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41
139) Assume a society can produce either olives or grapes. If the marginal rate of transformation of
bushels of olives into bushels of grapes is 0.2, then the opportunity cost of grapes is
A) the 5 bushels of olives that must be forgone.
B) the 5 bushels of grapes that must be forgone.
C) the 0.2 bushels of olives that must be forgone.
D) the additional 0.2 gallons of olives that can be produced.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
Learning Outcome: Micro-19
140) Assume a society can produce either olives or grapes. If the marginal rate of transformation of
bushels of olives into bushels of grapes is 0.2, then the opportunity cost of olives is
A) the 5 bushels of olives that must be forgone.
B) the 5 bushels of grapes that must be forgone.
C) the 0.2 bushels of olives that must be forgone.
D) the additional 0.2 gallons of olives that can be produced.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
Learning Outcome: Micro-19
141) A society can produce two goods: green tea and vitamin water. As this society moves down its
production possibility frontier, producing more and more units of vitamin water, the opportunity cost of
producing vitamin water increases. The society's production possibilities frontier will be
A) positively sloped and bowed outward.
B) positively sloped and bowed inward.
C) negatively sloped and bowed outward.
D) negatively sloped and bowed inward.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
142) If an economy's production possibility frontier is negatively sloped and "bowed outward" from the
origin, then the opportunity cost of producing a good
A) increases as more of that good is produced.
B) decreases as more of that good is produced.
C) remains constant as more of that good is produced.
D) remains constant as less of that good is produced.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
42
143) As you move up the production possibility frontier, the absolute value of the marginal rate of
transformation
A) increases.
B) decreases.
C) initially increases, then decreases.
D) initially decreases, then increases.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
144) Because resources are not equally well suited to producing all goods,
A) as more of a good is produced, the inputs used to produce that good will increase in price.
B) the opportunity costs of producing a good will increase as more of that good is produced.
C) the opportunity costs of producing a good will decrease as more of that good is produced.
D) as more of a good is produced, the quality of that good declines and therefore the costs of production
increase.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
145) Economic growth may occur when
A) a society acquires new resources.
B) a society decides to produce less using existing resources.
C) the society begins to produce the combination of goods society wants most.
D) technology remains unchanged but unemployment increases.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
146) Due to a mild winter, Florida experienced a bumper crop of oranges. This would best be represented
by a(n)
A) movement down the U.S. production possibility frontier.
B) movement off the U.S. production possibility frontier to some point inside the frontier.
C) movement up the U.S. production possibility frontier.
D) outward shift of the U.S. production possibility frontier away from the origin.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Analytical
AACSB: Analytical Thinking
Learning Outcome: Micro-20
43
147) In terms of the production possibility frontier, ________ would best be shown by the production
possibility frontier shifting outward.
A) an increase in productivity attributable to an increase in the capital stock
B) a decrease in the unemployment rate
C) a shift in resources from capital goods to consumer goods
D) a change in consumer tastes
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
148) An increase in the stock of capital will cause the
A) production possibility frontier to shift outward.
B) production possibility frontier to shift inward.
C) economy to move down the production possibility frontier.
D) economy to move closer to its production possibility frontier.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
149) A decrease in the stock of capital will cause the
A) production possibility frontier to shift outward.
B) production possibility frontier to shift inward.
C) economy to move down the production possibility frontier.
D) economy to move closer to its production possibility frontier.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
150) Consider two countries, Estonia and Ukraine. Estonia devotes a larger portion of its production to
capital. All other things equal, which of the following statements is most likely true?
A) Estonia is a poorer country than Ukraine.
B) Estonia will move up its production possibility curve faster than Ukraine.
C) Estonia's production possibility frontier will shift up and out farther and faster than Ukraine's.
D) Ukraine is producing inside its production possibility frontier, whereas Estonia is producing at a point
on its production possibility frontier.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
44
151) From 1935 to 2009, the yield per acre for corn has ________ in the United States.
A) slightly declined
B) roughly doubled
C) almost tripled
D) increased more than 6-fold
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Fact
Learning Outcome: Micro-19
152) From 1935 to 2009, the yield per acre for wheat has ________ in the United States.
A) slightly declined
B) roughly doubled
C) more than tripled
D) increased more than 6-fold
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Fact
Learning Outcome: Micro-19
153) An economy produces capital goods and consumer goods. This economy is operating at a point on
its production possibility frontier associated with a large amount of capital goods and a small amount of
consumer goods. This is most likely to be a
A) "poor" country because such a nation has difficulty devoting many resources to the production of
consumer goods.
