Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
115. The graph above shows the production possibilities curve for an economy producing two
goods, X and Y. Which of the points on the graph indicate unemployed resources?
116. The graph above shows the production possibilities curve for an economy producing two
goods, X and Y. All of the following may allow the economy to produce combination D in the
future, except?
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
117. If an economy is operating at a point inside the production possibilities curve, it indicates
that:
118. Consider a society that is producing inside its production possibilities curve. This society
could best achieve efficiency in its production of output by:
119. A reduction in the level of unemployment would have which effect with respect to the
nation’s production possibilities curve?
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
120. To improve the rate of growth of labor productivity a number of economists have
suggested that there needs to be:
121. Economic growth may be represented by a:
122. A nation that devotes more of its resources to capital investment is likely to:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
123. Refer to the above graph. Which point in the graph would allow a simultaneous increase
in the production of both investment and consumer goods?
124. Refer to the above graph. On which point in the graph does the society still have room to
improve its productive efficiency?
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
125. Refer to the above graph. The selection of which point on the production possibilities
curve is most likely to result in the largest increase in economic growth over time?
126. Refer to the above production possibilities curves. Curve (a) is the current curve for the
economy. Given production possibilities curve (a), point N suggests that the economy is:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
127. Refer to the above production possibilities curves. Curve (a) is the current curve for the
economy. A shift from curve (a) to curve (b) suggests:
128. Refer to the above production possibilities curves. Curve (a) is the current curve for the
economy. Other things being equal, society’s current choice of point P on curve (a) will:
129. Suppose there are two economies, Alpha and Beta, which have the same production
possibilities curves. If Beta devotes more resources to produce investment goods than
consumer goods as compared to Alpha, then in the future:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
130. Cuba is a command economy that suffered a decline in economic growth because of a
cut in support from the former Soviet Union when it collapsed. As a consequence, Cuba:
131. Which situation would most likely cause a nation’s production possibilities curve to shift
inward?
132. A nation can increase its production possibilities by:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
133. A society is limited to consuming only those combinations of outputs within its
production possibilities. But this will not hold true anymore if there is
134. How is the economic perspective reflected in lines for fast food?
135. From an economic perspective, when consumers leave a fast-food restaurant because the
lines to be served are too long, they have concluded that the:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
136. What is the best economic explanation for why a person would drop out of college to
take a job or start a business?
137. What is a major opportunity cost of going to college on a full-time basis?
138. What pitfall to objective thinking is reflected in a person’s view that oil companies are
price-gouging the consumer?
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
139. What pitfall to objective thinking is reflected when a person states that “greedy
capitalists don’t care about workers”?
140. A person observes that as consumer prices fall, economic growth increases. The person
concludes that falling consumer prices leads to economic growth. This would be an example
of:
141. You observe that as stock prices rise, interest rates fall, and therefore conclude that
higher stock prices lead to lower interest rates. This would be an example of:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
142. If you benefited from a decrease in the price of gasoline, the whole economy must have
benefited. This statement is an example of:
143. Which of the following is the fallacy in the fallacy of composition?
144. The post hoc, ergo propter hoc fallacy consists of:
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
145. Economics is the social science concerned with the best use of scarce resources to
achieve maximum satisfaction of economic wants.
146. Marginal analysis is the valuation of insignificant or small benefits from doing things.
147. Rational behavior implies that different people faced with similar choices will make the
same decisions.
148. Economic analysis is primarily concerned with marginal changes from the status quo.
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
149. The study of economics is not useful for consumers because economic analysis focuses
only on businesses and the government.
150. The scientific method involves developing hypotheses from factual observations, and
then testing the hypotheses.
151. The scientific method does not apply to economics because economics studies human
behavior which cannot be generalized.
152. Economic principles are value judgments about what the economy should be like or the
way the economic world should be.
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
153. Ceteris paribus means all other things are assumed not to change.
154. Macroeconomics is concerned with the national market for specific goods like oranges.
155. Normative economics is concerned with the use of the scientific method to establish
well-tested explanations for economic behavior.
156. The comment that “social security taxes must be reduced if there are to be adequate
incentives to work” is an example of a normative economic statement.
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
157. The economizing problem for individuals arises from the conflict between having
relatively unlimited time and relatively limited jobs to do.
158. The budget line shows the various incomes that an individual can earn from different
jobs.
159. The fundamental economic problem for society is that productive resources are so varied
and versatile, that it is hard to decide what to do with them.
160. The resource category called “capital” includes forests, mineral deposits, and water
resources.
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
161. The four factors of production are land, labor, capital, and government services.
162. Entrepreneurship refers to a new college graduate who is looking for a job with a large
company.
163. If economic resources were perfectly adaptable to alternative uses, then there would be
constant opportunity costs along the production possibilities curve.
164. If the marginal benefits are greater than the marginal cost of an activity, then society
should allocate fewer resources to this activity.
Chapter 01 – Limits, Alternatives, and Choices (+ Appendix)
165. If society has over-allocated resources to a particular activity, then the marginal benefits
of the activity would be less than the marginal costs.
166. A point inside the production possibilities curve illustrates an economy with an
unemployment problem.
167. Economic growth is shown as an increase in production from inside the production
possibilities curve out toward a point on the possibilities curve.
168. An increase in the labor supply due to immigration would shift the production
possibilities curve to the right.