47) The table above presents the production possibilities frontier for a nation. Using the
information in the table, when moving from possibility C to D, the cost of 1 unit of a capital
good in terms of the consumption goods forgone is ________ consumption goods per capital
good.
A) 25
B) 15
C) 20
D) 10
E) an undefined amount of
48) The table above presents the production possibilities frontier for a nation. Using the
information in the table, when moving from possibility A to B to C to ultimately E, the cost of a
unit of capital goods in terms of consumption goods
A) increases.
B) decreases.
C) remains the same.
D) decreases from possibility A to C, and then increases from possibility C to D.
E) cannot be calculated.
49) The figure above illustrates a small country’s production possibilities frontier. Based on the
figure, we can tell that the nation’s resources are
A) equally productive in all tasks because the slope is negative.
B) equally productive in all tasks because the production possibilities frontier is bowed out.
C) not equally productive in all tasks because the slope is negative.
D) not equally productive in all tasks because the production possibilities frontier is bowed out.
E) unlimited because the slope is negative and the PPF is bowed out.
50) The figure above illustrates a small country’s production possibilities frontier. Moving from
point A to point B, the per unit opportunity cost of a VCR is ________ per VCR.
A) 2 computers
B) 4/3 of a computer
C) 100 computers
D) 1/2 of a computer
E) 1 VCR
51) The figure above illustrates a small country’s production possibilities frontier. Moving from
point C to point B, the per unit opportunity cost of computers is ________ per computer.
A) 4 VCRs
B) 5/4 of a VCR
C) 4/5 of a VCR
D) 1/4 of a VCR
E) 1 computer
52) The figure above shows the production possibilities frontier for a country. In order for it to
move from producing at point A to producing at point B, the country would need to
A) decrease SUV production by 1 million.
B) decrease SUV production by 3 million.
C) decrease SUV production by 4 million.
D) decrease compact car production by 3 million.
E) acquire more resources and/or more advanced technology.
53) The figure above shows the production possibilities frontier for a country. In order for it to
move from producing at point A to producing at point B, the country would need to incur an
opportunity cost of
A) 1 million SUVs.
B) 3 million SUVs.
C) 4 million SUVs.
D) 3 million compact cars.
E) 0 because the gain in compact cars exceeds the loss in SUVs.
54) The figure above shows the production possibilities frontier for a country. How does the
opportunity cost of compact cars forgone per SUV gained moving from point C to point B
compare with the movement from point B to point A?
A) The opportunity cost of moving from point C to point B is greater than the movement from
point B to point A.
B) The opportunity cost of moving from point C to point B is the same as the movement from
point B to point A.
C) The opportunity cost of moving from point C to point B is less than the movement from point
B to point A.
D) The opportunity costs cannot be compared because the units of moving from point C to point
B differ from the units of moving from point B to point A.
E) More information is needed to determine how the two opportunity costs compare.
55) Once you find the opportunity cost of producing one unit of a good, to find the opportunity
cost of producing the other good, you must
A) take the inverse.
B) multiply by the total amount produced of the second good.
C) divide by the total amount produced of the second good.
D) do nothing because the opportunity cost for the first good is the same as the opportunity cost
for the second good.
E) None of the answers are correct.
56) While moving on the production possibilities frontier, if the opportunity cost of producing
one good is 1/2, the opportunity cost of producing the other good (in the same range) is
A) 1/2.
B) 1/4.
C) 2.
D) 4.
E) an amount that cannot be calculated without more information.
57) The opportunity cost of producing more of one good on a production possibilities frontier is
A) a dollar amount.
B) a ratio of quantities.
C) a ratio of prices.
D) equal to the area inside the production possibilities frontier.
E) a theoretical concept which cannot be measured.
58) The opportunity cost of one more slice of pizza in terms of sodas is the
A) number of pizza slices we have to give up in order to get one extra soda.
B) number of sodas we have to give up in order to get one extra pizza slice.
C) total number of sodas that we have divided by the total number of pizza slices that we have.
