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Page 1
1.
A simplified representation that is used to study a real situation is called a(n):
A)
model.
B)
production possibility frontier.
C)
assumption.
D)
trade-off.
2.
The models that economists construct:
A)
usually make simplifying assumptions.
B)
often rely on physical constructs, such as those used by architects.
C)
rarely use mathematical equations or graphs.
D)
attempt to precisely replicate the real world.
3.
When building a model, economists:
A)
simplify reality to highlight what really matters.
B)
attempt to duplicate reality in all of its complexity.
C)
ignore the facts and instead try to determine what the facts should be.
D)
are careful to avoid the scientific method.
4.
The models used in economics:
A)
are always limited to variables that are directly related.
B)
are essentially not reliable because they are not testable in the real world.
C)
are of necessity unrealistic and not related to the real world.
D)
emphasize basic relationships by abstracting from complexities in the everyday
world.
5.
Economic models are:
A)
set up and used to precisely mirror reality.
B)
useless if they are simple.
C)
made generally of wood, plastic, and/or metal.
D)
potentially useful in forming economic policy.
6.
The importance of an economic model is that it allows us to:
A)
build a complex and accurate model of how the economy should work.
B)
build an accurate mathematical model of every aspect of the economy.
C)
focus on the effects of only one change at a time.
D)
avoid opportunity costs.
Page 2
7.
In constructing a model, economists:
A)
might use a computer simulation.
B)
avoid making any assumptions.
C)
assume that all relevant factors are constantly changing.
D)
are prohibited from using mathematics.
8.
A simplified version of reality that is used to clarify economic situations is called a(n):
A)
economic fact.
B)
current event.
C)
model.
D)
scarce resource.
9.
An economic model:
A)
is useful for explaining past economic conditions but not for predicting future
outcomes.
B)
often leads to faulty conclusions because of the ceteris paribus assumption.
C)
allows nothing to change in the economic situation that is being described.
D)
is a simplified version of reality used to understand real-world economic
conditions.
10.
The production possibility frontier illustrates that:
A)
the economy will automatically end up at full employment.
B)
an economy's productive capacity increases one-for-one with its population.
C)
if all resources of an economy are being used efficiently, more of one good can be
produced only if less of another good is produced.
D)
economic production possibilities have no limit.
Use the following to answer questions 11-16:
Page 3
11.
(Ref 2-1 Table: Production Possibilities Schedule I) Use Table: Production Possibilities
Schedule I. If the economy produces two units of consumer goods per period, it also can
produce, at most, _____ units of capital goods per period.
A)
30
B)
28
C)
24
D)
18
12.
(Ref 2-1 Table: Production Possibilities Schedule I) Use Table: Production Possibilities
Schedule I. If the economy produces 10 units of capital goods per period, it also can
produce, at most, _____ units of consumer goods per period.
A)
5
B)
4
C)
3
D)
2
13.
(Ref 2-1 Table: Production Possibilities Schedule I) Use Table: Production Possibilities
Schedule I. The opportunity cost of producing the fourth unit of consumer goods is
_____ units of capital goods.
A)
2
B)
4
C)
6
D)
8
14.
(Ref 2-1 Table: Production Possibilities Schedule I) Use Table: Production Possibilities
Schedule I. If the economy produces 4 units of consumer goods per period, it also can
produce, at MOST, _____ units of capital goods per period.
A)
30
B)
28
C)
10
D)
18
15.
(Ref 2-1 Table: Production Possibilities Schedule I) Use Table: Production Possibilities
Schedule I. If the economy produces 24 units of capital goods per period, it also can
produce, at MOST, _____ units of consumer goods per period.
A)
5
B)
4
C)
3
D)
2
Page 4
16.
(Ref 2-1 Table: Production Possibilities Schedule I) Use Table: Production Possibilities
Schedule I. The opportunity cost of producing the third unit of consumer goods is _____
units of capital goods.
A)
2
B)
4
C)
6
D)
8
Use the following to answer questions 17-21:
17.
