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139. Efficiency is illustrated by
a.
both the production possibilities frontier and the circular-flow diagram.
b.
neither the production possibilities frontier nor the circular-flow diagram.
c.
the production possibilities frontier only.
d.
the circular-flow diagram only.
140. Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that
a.
the nation is producing beyond its capacity, so inflation will occur.
b.
the nation is not using all available resources or is using inferior technology or both.
c.
the nation is producing an efficient combination of goods.
d.
there will be a large opportunity cost if the nation tries to increase production of any good.
141. When an economy is operating inside its production possibilities frontier, we know that
a.
there are unused resources or inefficiencies in the economy.
b.
all of the economy’s resources are fully employed.
c.
economic growth would have to occur in order for the economy to move to a point on the frontier.
d.
in order to produce more of one good, the economy would have to give up some of the other good.
142. It is possible for an economy to increase its production of both goods if the economy
a.
moves downward and to the right along its production possibilities frontier and the frontier is bowed outward.
b.
moves upward and to the left along its production possibilities frontier and the frontier is bowed outward.
c.
moves in either direction along its production possibilities frontier and the frontier is a straight line.
d.
moves from a situation of inefficient production to a situation of efficient production.
143. Unemployment would cause an economy to
a.
produce inside its production possibilities frontier.
b.
produce on its production possibilities frontier.
c.
produce outside its production possibilities frontier.
d.
experience an inward shift of its production possibilities frontier.
144. The production possibilities frontier provides an illustration of the principle that
a.
trade can make everyone better off.
b.
governments can sometimes improve market outcomes.
c.
people face trade-offs.
d.
people respond to incentives.
145. The production possibilities frontier illustrates
a.
the trade-off between efficiency and equality.
b.
the combination of output that an economy should produce.
c.
the combination of output that each member of society should consume.
d.
None of the above is correct.
146. Which of the following trade-offs does the production possibilities frontier illustrate?
a.
If an economy wants to increase efficiency in production, then it must sacrifice equality in consumption.
b.
Once an economy has reached the efficient points on its production possibilities frontier, the only way of
getting more of one good is to get less of the other.
c.
For an economy to consume more of one good, it must stop consuming the other good entirely.
d.
For an economy to produce and consume goods, it must sacrifice environmental quality.
147. Which of the following concepts cannot be illustrated by the production possibilities frontier?
a.
efficiency
b.
opportunity cost
c.
equality
d.
trade-offs
148. The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the
a.
amount of the other good that must be given up.
b.
market price of the additional amount produced.
c.
amount of resources that must be devoted to its production.
d.
number of dollars that must be spent to produce it.
149. The bowed shape of the production possibilities frontier can be explained by the fact that
a.
all resources are scarce.
b.
economic growth is always occurring.
c.
the opportunity cost of one good in terms of the other depends on how much of each good the economy is
producing.
d.
the only way to get more of one good is to get less of the other.
150. Economists believe that production possibilities frontiers are often bowed because
a.
trade-offs inevitably create unemployment.
b.
resources are not completely adaptable.
c.
opportunity costs are constant.
d.
of improvements in technology.
151. On a bowed production possibilities frontier, as you move down along the curve
a.
more of one good must be given up to receive one unit of the other good.
b.
the available production technology does not change.
c.
the opportunity cost increases.
d.
All of the above are correct.
152. When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a
good
a.
increases as more of the good is produced.
b.
decreases as more of the good is produced.
c.
does not change as more of the good is produced.
d.
may increase, decrease, or not change as more of the good is produced.
153. Production possibilities frontiers are usually bowed outward. This is because
a.
the more resources a society uses to produce one good, the fewer resources it has available to produce another
good.
b.
the opportunity cost of producing a good decreases as more and more of that good is produced.
c.
of the effects of technological change.
d.
resources are specialized; that is, some are better at producing particular goods rather than other goods.
154. Economists believe that production possibilities frontiers
a.
never have a bowed shape.
b.
rarely have a bowed shape.
c.
often have a bowed shape.
d.
always have a bowed shape.
