Chapter 01 Testbank
Student: ___________________________________________________________________________
1. The economising problem is essentially one of deciding how to make the best use of:
A. virtually unlimited resources, to satisfy virtually unlimited wants.
B. limited resources, to satisfy virtually unlimited wants.
C. unlimited resources, to satisfy limited wants.
D. limited resources, to satisfy limited wants.
2. The concept of economic efficiency is primarily concerned with:
A. the limited wants and unlimited resources dilemma.
B. considerations of equity in the distribution of wealth.
C. obtaining the maximum output from available resources.
D. the conservation of irreplaceable natural resources.
3. The fundamental problem of economics is:
A. to establish an equitable system of personal and business taxation.
B. to establish a democratic political framework for the provision of social goods and services.
C. the establishment of prices that accurately reflect the relative scarcities of products and resources.
D. the scarcity of productive resources relative to material wants.
4. The scarcity problem:
A. persists only because countries have failed to achieve continuous full employment.
B. persists because material wants exceed available productive resources.
C. has been solved in all industrialised nations.
D. has been eliminated in affluent societies such as Australia.
5. An ‘increase in efficiency' suggests that an economy:
A. is using more costly production techniques.
B. has decided to produce more consumer goods and fewer capital goods.
C. is able to obtain fewer goods and services from a given amount of resources.
D. is able to obtain more goods and services from a given amount of resources.
,6. Economic resources are also called:
A. free gifts of nature.
B. consumption goods.
C. units of money capital.
D. factors of production.
7. The idea of ‘allocative efficiency' refers to:
A. the use of the least-cost method of production.
B. the production of the product-mix most wanted by society.
C. the full employment of all available resources.
D. production, at some point, inside of the production possibilities curve.
8. ‘Productive efficiency' refers to:
A. the use of the least-cost method of production.
B. the production of the product-mix most wanted by society.
C. the full employment of all available resources.
D. production, at some point, inside of the production possibilities curve.
9. The production possibilities curve illustrates the basic principle that:
A. the larger production of a particular good, in time, will require smaller and smaller sacrifices from other goods.
B. an economy will automatically seek a level of output so that all of its resources are employed.
C. if all the resources of an economy are in use, more of one good can be produced if less of another good is
produced.
D. an economy has the capacity to produce increases in proportion to its population size.
10. Which of the following will not entail an outward shift of the production possibilities curve?
A. an upgrading of the quality of a nation's human resources.
B. the reduction of unemployment.
C. an increase in the quantity of a society's labour force.
D. the improvement of a society's technological knowledge.
11. The production possibilities curve is bowed out from the origin because:
A. of increasing opportunity cost.
B. economic resources are perfectly substitutable in the production of the two products.
C. of underemployment.
D. equal quantities of both products are produced at each possible point on the curve.
,12. Refer to the data in the table. If the economy is producing at production option C, the opportunity cost of the tenth
unit of consumer goods will be:
A. 4 units of capital goods.
B. 2 units of capital goods.
C. 3 units of capital goods.
D.
of a unit of capital goods.
13. Refer to the data in the table. When compared with production option D, the choice of option C would:
A. tend to generate a more rapid growth rate.
B. be unattainable.
C. entail unemployment.
D. tend to generate a slower growth rate.
14. Refer to the data in the table. In this illustration, the law of increasing opportunity costs is reflected in the fact that:
A. human wants in the aggregate are insatiable and all the combinations of consumer goods and capital goods the
economy can produce are finite amounts.
B. the amount of consumer goods that must be sacrificed to get more capital goods diminishes beyond a point.
C. larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods.
D. the production possibilities data would graph as a straight, down-sloping line.
15. Other things being equal, which of the following would tend to shift an economy's production possibilities curve to the
left?
A. The discovery of a low-cost means of generating and storing solar energy.
B. The entrance of more women into the labour force.
C. A law requiring mandatory retirement from the labour force at age 55.
D. An increase in the proportion of total output consisting of capital or investment goods.
, 16. The production possibilities curve is bowed outward if:
A. resources are not perfectly adaptable to different alternative uses.
B. the amount of resources increases.
C. the level of technology increases.
D. both B and C are correct.
17. The difference between production possibilities curves that are bowed out and those that are linear is that:
A. bowed out production possibilities curves illustrate trade-offs where linear production possibilities frontiers do not.
B. bowed out production possibilities curves show increasing opportunity cost where linear ones show constant
opportunity cost.
C. bowed out production possibilities curves are the result of perfectly shiftable resources where linear production
possibilities frontiers are not.
D. linear production possibilities curves illustrate real-world conditions more than bowed out production possibilities
frontiers.
18. When constructing a production possibilities curve, all of the following are assumptions, except:
A. the economy produces only two goods.
B. all the economy's factors of production are being used.
C. the economy has a fixed level of technology.
D. the economy may increase its available factors of production.
19. Any point inside the production possibilities curve indicates that:
A. the resources of an economy are fully employed, and productive efficiency is achieved.
B. as the production of one good increases, larger and larger sacrifices of other goods will be required.
C. least-cost production has been realised.
D. more output could be produced with available resources.
20. The production possibilities curve illustrates the basic principle that:
A. as the production of one good increases, smaller and smaller sacrifices of other goods will be required.
B. an economy will automatically achieve that level of output at which all its resources are fully employed.
C. if all the resources of an economy are employed, and productive efficiency is achieved, more of one good can be
produced only if less of another good is produced.