(Ref 2-2 Figure: Guns and Butter) Use Figure: Guns and Butter. On this figure, points
A, B, E, and F:
A)
indicate combinations of guns and butter that society can produce using all of its
factors efficiently.
B)
indicate increasing opportunity costs for guns but decreasing opportunity costs for
butter.
C)
indicate that society wants butter more than it wants guns.
D)
indicate constant opportunity costs for guns and increasing costs for butter.
Page 5
18.
(Ref 2-2 Figure: Guns and Butter) Use Figure: Guns and Butter. This production
possibility frontier is:
A)
bowed out because of increasing opportunity costs.
B)
bowed in because of increasing opportunity costs.
C)
bowed in because of constant costs of guns and butter.
D)
linear because of constant costs.
19.
(Ref 2-2 Figure: Guns and Butter) Use Figure: Guns and Butter. If the economy is
operating at point B, producing 16 guns and 12 pounds of butter per period, a decision to
move to point E and produce 18 pounds of butter:
A)
indicates that you can have more butter and guns simultaneously.
B)
makes it clear that this economy has decreasing opportunity costs.
C)
necessitates a loss of 8 guns per period.
D)
necessitates a loss of 4 guns per period.
20.
(Ref 2-2 Figure: Guns and Butter) Use Figure: Guns and Butter. The combination of
guns and butter at point H:
A)
can be attained but would cost too much.
B)
cannot be attained, given the level of technology and the factors of production
available.
C)
has no meaning since it does not relate to the preferences of consumers.
D)
is attainable but would increase unemployment.
21.
(Ref 2-2 Figure: Guns and Butter) Use Figure: Guns and Butter. Suppose the economy
produced 8 guns and 12 pounds of butter per period. Given that, which statement is
true?
A)
This is a possible choice, but it is inefficient.
B)
This combination invalidates the notion of increasing opportunity cost.
C)
The economy is still efficient but does not buy as much as it could.
D)
Something must be done to reduce the amount of employment.
22.
If an economy has to sacrifice only one unit of good X for each unit of good Y produced
throughout the relevant range, then its production possibility frontier has a(n):
A)
zero slope.
B)
constant negative slope.
C)
increasing negative slope.
D)
decreasing negative slope.
Page 6
23.
A production possibility frontier that is a line sloping straight down from left to right
suggests that:
A)
more of both goods could be produced moving along the frontier.
B)
the two products must have the same price.
C)
the opportunity costs of the products are constant.
D)
there are no opportunity costs.
Use the following to answer questions 24-26:
24.
(Ref 2-3 Table: Production Possibilities Schedule II) Use Table: Production Possibilities
Schedule II. If the economy is producing at alternative X, the opportunity cost of
producing at Y instead of X is _____ units of consumer goods per period.
A)
0
B)
6
C)
8
D)
14
25.
(Ref 2-3 Table: Production Possibilities Schedule II) Use Table: Production Possibilities
Schedule II. If an economy is producing at alternative W, the opportunity cost of
producing at X is _____ unit(s) of consumer goods per period.
A)
0
B)
1
C)
4
D)
18
26.
(Ref 2-3 Table: Production Possibilities Schedule II) Use Table: Production Possibilities
Schedule II. The production of 14 units of consumer goods and 1 unit of capital goods
per period would result in:
A)
full employment.
B)
no unused resources.
C)
some unused or inefficiently used resources.
D)
an increase in economic growth.
Page 7
27.
In movement along a production possibility frontier, the opportunity cost to society of
getting more of one good:
A)
is always constant.
B)
is measured in dollar terms.
C)
is measured by the amount of the other good that must be given up.
D)
usually decreases.
28.
If an economy has to sacrifice increasing amounts of good X for each additional unit of
good Y produced, then its production possibility frontier is:
A)
bowed out.
B)
bowed in.
C)
a straight line.
D)
a vertical line.
29.
The fact that a society's production possibility frontier is bowed out, or concave to the
origin of a graph, demonstrates the law of _____ opportunity cost.
A)
increasing
B)
decreasing
C)
constant
D)
concave
30.
The economy's factors of production are not equally suitable for producing different
types of goods. This principle generates:
A)
economic growth.