Table 2-1
The following table contains some production possibilities for an economy for a given month.
Hammers
Nails
3
900
6
?
9
300
155. Refer to Table 2-1. If the production possibilities frontier is bowed outward, then “?” could be
a.
400.
b.
450.
c.
600.
d.
750.
Table 2-2
The following table contains some production possibilities for an economy for a given year:
Tennis Rackets
Tennis Balls
100
8000
200
6500
300
?
156. Refer to Table 2-2. If the production possibilities frontier is bowed outward, then "?" could be
a.
6000.
b.
5500.
c.
5000.
d.
4500.
157. A production possibilities frontier can shift outward if
a.
government increases the amount of money in the economy.
b.
there is a technological improvement.
c.
resources are shifted from the production of one good to the production of the other good.
d.
the economy abandons inefficient production methods in favor of efficient production methods.
158. A production possibilities frontier shifts outward when
a.
the economy experiences economic growth.
b.
the desires of the economy’s citizens change.
c.
at least one of the basic principles of economics is violated.
d.
opportunity costs are lessened.
159. In a certain economy, jam and bread are produced, and the economy currently operates on its production possibilities
frontier. Which of the following events would allow the economy to produce more jam and more bread, relative to the
quantities of those goods that are being produced now?
a.
Unemployed labor is put to work producing jam and bread.
b.
The economy puts its idle capital to work producing jam and bread.
c.
The economy experiences economic growth.
d.
All of the above are correct.
160. In a certain economy, toys and greeting cards are produced, and the economy currently operates on its production
possibilities frontier. Which of the following events would allow the economy to produce more toys and more greeting
cards, relative to the quantities of those goods that are being produced now?
a.
The economy experiences economic growth.
b.
There is a technological advance in the toy industry, but the greeting card industry experiences no such
advance.
c.
There is a technological advance in the greeting card industry, but the toy industry experiences no such
advance.
d.
All of the above are correct.
161. The country of Gerance produces two goods, cars and wine. Last year, it produced 1,000 cars and 15,000 cases of
wine. This year, it produced 1,300 cars and 20,000 cases of wine. Given no other information, which of the following
events could not explain this change?
a.
Gerance experienced a reduction in unemployment.
b.
Gerance experienced an improvement in car-making technology.
c.
Gerance acquired more resources.
d.
Any of these events could explain the change.
162. Suppose an economy produces two goods, food and machines. This economy always operates on its production
possibilities frontier. Last year, it produced 1000 units of food and 47 machines. This year, it is producing 1050 units of
food and 52 machines. Which of the following events could not explain the increase in output?
a.
a reduction in unemployment
b.
an increase in available labor
c.
an improvement in technology
d.
Any of these events could explain the increase in output.
163. Suppose an economy produces two goods, food and machines. This economy always operates on its production
possibilities frontier. Last year, it produced 1000 units of food and 47 machines. This year it experienced a technological
advance in its machine-making industry. As a result, this year the society wants to produce 1050 units of food and 47
machines. Which of the following statements is correct?
a.
Because the technological advance occurred in the machine-making industry, it will not be possible to increase
food production without reducing machine production below 47.
b.
Because the technological advance occurred in the machine-making industry, increases in output can only
occur in the machine industry.
c.
In order to increase food production in these circumstances without reducing machine production, the
economy must reduce inefficiencies.
d.
The technological advance reduced the amount of resources needed to produce 47 machines, so these
resources could be used to produce more food.
164. Suppose an economy only produces two goods, robots and ice cream. Last month, the economy produced 10 robots
and 200 gallons of ice cream. This month, the same economy produced 15 robots and 240 gallons of ice cream. Which of
the following statements could explain this change?
a.
This month, the economy reduced the unemployment of its resources.
b.
This month, the economy experienced an improvement in technology.
c.
This month, the economy experienced an increase in resources
d.
All of the above are correct.
