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114. If the law of increasing opportunity costs is operable, and currently the opportunity cost of producing the 101st unit
of good X is 5Y, then the opportunity cost of producing the 201st unit of good is X is most likely to be
a.
less than 5Y.
b.
more than 1/5Y but less than 5Y.
c.
more than 5Y
d.
less than 1/5Y but more than zero.
115. If the law of increasing opportunity costs is operable, and currently the opportunity cost of producing the 1,000th unit
of good X is 0.5Y, then the opportunity cost of producing the 2,001st unit of good is X is most likely to be
a.
less than 0.5Y.
b.
more than 0.5Y but less than 2Y.
c.
more than 0.5Y
d.
less than 0.5Y but more than zero.
e.
none of the above
116. Which scenario below most accurately describes the process by which a technological change can affect employment
patterns across industries?
a.
A technological advance makes it possible to produce more of good X with less labor. As a result, labor is
released from producing good X. Some of this labor ends up producing goods Y and Z.
b.
A technological advance makes it possible to produce less of good X with less labor. As a result, labor is
released from producing good X. Some of this labor ends up producing good Y.
c.
A technological advance makes it possible to produce more of good X with more labor. As a result, more labor
is needed to produce good X. There is less labor available to produce goods Y and Z.
d.
A technological advance makes it possible to produce more of good X with less labor. As a result, labor
becomes more important to the production of good X. More labor ends up producing good X.
e.
none of the above
117. The economy was at point A producing 100X and 200Y. It moved to point B where it produces 200X and 300Y. It
follows that
a.
point A may have been a point below the economy's PPF, while point B may lie on the PPF.
b.
the economy's PPF could have shifted outward and point A was a point on the economy's old PPF.
c.
the economy has moved from one point on its PPF to another point on the same PPF.
d.
a or b
e.
a or c
118. If an economy is operating on its production possibilities frontier (PPF), are there any unemployed resources in the
economy?
a.
Yes, because if there weren't any unemployed resources the economy would be producing beyond its PPF.
b.
No, because if there were any unemployed resources the economy would be producing below its PPF.
c.
It depends on whether the economy's PPF is a concave (downward-sloping) curve or a straight line.
d.
Yes, because there are always some natural resources that are unemployed.
e.
The answer is "yes," but not for any of the reasons specified in answers a through d.
119. Productive efficiency implies
a.
the possibility of gains in one area without losses in another.
b.
that more output has been produced.
c.
the impossibility of gains in one area without losses in another.
d.
that prices are stable.
e.
c and d
120. An economy can produce the following combinations of goods: 50X and 0Y, 40X and 10Y, 30X and 20Y, 20X and
30Y, 10X and 40Y, and 0X and 50Y. The production possibilities frontier (PPF) for the economy is
a.
concave downward because the opportunity cost of producing the 10th unit of Y is greater than the
opportunity cost of producing the first unit of Y.
b.
a straight (downward-sloping) line because the opportunity cost of producing the two goods is constant.
c.
concave downward because the opportunity cost of producing the 40th unit of Y is less than the opportunity
cost of producing the 10th unit of Y.
d.
a straight (downward-sloping) line because the opportunity cost of producing the 10th unit of X is greater than
the opportunity cost of producing the 40th unit of X.
e.
a straight (downward-sloping) line because the opportunity cost of producing the 30th unit of Y is greater than
the opportunity cost of producing the 30th unit of X.
121. Which of the following is not true about production possibilities frontiers?
a.
moving from one point to another on a PPF incurs a tradeoff
b.
economic growth is shown by shifting the PPF outward
c.
unemployment of resources is shown by shifting the PPF inward
d.
a PPF can shift inward or outward
122. Country X has a high unemployment rate. It follows that country X is operating
a.
beyond its production possibilities frontier (PPF).
b.
on its PPF.
c.
inside (below) its PPF.
d.
at a productive efficient point.
e.
b and d
123. Country 1 produces two goods, A and B. Country 2 produces the same two goods. Currently, country 1 produces
100A and 200B and country 2 produces 300A and 700B. Which of the following statements is true?
a.
If country 1 is on its production possibilities frontier, then country 2 must be on its PPF, too.
b.
The PPF for country 1 is necessarily closer to the origin (or further to the left) than the PPF for country 2.
c.
If country 1 is productive inefficient, then so is country 2.
d.