B)
technical efficiency.
C)
underuse of resources.
D)
the law of increasing opportunity cost.
Page 8
Use the following to answer questions 31-33:
\\
31.
(Ref 2-4 Figure: Strawberries and Submarines) Use Figure: Strawberries and
Submarines. Suppose the economy is operating at point G. This implies that:
A)
the economy can move to a point such as C only if it improves its technology.
B)
the economy has unemployment and/or inefficiently allocates resources.
C)
the economy lacks the resources to achieve a combination such as C.
D)
people in this economy don't really like strawberries or submarines.
32.
(Ref 2-4 Figure: Strawberries and Submarines) Use Figure: Strawberries and
Submarines. As the economy moves from point A toward point D, it will find that the
opportunity cost of each additional submarine:
A)
falls.
B)
rises.
C)
remains unchanged.
D)
doubles.
Page 9
33.
(Ref 2-4 Figure: Strawberries and Submarines) Use Figure: Strawberries and
Submarines. Suppose the economy now operates at point C. Moving to point E would
require that the economy:
A)
achieve full employment and an efficient allocation of resources.
B)
eliminate its production of strawberries.
C)
reduce its production of submarines.
D)
improve its technology or increase its quantities of factors of production.
34.
If an economy is producing a level of output that is on its production possibility frontier,
the economy has:
A)
idle resources.
B)
idle resources but is using resources efficiently.
C)
no idle resources but is using resources inefficiently.
D)
no idle resources and is using resources efficiently.
Use the following to answer questions 35-36:
35.
(Ref 2-4 Figure: Consumer and Capital Goods) Use Figure: Consumer and Capital
Goods. The movement from curve 1 to curve 2 indicates:
A)
economic growth.
B)
a change from unemployment to full employment.
C)
a decrease in the level of technology.
D)
instability.
Page 10
36.
(Ref 2-4 Figure: Consumer and Capital Goods) Use Figure: Consumer and Capital
Goods. Assume the economy's current production possibilities frontier is given by curve
1. Point Z:
A)
is unattainable, all other things unchanged.
B)
is attainable if the economy is able to reach full employment.
C)
is attainable if the quantity and/or quality of factors decreases.
D)
will be attained as soon as the economy becomes efficient and moves to curve 2.
37.
Technological improvements will:
A)
leave the production possibility frontier unchanged.
B)
shift the production possibility frontier inward.
C)
shift the production possibility frontier outward.
D)
necessarily lead to increased unemployment.
38.
A two-dimensional production possibility frontier illustrates the _____ facing an
economy that _____ only two goods.
A)
prices; sells
B)
trade-offs; produces
C)
trade-offs; sells
D)
shortages; produces
39.
Suppose Oklahoma decides to produce only two goods, oil and football helmets. If
Oklahoma is producing on its production possibility frontier, as oil production increases,
the production of football helmets will:
A)
increase.
B)
not change.
C)
decrease at a necessarily decreasing rate.
D)
decrease at some rate.
40.
One of the controversies surrounding the United States' energy markets is the trade-off
between energy production and clean air. Assuming clean air has value, the United
States will be on its production possibility frontier if and only if:
A)
resources used to produce clean air and energy are not being fully used.
B)
pollution is eliminated.
C)
the price of energy is relatively low.
D)
resources used to produce clean air and energy are being fully used.
Page 11
41.
If an economy is producing at a point on its production possibilities frontier, it is:
A)
efficient in production and allocation.
B)
efficient in production but not necessarily in allocation.
C)
efficient in allocation but not necessarily in production.
D)
not necessarily efficient in production or allocation.
42.
Consider a production possibility frontier for Italy. If in 2016 Italy's resources are not
being fully utilized, Italy will be somewhere _____ of its production possibility frontier.
A)
inside
B)
outside
C)
near the bottom
D)
near the top
43.
All points inside the production possibility frontier represent:
A)
efficient production points.
B)
inefficient production points.
C)
infeasible production points.
D)
regions of economic growth.
44.
All points on the production possibility frontier are:
A)
efficient.