D) total number of pizza slices that we have divided by the total number of sodas that we have.
E) price of a pizza slice minus the price of a soda.
59) Moving between two points on a PPF, a country gains 6 automobiles and forgoes 3 trucks.
The opportunity cost of 1 automobile is
A) 3 trucks.
B) 6 automobiles – 3 trucks.
C) 2 trucks.
D) 1/2 of a truck.
E) 1 automobile.
60) Moving between two points on a PPF, a country gains 8 desktop computers and forgoes 4
laptop computers. The opportunity cost of 1 desktop computer is
A) 4 laptops.
B) 8 desktops.
C) 1 desktop.
D) 2 laptops.
E) 1/2 of a laptop.
61) A country produces only cans of soup and ink pens. If the country produces on its bowed
outward PPF and increases the production of cans of soup, the opportunity cost of additional
A) cans of soup is increasing.
B) cans of soup is decreasing.
C) cans of soup remains unchanged.
D) ink pens is increasing.
E) More information is needed to determine what happens to the opportunity cost.
62) Moving along a country’s PPF, a reason opportunity costs increase is that
A) unemployment decreases as a country produces more and more of one good.
B) unemployment increases as a country produces more and more of one good.
C) technology declines as a country produces more and more of one good.
D) some resources are better suited for producing one good rather than the other.
E) technology must advance in order to produce more and more of one good.
63) Increasing opportunity cost exists
A) in the real world.
B) as long as there is high unemployment.
C) only in theory but not in real life.
D) for a country but not for an individual.
E) inside the PPF but not on the PPF.
3.3 Economic Growth
1) Which of the following is the best definition of economic growth?
A) The investment in capital and consumption goods by an economy.
B) The opportunity cost of capital.
C) The opportunity cost of consumption.
D) Increased development of land and entrepreneurship.
E) The sustained expansion of production possibilities.
2) The sustained expansion of production possibilities is called
A) economic investment.
B) production expansion.
C) opportunity cost of growth.
D) economic growth.
E) production possibilities.
3) Economic growth depends upon which of the following?
i. Increasing the quantity of labor.
ii. Lowering the prices of goods and services.
iii. Advancing technology.
A) i only.
B) ii only.
C) iii only.
D) i and iii.
E) i, ii, and iii.
4) Economic growth depends upon which of the following?
i. Improving the quality of labor
ii. Technological advancement
iii. Increasing the amount of capital
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
5) As an economy grows,
A) its PPF shifts outward.
B) it can eliminate scarcity.
C) the opportunity cost of production will approach 0.
D) the opportunity cost of production will increase.
E) its PPF does not shift; instead, the production point moves from inside the PPF to be closer to
the PPF.
6) The opportunity cost of economic growth is
A) 0, because it means an expansion of production possibilities.
B) the decrease in the current production of productive factors.
C) a slower accumulation of human capital.
D) the decrease in the current production of consumption goods.
E) the increase in the nation’s capital stock and/or its technology.
7) What is the opportunity cost of economic growth?
A) Consumption goods.
B) Capital goods.
C) Land.
D) Both consumption and capital goods.
E) Both capital goods and land.
8) The above figure shows the PPF for a country that produces computers and computer
factories. Which of the following would most likely shift the PPF from PPF0 in one year to
PPF1 in the next?
A) Nothing, because the PPF does not shift.
B) Increase the production of computers from 9 million (at point C) to 11 million (at point B).
C) Decrease the production of computers from 11 million (at point B) to 9 million (at point C)
and build 9 new computer factories.
D) Increase consumption of both computers and computer factories.
E) Decrease production of both computers and computer factories by moving into the interior of
the PPF.
9) The above figure shows the PPF for a country that produces computers and computer
factories. The nation’s production possibilities frontier is PPF0 . At which of the following
production points would the economy grow most rapidly?
A) Point A.
B) Point B.
C) Point C.
D) It makes no difference among the three points because they are all production efficient.