Country 2 is operating on its PPF, but country 1 is clearly not operating on its PPF.
e.
none of the above
124. If Luke can bake bread at a lower opportunity cost than Jason, and Jason can produce paintings at a lower
opportunity cost than Luke, it follows that
a.
Luke has a comparative advantage in paintings and Jason has a comparative advantage in baking bread.
b.
Both Luke and Jason have a comparative advantage in baking bread.
c.
Both Luke and Jason have a comparative disadvantage in producing paintings.
d.
Luke has a comparative advantage in baking bread and Jason has a comparative advantage in producing
paintings.
e.
There is not enough information to answer the question.
125. Carlos can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and 20Y. The
opportunity cost of one unit of X for Carlos is
a.
1 unit of Y.
b.
2 units of Y.
c.
1/2 unit of Y.
d.
1/4 unit of Y.
e.
none of the above
126. Keisha can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X and 40Y. The
opportunity cost of one unit of Y for Keisha is
a.
5 units of X.
b.
0.2 units of X.
c.
3 units of X.
d.
1/2 unit of X.
e.
none of the above
127. Michael can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and 20Y. Vernon
can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X and 40Y. It follows that
a.
Michael has the comparative advantage in producing X and Vernon has the comparative advantage in
producing Y.
b.
Michael has the comparative advantage in producing Y and Vernon has the comparative advantage in
producing X.
c.
Neither Michael nor Vernon has a comparative advantage in producing X.
d.
Neither Michael nor Vernon has a comparative advantage in producing Y.
e.
There is not enough information to answer the question.
128. A person has a comparative advantage in the production of a good when they can produce the product at a(n)
________ opportunity cost compared to another person.
a.
higher
b.
increasing
c.
lower
d.
equal
129. Between 1910 and today, the number of farmers in the United States _____________ dramatically as a result of
___________________ in farming in the twentieth century.
a.
dropped; technological improvements
b.
rose; technological improvements
c.
dropped; technological declines
d.
rose; technological declines
130. Suppose Andrea is taking just two courses and is at a point on her PPF of grades for those two courses. Now this
PPF shifts inward and Andrea moves to a point on the new PPF. Which of the following would be impossible after her
PPF has shifted inward compared to before the PPF shifted?
a.
both of her grades to fall
b.
both of her grades to rise
c.
one of her grades to rise and the other grade to fall
d.
one of her grades to fall while the other grade stays constant
131. Suppose Andrea is taking just two courses and is at a point inside her PPF of grades for those two courses. If Andrea
changes her work habits then it is impossible for
a.
either one of her grades to rise.
b.
both of her grades to rise.
c.
both of her grades to fall.
d.
either one of her grades to rise while the other grade remains constant.
e.
none of the above is impossible in this situation
132. The PPF between goods X and Y will be a downward-sloping
a.
straight line if increasing opportunity costs exist.
b.
straight line if decreasing opportunity costs exist.
c.
curve that is bowed inward if increasing opportunity costs exist.
d.
straight line if constant opportunity costs exist.
Exhibit 2-8
Maria
Maya
Good X
Good Y
Good X
Good Y
90
0
60
0
60
30
40
10
30
60
20
20
0
90
0
30
133. Refer to Exhibit 2-8. Who has the comparative advantage in the production of good X?
a.
Maria
b.
Maya
c.
Both Maria and Maya
d.
Neither Maria nor Maya
134. Refer to Exhibit 2-8. Who has the comparative advantage in the production of good Y?
a.
Maria
b.
Maya
c.
Both Maria and Maya
d.
Neither Maria nor Maya
135. Refer to Exhibit 2-8. If Maria and Maya each specialize in the good in which she has a comparative advantage and
then engage in trade, ____________________ can consume a combination of goods that lies beyond her PPF.
a.
Maria, but not Maya,
b.
Maya, but not Maria,
c.
both Maria and Maya
d.
neither Maria nor Maya
136. Refer to Exhibit 2-8. For Maya, the opportunity cost of producing one unit of good X is ___________ unit(s) of good
Y.
a.
2.00
b.
1.00
c.
10.00
d.
0.50
137. Refer to Exhibit 2-8. For Maria, the opportunity cost of producing one unit of good X is ___________ unit(s) of
good Y.
a.
2.00
b.
1.00
c.
10.00
d.