165. A certain production possibilities frontier shows production possibilities for two goods, jewelry and clothing. Which
of the following concepts cannot be illustrated by this model?
a.
the flow of dollars between sellers of jewelry and clothing and buyers of jewelry and clothing
b.
the tradeoff between production of jewelry and production of clothing
c.
the opportunity cost of clothing in terms of jewelry
d.
the effect of economic growth on production possibilities involving jewelry and clothing
166. The production possibilities frontier is used to illustrate some basic economic ideas, including
a.
scarcity.
b.
opportunity cost.
c.
economic growth.
d.
All of the above are correct.
Table 2-3
Production Possibilities for Footville
Shoes
Socks
800
0
600
400
400
700
200
900
0
1000
167. Refer to Table 2-3. What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600?
a.
400 socks
b.
300 socks
c.
200 socks
d.
100 socks
168. Refer to Table 2-3. Which of the following statements is correct?
a.
The opportunity cost of an additional 200 shoes is constant at 200 socks.
b.
The opportunity cost of an additional 200 shoes is constant at 300 socks.
c.
Footville’s production possibilities frontier is a straight, downward-sloping line.
d.
The opportunity cost of an additional 200 shoes increases as more socks are produced.
Table 2-4
Production Possibilities for Picnicland
Hotdogs
Burgers
1800
0
1350
450
900
750
450
975
0
1125
169. Refer to Table 2-4. What is the opportunity cost to Picnicland of increasing the production of hotdogs from 450 to
900?
a.
150 burgers
b.
225 burgers
c.
300 burgers
d.
450 burgers
170. Refer to Table 2-4. What is the opportunity cost to Picnicland of increasing the production of burgers from 450 to
750?
a.
150 hotdogs
b.
225 hotdogs
c.
300 hotdogs
d.
450 hotdogs
Figure 2-4
171. Refer to Figure 2-4. At which point is this economy producing its maximum possible quantity of doors?
a.
R
b.
S
c.
T
d.
U
172. Refer to Figure 2-4. This economy has the ability to produce at which point(s)?
a.
Q, R, T, U
b.
R, T, U
c.
R, U
d.
T
173. Refer to Figure 2-4. This economy cannot produce at which point(s)?
a.
Q
b.
Q, S
c.
Q, S, T
d.
S
174. Refer to Figure 2-4. Efficient production is represented by which point(s)?
a.
Q, R, U
b.
R, T, U
c.
R, U
d.
S, T
175. Refer to Figure 2-4. Inefficient production is represented by which point(s)?
a.
Q, S
b.
Q, S, T
c.
R, U
d.
T
176. Refer to Figure 2-4. Unemployment could cause this economy to produce at which point(s)?
a.
Q, S
b.
Q, S, T
c.
R, U
d.
T
Figure 2-5
177. Refer to Figure 2-5. If this economy devotes all of its resources to the production of dryers, then it will produce
a.
0 dryers and 100 washers.
b.
60 dryers and 50 washers.
c.
80 dryers and 0 washers.
d.
80 dryers and 50 washers.
178. Refer to Figure 2-5. It is possible for this economy to produce
a.
60 dryers and 50 washers.
b.
60 dryers and 60 washers.
c.
80 dryers and 50 washers.
d.
All of the above.
179. Refer to Figure 2-5. It is not possible for this economy to produce at point
a.
A.
b.
B.
c.
C.
d.
D.
180. Refer to Figure 2-5. This economy cannot currently produce 70 washers and 70 dryers because
a.
it is not using all of its resources.
b.
it is not using the most efficient production process.
c.
it does not have the resources and technology to produce that level of output.
d.
All of the above are correct.
181. Refer to Figure 2-5. Suppose this economy is producing at point D. Which of the following statements would best
explain this situation?
a.
The economy has insufficient resources to produce at a more desirable point.
b.
The economy’s available technology prevents it from producing at a more desirable point.
c.
There is widespread unemployment in the economy.
d.
Any of the above statements would be a legitimate explanation for this situation.
182. Refer to Figure 2-5. Efficient production is represented by which point(s)?
a.
A, B
b.
A, B, D
c.
A, B, C
d.
C
183. Refer to Figure 2-5. Inefficient production is represented by which point(s)?
a.