E) More information is needed to answer the question.
10) Suppose Puerto Rico and Hawaii currently have the same production possibilities so that the
above figure is the PPF for hotels and consumption goods in the two areas. Hotels are a capital
good that,once built, will help produce still more consumption goods. If Puerto Rico produces
more hotels than Hawaii,
A) Hawaii’s PPF will shift outward further than Puerto Rico’s PPF.
B) Hawaii’s PPF will shift inward.
C) Puerto Rico’s PPF will not shift.
D) Puerto Rico’s and Hawaii’s PPF will shift outward by the same amount.
E) Puerto Rico’s PPF will shift outward further than Hawaii’s PPF.
11) Suppose Puerto Rico and Hawaii currently have the same production possibilities so that the
above figure is the PPF for hotels and consumption goods in the two areas. Hotels are a capital
good that,once built, will help produce still more consumption goods.. According to the figure,
which island will have more rapid economic growth?
A) Hawaii
B) Both Hawaii and Puerto Rico will grow at the same speed.
C) Puerto Rico
D) Neither Hawaii nor Puerto Rico will grow.
E) More than one of the above answers is correct.
12) Suppose India and France have the same PPF, shown in the figure above. Based on their
current production points, which is India’s most likely future PPF?
A) PPF2.
B) PPF1.
C) PPF0.
D) Either PPF0 or PPF1.
E) None of the above because economic growth will not happen in India.
13) Suppose India and France have the same PPF, shown in the figure above. Based on their
current production points, which is France’s most likely future PPF?
A) PPF2.
B) PPF1.
C) PPF0.
D) Either PPF0 or PPF1.
E) None of the above because economic growth will not happen in India.
14) Suppose India and France have the same PPF, shown in the figure above. Based on their
current production points, India’s most likely future PPF is ________ and France’s most likely
future PPF is ________.
A) PPF1; PPF1
B) PPF2; PPF2
C) PPF0; PPF0.
D) PPF2; PPF1.
E) PPF1; PPF2.
15) Suppose that Germany, France, Estonia, and India all have the same production possibilities,
illustrated in the figure above. Based on the production points in the figure, which country is
most likely to expand its PPF to PPF3?
A) India
B) Germany
C) Estonia
D) France and Germany equally.
E) France
16) Suppose that Germany, France, Estonia, and India all have the same production possibilities,
illustrated in the figure above. Based on the production points in the figure, which country is
most likely to expand its PPF to PPF1?
A) France and Germany equally.
B) India
C) Estonia
D) France
E) Germany
17) Suppose that Germany, France, Estonia, and India all have the same production possibilities,
illustrated in the figure above. Based on the production points in the figure, India is most likely
to expand its PPF to
A) PPF3 or PPF2.
B) PPF3.
C) PPF1.
D) PPF1. or PPF2.
E) PPF2.
18) Suppose that Germany, France, Estonia, and India all have the same production possibilities,
illustrated in the figure above. Based on the production points in the figure, Germany is most
likely to expand its PPF to
A) PPF3 or PPF2.
B) PPF3.
C) PPF1.
D) PPF1. or PPF2.
E) PPF2.
19) To increase its economic growth, a nation should
A) limit the number of people in college because they produce nothing.
B) encourage spending on goods and services.
C) encourage education because that increases the quality of labor.
D) increase current consumption.
E) eliminate expenditure on capital goods.
20) Other things equal, if Mexico devotes more resources to train its population than Spain,
A) Mexico will be able to eliminate opportunity cost faster than Spain.
B) Mexico will be able to eliminate scarcity faster than Spain.
C) Spain will grow faster than Mexico.
D) Mexico will have more current consumption than Spain.
E) Mexico will grow faster than Spain.
21) If a nation devotes a larger share of its current production to consumption goods, then
A) its economic growth will slow down.
B) its PPF will shift outward.
C) its PPF will shift inward.
D) some productive factors will become unemployed.
E) it must produce at a point within its PPF.
