inside of the production possibility frontier. b. outward shift of the production possibility frontier. c. movement from one point to another along the production possibility frontier. *d. inward shift of the production possibility frontier. 52. An inward shift in the U.S. economy's production possibility frontier could represent which? *a. U.S. workers moving to Canada b. U.S. workers moving from New Jersey to Massachusetts c. U.S. economic growth d. U.S. economic growth as workers move to different states 53. Suppose Indiana produces only steel and corn, with fixed amounts of land, labor, and capital resources. Which of the following best creates potential economic growth? a. The unemployment rate in Indiana rises from 5% to 6%. b. The Midwestern United States has a devastating drought. *c. The percentage of Indiana residents with a college degree rises from 25% to 30%. d. The United States imports more and more low-cost steel from Asian countries. 54. The U.S. production possibility frontier would ________ if all computers using Microsoft operating systems contracted a virus that deleted all information on those computers. *a. shift inb. shift out c. not change d. cannot be determined from the information provided 55. The U.S. production possibility frontier will ________ if there is a large influx of immigrants. a. shift in *b. shift out c. not change d. cannot be determined from the information provided 56. In Kessy's old kitchen, he could bake 10 cookies or mix 15 glasses of lemonade in one day. Now Kessy has a larger oven and refrigerator. How does this affect his production possibility frontier? *a. It shifts out his production possibility frontier. b. It shifts in his production possibility frontier. c. He will not be efficient. d. He will not be able to produce as much as before. 57. Figure: Bicycles and Radishes II Reference: Ref 2-4 (Figure: Bicycles and Radishes II) Look at the Figure: Bicycles and Radishes II. The country depicted in this figure is operating at point M. It could achieve production at point I only if it: a. used its resources more efficiently. b. devoted more resources to radish production. c. devoted more resources to bicycle production. *d. increased the quantities of capital, natural resources, or labor available or improved its technology. 58. The process observed when an economy's production possibility frontier is shifted outward is: a. comparative advantage. *b. economic growth. c. full employment. d. specialization.59. Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to: a. shift inward to the left. *b. shift outward to the right. c. remain unchanged. d. become vertical. 60. Technological improvements will: a. leave the production possibility frontier unchanged. b. shift the production possibility frontier inward. *c. shift the production possibility frontier outward. d. necessarily lead to increased unemployment. 61. Abe starts exercising regularly, and after a few months he can do twice as much of everything—in a single day Abe can now make 10 hamburgers or 8 milkshakes rather than the 5 hamburgers and 4 milkshakes he made in the past. We now know that Abe's production possibility frontier has: *a. shifted right, but his opportunity costs of making milkshakes are unchanged. b. shifted right, but his opportunity costs of making milkshakes have decreased. c. not changed, but his opportunity costs of making milkshakes have increased. d. not changed, but his opportunity costs of making milkshakes have decreased. 62. When a nation experiences economic growth: *a. its production possibility frontier shifts outward. b. its production possibility frontier shifts inward. c. it has been able to reach full employment. d. it has moved to a more consumer-oriented position on its production possibility frontier. 63. Reference: Ref 2-5 (Table: Production Possibilities Schedule I) Look at the Table: Production Possibilities Schedule I. If the economy produces 2 units of consumer goods per period, it also can produce at most ________ units of capital goods per period.a. 30 b. 28 *c. 24 d. 18 64. Reference: Ref 2-5 (Table: Production Possibilities Schedule I) Look at the Table: Production Possibilities Schedule I. If the economy produces 10 units of capital goods per period, it also can produce at most ________ units of consumer goods per period. a. 5 *b. 4 c. 3 d. 2 65. Reference: Ref 2-5 (Table: Production Possibilities Schedule I) Look at the Table: Production Possibilities Schedule I. The opportunity cost of producing the fourth unit of consumer goods is ________ units of capital goods. a. 2 b. 4 c. 6 *d. 8 66. Figure: Guns and Butter Reference: Ref 2-6 (Figure: Guns and Butter) Look at the Figure: Guns and Butter. On this figure, points A, B, E, and F:*a. indicate combinations of guns and butter that society can produce using all of its factors efficiently. b. show that the opportunity cost of more guns increases but that of more butter decreases. c. indicate that society wants butter more than it wants guns. d. indicate constant costs for guns and increasing costs for butter. 67. Figure: Guns and Butter Reference: Ref 2-6 (Figure: Guns and Butter) Look at the Figure: Guns and Butter. This production possibility frontier is: *a. bowed out from the origin because of increasing opportunity costs. b. bowed in toward the origin because of increasing opportunity costs. c. bowed in toward the origin because of constant costs of guns and butter. d. linear because of constant costs. 68. Figure: Guns and Butter Reference: Ref 2-6 (Figure: Guns and Butter) Look at the Figure: Guns and Butter. If the economy were operating at point B, producing 16 guns and 12 pounds of butter per period, a decision to move to point E and produce 18 pounds of butter: a. indicates you can have more butter and guns simultaneously. b. makes it clear that this economy experiences decreasing opportunity costs. *c. involves a loss of 8 guns per period. d. involves a loss of 4 guns per period. 69. Figure: Guns and Butter Reference: Ref 2-6 (Figure: Guns and Butter) Look at the Figure: Guns and Butter. The combination of guns and butter at point H: a. can be attained but would cost too much. *b. cannot be attained, given the level of technology and the factors of production available.c. has no meaning, since it does not relate to the preferences of consumers. d. is attainable but would increase unemployment. 70. Figure: Guns and Butter Reference: Ref 2-6 (Figure: Guns and Butter) Look at the Figure: Guns and Butter. Suppose the economy produced 8 guns and 12 pounds of butter per period. *a. This is a possible choice but is inefficient. b. The notion of increasing opportunity cost is invalidated. c. The economy is still efficient but has made a decision not to buy as much as it could. d. Something must be done to reduce the amount of employment. 71. Reference: Ref 2-7 (Table: Production Possibilities Schedule II) Look at the Table: Production Possibilities Schedule II. If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is ________ units of consumer goods per period. a. 0 *b. 6 c. 8 d. 14 72. Reference: Ref 2-7 (Table: Production Possibilities Schedule II) Look at the Table: Production Possibilities Schedule II. If an economy is producing at alternative W, the opportunity cost of producing at X is ________ unit(s