A, B
b.
C
c.
C, D
d.
D
184. Refer to Figure 2-5. The opportunity cost of this economy moving from point A to point B is
a.
20 dryers.
b.
20 washers.
c.
20 dryers and 20 washers.
d.
60 dryers.
185. Refer to Figure 2-5. The opportunity cost of obtaining 40 additional dryers by moving from point D to point C is
a.
0 washers.
b.
20 washers.
c.
40 washers.
d.
None of the above; the economy cannot move from point D to point C.
186. Refer to Figure 2-5. The opportunity cost of obtaining 20 additional dryers by moving from point D to point A is
a.
0 washers.
b.
20 washers.
c.
40 washers.
d.
None of the above; the economy cannot move from point D to point A.
Figure 2-6
187. Refer to Figure 2-6. If this economy devotes all of its resources to the production of blankets, then it will produce
a.
0 blankets and 360 pillows.
b.
200 blankets and 240 pillows.
c.
320 blankets and 120 pillows.
d.
360 blankets and 0 pillows.
188. Refer to Figure 2-6. If this economy devotes one-half of its available resources to the production of blankets and the
other half to the production of pillows, it could produce
a.
120 pillows and 320 blankets.
b.
180 pillows and 180 blankets.
c.
240 pillows and 200 blankets.
d.
We would have to know the details of this economy’s technology in order to determine this.
189. Refer to Figure 2-6. A movement from point H to point K could be caused by
a.
unemployment.
b.
a decrease in society's preference for pillows.
c.
fewer resources available for production of pillows.
d.
All of the above are correct.
190. Refer to Figure 2-6. If this economy moves from point F to point G, then which of the following statements is
correct?
a.
This economy has moved from a point of inefficient production to a point of efficient production.
b.
This economy has experienced economic growth.
c.
This economy has experienced an increase in employment.
d.
None of the above is correct.
191. Refer to Figure 2-6. The opportunity cost of this economy moving from point I to point H is
a.
120 pillows.
b.
120 blankets.
c.
120 blankets and 120 pillows.
d.
200 blankets.
192. Refer to Figure 2-6. The opportunity cost of this economy moving from point I to point F is
a.
zero.
b.
40 blankets.
c.
120 pillows.
d.
360 blankets.
193. Refer to Figure 2-6. The opportunity cost of this economy moving from point K to point H is
a.
zero.
b.
50 blankets.
c.
60 pillows.
d.
50 blankets and 60 pillows.
Figure 2-7
194. Refer to Figure 2-7. If this economy devotes all of its resources to the production of engines, then it will produce
a.
0 engines and 40 tvs.
b.
10 engines and 35 tvs.
c.
40 engines and 0 tvs.
d.
40 engines and 40 tvs.
195. Refer to Figure 2-7. This economy has the ability to produce at which point(s)?
a.
N, O, P
b.
L, M
c.
L, M, N, O, P
d.
L, M, Q
196. Refer to Figure 2-7. This economy cannot produce at which point(s)?
a.
L, M
b.
N, O, P, Q
c.
N, O, P
d.
Q
197. Refer to Figure 2-7. Efficient production is represented by which point(s)?
a.
L, M
b.
L, M, N, P, Q
c.
N, O, P
d.
Q
198. Refer to Figure 2-7. Inefficient production is represented by which point(s)?
a.
L, M
b.
N, O, P, Q
c.
N, O, P
d.
Q
199. Refer to Figure 2-7. Unemployment could cause this economy to produce at which point(s)?
a.
L, M
b.
N, O, P, Q
c.
N, O, P
d.
Q
200. Refer to Figure 2-7. If this economy moved from point P to point N, then
a.
it still would not be producing efficiently.
b.
there would be no gain in either engines or tvs.
c.
it would be producing more engines and more tvs than at point P.
d.
It is not possible for this economy to move from point P to point N without additional resources.
201. Refer to Figure 2-7. What is the opportunity cost of moving from point L to point M?
a.
zero
b.
15 tvs
c.
20 engines and 15 tvs
d.
20 engines