0.50
138. Refer to Exhibit 2-8. For Maya, the opportunity cost of producing one unit of good Y is ___________ unit(s) of good
X.
a.
2.00
b.
1.00
c.
10.00
d.
0.50
139. Refer to Exhibit 2-8. For Maria, the opportunity cost of producing one unit of good Y is ___________ unit(s) of
good X.
a.
2.00
b.
1.00
c.
10.00
d.
0.50
Exhibit 2-9
Alex
Adam
Good A
Good B
Good A
Good B
0
300
0
160
25
225
30
120
50
150
60
80
75
75
90
40
100
0
120
0
140. Refer to Exhibit 2-9. Who has the comparative advantage in the production of good A?
a.
Alex
b.
Adam
c.
Both Alex and Adam
d.
Neither Alex nor Adam
141. Refer to Exhibit 2-9. Who has the comparative advantage in the production of good B?
a.
Alex
b.
Adam
c.
Both Alex and Adam
d.
Neither Alex nor Adam
142. Refer to Exhibit 2-9. If Alex and Adam each specialize in the good in which he has a comparative advantage and
then engage in trade, ____________________ can consume a combination of goods that lies beyond his PPF.
a.
Alex, but not Adam,
b.
Adam, but not Alex
c.
Alex and Adam
d.
neither Alex nor Adam
143. Refer to Exhibit 2-9. For Alex, the opportunity cost of producing one unit of good A is ____________ unit(s) of
good B.
a.
3.00
b.
0.33
c.
0.75
d.
1.33
144. Refer to Exhibit 2-9. For Alex, the opportunity cost of producing one unit of good B is ____________ unit(s) of
good A.
a.
3.00
b.
0.33
c.
0.75
d.
1.33
145. Refer to Exhibit 2-9. For Adam, the opportunity cost of producing one unit of good B is ____________ unit(s) of
good A.
a.
3.00
b.
0.33
c.
0.75
d.
1.33
146. Refer to Exhibit 2-9. For Adam, the opportunity cost of producing one unit of good A is ____________ unit(s) of
good B.
a.
3.00
b.
0.33
c.
0.75
d.
1.33
Exhibit 2-10
Person A
Good X
Good Y
200
0
150
50
100
100
50
150
0
200
Person B
Good X
Good Y
0
160
40
120
80
80
120
40
160
0
147. Refer Exhibit 2-10. Person A has the comparative advantage in the production of _____________ and person B has
the comparative advantage in the production of __________________.
a.
X; Y
b.
Y; X
c.
neither good X nor good Y; neither good X nor good Y
d.
both good X and good Y; neither good X nor good Y
e.
neither good X nor good Y; both good X and good Y
148. Refer Exhibit 2-10. Which of the following statements is true?
a.
There would be no gains from trade between person A and person B because they have the opportunity cost of
producing one unit of good X (or one unit of good Y) is the same for both persons.
b.
Both person A and person B will benefit from specialization and trade as long as person A specializes in the
production of good X and person B specializes in the production of good Y.
c.
Both person A and person B will benefit from specialization and trade as long as person A specializes in the
production of good Y and person B specializes in the production of good X.
d.
Both person A and person B will benefit from trade as long as person A produces both good X and good Y,
and person B produces neither good.
e.
Both person A and person B will benefit from trade as long as person B produces both good X and good Y,
and person A produces neither good.
149. Give a definition of an advance in technology. Suppose that you are drawing a PPF for civilian goods and military
goods, describe the effect on the PPF of an advance in technology in both civilian goods and military goods. How would
the impact on the PPF be different if the technological improvement only helped in the production of military goods, but
not civilian goods?
150. Why is the production possibilities frontier (PPF) typically bowed-outward? Under what circumstances would the
PPF be a straight line?
151. Using your own words, describe the law of increasing opportunity costs. Be sure to explain why this phenomenon
occurs and how it helps to contribute to the shape of the production possibilities frontier.
152. Explain what productive efficiency means. Describe how productive efficiency is represented by a PPF.
153. Explain how a technological advancement in one sector of the economy can lead to a change in the number of people
who work in another sector of the economy. Give an example to help support your answer.
154. Assume that two products are being produced: benches and chairs. Create a table that illustrates constant opportunity
costs in the production of these two goods. Draw a production possibilities frontier (PPF) based on the data in your table
and explain the condition necessary for a PPF to exhibit constant opportunity costs.