22) Which of the following statements is correct?
i. As the economy grows, the opportunity costs of economic growth decrease.
ii. Economic growth has no opportunity cost.
iii. The opportunity cost of economic growth is current consumption forgone.
A) i only
B) ii only
C) iii only
D) i and iii
E) i and ii
23) When a country’s production possibilities frontier shifts outward over time, the country is
experiencing
A) no opportunity cost.
B) economic growth.
C) higher unemployment of resources.
D) a decrease in unemployment of resources.
E) an end to opportunity cost.
24) The opportunity cost of economic growth is ________ and the benefit of economic growth is
________.
A) increased current consumption; increased future consumption
B) increased current consumption; decreased future consumption
C) decreased current consumption; increased future consumption
D) decreased current consumption; decreased future consumption
E) nothing; increased future consumption
3.4 Specialization and Trade
1) Hank requires 1 hour to cut the grass and 3 hours to clean the house. His sister Holly requires
1 hour to cut the grass and 4 hours to clean the house. Which of the following statements is true?
A) Hank has a comparative advantage in both cutting the grass and cleaning the house.
B) Hank and Holly both have a comparative advantage in cutting the grass.
C) Hank has a lower opportunity cost of cutting the grass.
D) Hank has an absolute advantage in both cutting the grass and cleaning the house.
E) Holly has a comparative advantage in cutting the grass.
2) The United States can use all its resources to produce 250 DVDs or 500 shoes. China can use
all of its resources to produce 30 DVDs or 300 shoes. The opportunity cost of producing a DVD
in the United States is
A) 2 shoes.
B) 1/2 of a shoe.
C) 20 shoes.
D) 500 shoes.
E) 1 DVD.
3) In the table above, how many jackets must Mary forgo for every dress she makes?
A) 12 jackets
B) 3/4 of a jacket
C) 2/3 of a jacket
D) 1 1/2 jackets
E) 8 jackets
4) In the table above, how many jackets must Mark forgo for every dress he makes?
A) 1 jacket
B) 16 jackets
C) 2/3 of a jacket
D) 1 1/2 jackets
E) 24 dresses
5) In the above table, for Mary the opportunity cost of producing a dress is ________ and the
opportunity cost for Mark of producing a dress is ________.
A) 1 1/2 jackets; 2/3 of a jacket
B) 1 1/2 jackets; 2 1/2 jackets
C) 1 1/4 jackets; 1/2 of a jacket
D) 1 jacket; 1 jacket
E) 1 dress; 1 dress
6) A country has a comparative advantage in the production of a good if it can
A) produce more of the good than another country.
B) produce more of the good most efficiently.
C) produce the good on and remain on its production possibilities frontier.
D) tradeoff producing the good for another good.
E) produce the good at the lowest opportunity cost.
7) Having a comparative advantage means a nation can
A) benefit from trade.
B) produce at a higher opportunity cost.
C) produce more of the good.
D) produce without incurring an opportunity cost.
E) produce the good at a point beyond its PPF.
8) When a person has a comparative advantage in producing a good or service, the person has
A) a higher opportunity cost in producing that product than someone else.
B) a constant opportunity cost in producing that product.
C) a decreasing opportunity cost in producing that product.
D) a lower opportunity cost in producing that product than someone else.
E) an increasing marginal benefit in producing the good.
9) Which of the following best describes comparative advantage?
A) being able to produce more output than any other country
B) using the fewest number of resources to produce a given amount of output
C) having the largest number of resources compared to other countries
D) forgoing the fewest units of one product to produce a unit of another product
E) It is the same as absolute advantage.
10) Which of the following is correct about comparative advantage?
A) Some countries will have a comparative advantage in everything.
B) Having a comparative advantage without an absolute advantage is impossible.
C) A comparative advantage in a good means that the country can produce more of the good than
any other country.
D) A country has a comparative advantage in the production of a good if it can produce the good
at lower opportunity cost than any other country.
E) None of the above answers is correct.