B) "rich" country because such a nation can afford to sacrifice.
C) country with a free market.
D) country with a command economy.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-19
154) Given scarce resources, how societies go about deciding what to produce, how to produce it, and for
whom to produce best describes
A) decreasing opportunity costs.
B) the fallacy of composition.
C) Ockham's razor.
D) the economic problem.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
45
155) Related to the Economics in Practice on p. 25: Based on the increase in the number of women in the
labor force over the past 50 years, the opportunity cost of preparing a home-cooked meal
A) decreased.
B) increased.
C) remained constant.
D) dropped to zero.
Topic: Scarcity, Choice, and Opportunity Cost: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
156) Related to the Economics in Practice on p. 25: One reason for the increase in sales of frozen foods from
$1 billion in 1950 to $44 billion in 2012 is the
A) increased opportunity cost of cooking frozen meals.
B) decrease in the number of women in the labor force.
C) increased opportunity cost of preparing home-cooked meals.
D) decrease in popularity of the microwave oven.
Topic: Scarcity, Choice, and Opportunity Cost: Economics in Practice
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-20
157) Related to the Economics in Practice on p. 35: In the survey conducted by Esther Duflo and Abhijit
Banerjee, the extremely poor were found to consume ________ of their budgets on weddings, funerals,
and other festivals.
A) virtually none
B) less than 5 percent
C) almost 10 percent
D) over half
Topic: Scarcity, Choice, and Opportunity Cost: Economics in Practice
Skill: Fact
Learning Outcome: Micro-25
158) Related to the Economics in Practice on p. 35: In all societies, resources are limited relative to people's
demands, and there are ________ trade-offs individuals face in rich countries versus poor countries.
A) fewer
B) large differences in the kinds of
C) virtually no differences in the types of
D) more important
Topic: Scarcity, Choice, and Opportunity Cost: Economics in Practice
Skill: Fact
Learning Outcome: Micro-25
46
159) In economics, the term capital refers only to some form of money.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
160) Among the resources used in production are labor and capital.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
161) Things that have already been produced that are in turn used to produce other goods and services
over time are called "capital."
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
162) Points outside a production possibility frontier represent inefficiency.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
163) Economic growth shifts a society's production possibility frontier away from the origin.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
164) A society's production possibility frontier is bowed in from the origin due to specialized resources.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
47
165) The "economic problem" is that given scarce resources, how do large societies go about answering
the basic economic questions of what will be produced, how it will be produced, and who will get it.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
166) Comparative advantage refers to the ability to produce better quality goods than a competitor.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
167) Comparative advantage refers to the ability to produce at a lower opportunity cost than a
competitor.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
168) The marginal rate of transformation is the slope of the production possibility frontier.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
169) In economics, the term "investment" refers to the purchase of stocks and bonds.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
170) Resources are also referred to as outputs.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
171) The inputs into the process of production are called factors of production.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
48
172) When two people trade, one must lose for the other to win.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
173) A bowed-out production possibility frontier represents decreasing opportunity costs.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
174) A society's production possibility frontier is bowed out from the origin because some resources are
better suited for producing one good as opposed to the other.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-3
175) The marginal rate of transformation represents the slope of the production possibility frontier.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
176) Comparative advantage refers to the ability to produce goods at a lower opportunity cost, and
therefore more efficiently, than a competitor.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
177) Comparative advantage refers to the ability to produce at a lower financial cost than a competitor.
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Definition
Learning Outcome: Micro-1
49
178) Manufacturers produce only what the market is willing to pay for.
Answer: FALSE
Diff: 1
Topic: Scarcity, Choice, and Opportunity Cost
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Micro-1
2.2 Economic Systems and the Role of Government
1) An economy in which a central authority draws up a plan that establishes what will be produced and
when, sets production goals, and makes rules for distribution is a
A) free-market economy.
B) laissez-faire economy.
C) public-goods economy.
D) command economy.
Topic: Economic Systems and the Role of Government
Skill: Definition
Learning Outcome: Micro-1
2) An economy in which individual people and firms pursue their own self-interest without any central
direction or regulation is a(n)
A) command economy.
B) laissez-faire economy.
C) invisible-hand economy.
D) private-sector economy.
Topic: Economic Systems and the Role of Government
Skill: Definition
Learning Outcome: Micro-1
3) Private enterprise plays some role in production decisions for
A) all countries in the world.
B) most countries in the world.
C) about half of the countries in the world.
D) few countries in the world.
Topic: Economic Systems and the Role of Government
Skill: Fact
AACSB: Reflective Thinking
Learning Outcome: Micro-19