D. combinations of goods and services indicated by points outside the frontier will never be achieved over time.
21. When a production possibilities curve shifts outward, it is demonstrating the concept of:
A. tradeoffs.
B. efficiency.
C. economic growth.
D. opportunity cost.
Student: ___________________________________________________________________________
1. The economising problem is essentially one of deciding how to make the best use of:
A. virtually unlimited resources, to satisfy virtually unlimited wants.
B. limited resources, to satisfy virtually unlimited wants.
C. unlimited resources, to satisfy limited wants.
D. limited resources, to satisfy limited wants.
2. The concept of economic efficiency is primarily concerned with:
A. the limited wants and unlimited resources dilemma.
B. considerations of equity in the distribution of wealth.
C. obtaining the maximum output from available resources.
D. the conservation of irreplaceable natural resources.
3. The fundamental problem of economics is:
A. to establish an equitable system of personal and business taxation.
B. to establish a democratic political framework for the provision of social goods and services.
C. the establishment of prices that accurately reflect the relative scarcities of products and resources.
D. the scarcity of productive resources relative to material wants.
4. The scarcity problem:
A. persists only because countries have failed to achieve continuous full employment.
B. persists because material wants exceed available productive resources.
C. has been solved in all industrialised nations.
D. has been eliminated in affluent societies such as Australia.
5. An ‘increase in efficiency' suggests that an economy:
A. is using more costly production techniques.
B. has decided to produce more consumer goods and fewer capital goods.
C. is able to obtain fewer goods and services from a given amount of resources.
D. is able to obtain more goods and services from a given amount of resources.
,6. Economic resources are also called:
A. free gifts of nature.
B. consumption goods.
C. units of money capital.
D. factors of production.
7. The idea of ‘allocative efficiency' refers to:
A. the use of the least-cost method of production.
B. the production of the product-mix most wanted by society.
C. the full employment of all available resources.
D. production, at some point, inside of the production possibilities curve.
8. ‘Productive efficiency' refers to:
A. the use of the least-cost method of production.
B. the production of the product-mix most wanted by society.
C. the full employment of all available resources.
D. production, at some point, inside of the production possibilities curve.
9. The production possibilities curve illustrates the basic principle that:
A. the larger production of a particular good, in time, will require smaller and smaller sacrifices from other goods.
B. an economy will automatically seek a level of output so that all of its resources are employed.
C. if all the resources of an economy are in use, more of one good can be produced if less of another good is
produced.
D. an economy has the capacity to produce increases in proportion to its population size.
10. Which of the following will not entail an outward shift of the production possibilities curve?
A. an upgrading of the quality of a nation's human resources.
B. the reduction of unemployment.
C. an increase in the quantity of a society's labour force.
D. the improvement of a society's technological knowledge.
11. The production possibilities curve is bowed out from the origin because:
A. of increasing opportunity cost.
B. economic resources are perfectly substitutable in the production of the two products.
C. of underemployment.
D. equal quantities of both products are produced at each possible point on the curve.
,12. Refer to the data in the table. If the economy is producing at production option C, the opportunity cost of the tenth
unit of consumer goods will be:
A. 4 units of capital goods.
B. 2 units of capital goods.
C. 3 units of capital goods.
D.
of a unit of capital goods.
13. Refer to the data in the table. When compared with production option D, the choice of option C would:
A. tend to generate a more rapid growth rate.
B. be unattainable.
C. entail unemployment.
D. tend to generate a slower growth rate.
14. Refer to the data in the table. In this illustration, the law of increasing opportunity costs is reflected in the fact that:
A. human wants in the aggregate are insatiable and all the combinations of consumer goods and capital goods the
economy can produce are finite amounts.
B. the amount of consumer goods that must be sacrificed to get more capital goods diminishes beyond a point.
C. larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods.
D. the production possibilities data would graph as a straight, down-sloping line.
15. Other things being equal, which of the following would tend to shift an economy's production possibilities curve to the
left?
A. The discovery of a low-cost means of generating and storing solar energy.
B. The entrance of more women into the labour force.
C. A law requiring mandatory retirement from the labour force at age 55.
D. An increase in the proportion of total output consisting of capital or investment goods.
, 16. The production possibilities curve is bowed outward if:
A. resources are not perfectly adaptable to different alternative uses.
B. the amount of resources increases.
C. the level of technology increases.
D. both B and C are correct.
17. The difference between production possibilities curves that are bowed out and those that are linear is that:
A. bowed out production possibilities curves illustrate trade-offs where linear production possibilities frontiers do not.
B. bowed out production possibilities curves show increasing opportunity cost where linear ones show constant
opportunity cost.
C. bowed out production possibilities curves are the result of perfectly shiftable resources where linear production
possibilities frontiers are not.
D. linear production possibilities curves illustrate real-world conditions more than bowed out production possibilities
frontiers.
18. When constructing a production possibilities curve, all of the following are assumptions, except:
A. the economy produces only two goods.
B. all the economy's factors of production are being used.
C. the economy has a fixed level of technology.
D. the economy may increase its available factors of production.
19. Any point inside the production possibilities curve indicates that:
A. the resources of an economy are fully employed, and productive efficiency is achieved.
B. as the production of one good increases, larger and larger sacrifices of other goods will be required.
C. least-cost production has been realised.
D. more output could be produced with available resources.
20. The production possibilities curve illustrates the basic principle that:
A. as the production of one good increases, smaller and smaller sacrifices of other goods will be required.
B. an economy will automatically achieve that level of output at which all its resources are fully employed.
C. if all the resources of an economy are employed, and productive efficiency is achieved, more of one good can be
produced only if less of another good is produced.
D. combinations of goods and services indicated by points outside the frontier will never be achieved over time.
21. When a production possibilities curve shifts outward, it is demonstrating the concept of:
A. tradeoffs.
B. efficiency.
C. economic growth.
D. opportunity cost.