B)
inefficient.
C)
infeasible.
D)
regions of economic growth.
45.
All points outside the production possibility frontier are:
A)
efficient.
B)
inefficient.
C)
infeasible.
D)
regions of economic growth.
Page 12
Use the following to answer questions 46-48:
46.
(Ref 2-5 Figure: Production Possibility Frontier for Tealand) Use Figure: Production
Possibility Frontier for Tealand. If Tealand is producing 10 million scones and 10
million cups of tea (point A), we know that the economy:
A)
is using its resources efficiently.
B)
is using its resources inefficiently.
C)
is fully employing its resources.
D)
has found new resources.
47.
(Ref 2-5 Figure: Production Possibility Frontier for Tealand) Use Figure: Production
Possibility Frontier for Tealand. Tealand is producing at point C on its production
possibility frontier. What is the opportunity cost of increasing the production of tea from
20 million cups to 30 million cups?
A)
10 million cups of tea
B)
5 million scones
C)
10 million scones
D)
The answer is impossible to determine from the information given.
48.
(Ref 2-5 Figure: Production Possibility Frontier for Tealand) Use Figure: Production
Possibility Frontier for Tealand. Tealand can produce at point E only if:
A)
the government eliminates unemployment.
B)
the government raises taxes.
C)
the country experiences economic growth.
D)
increases the cost of production by decreasing the use of technology.
Page 13
49.
The production possibility frontier is bowed out because:
A)
resources are not equally suited for the production of both goods.
B)
resources are scarce.
C)
economic growth leads to inefficiency.
D)
resources are inefficiently used.
50.
The opportunity cost of production:
A)
is the price of a good.
B)
is what you give up to produce the good.
C)
decreases as production increases.
D)
is what you gain by producing the good.
51.
Suppose Poland is producing on its production possibilities frontier, and it decides to
increase the production of steel and decrease the production of vodka. The bowed-out
production possibility frontier suggests that there will be a(n) _____ opportunity cost of
producing more steel.
A)
increasing
B)
decreasing
C)
nonexistent
D)
unchanged
52.
Economists usually assume that production is subject to increasing opportunity costs
because:
A)
higher production usually results in more inflation.
B)
not all resources are equally suited to producing every good.
C)
individuals desire constantly increasing opportunities to make themselves better
off.
D)
if production is efficient, it is not possible to increase the production of all goods
simultaneously.
53.
The production possibility frontier will shift outward because of:
A)
a decrease in the labor force.
B)
an increase in infrastructure spending.
C)
better technology that improves worker productivity.
D)
a decrease in the unemployment rate.
Page 14
54.
In terms of the production possibility frontier, the inefficient use of available resources
is shown by:
A)
an increase in the labor force growth rate.
B)
a movement from one point to another along the production possibility frontier.
C)
an inward shift of the production possibility frontier due to the lack of opportunity.
D)
production at a point inside the production possibility frontier.
55.
The production possibility frontier will not shift outward due to an:
A)
increase in the unemployment rate.
B)
increase in the labor force.
C)
improvement in technology.
D)
increase in worker productivity.
56.
The effect of an increase in productive inputs such as labor and capital can be shown by
a(n):
A)
point inside of the production possibility frontier.
B)
outward shift of the production possibility frontier.
C)
movement from one point to another along the production possibility frontier.
D)
inward shift of the production possibility frontier.
57.
The effect of a natural disaster can be shown by a(n) _____ the production possibility
frontier.
A)
point inside of
B)
outward shift of
C)
movement from one point to another along
D)
inward shift of
58.
An inward shift in the U.S. economy's production possibility frontier could represent:
A)
U.S. workers moving to Canada.
B)
workers moving from New Jersey to Massachusetts.
C)
U.S. economic growth.
D)
a movement from labor-intensive to capital-intensive industries in some states.
59.
If the production possibility frontier is a straight line:
A)
opportunity costs are constant.
B)
firms face increasing costs.
C)
firms face decreasing costs.
D)
there is no trade-off between the two goods represented.
Page 15
Use the following to answer questions 60-66:
60.
(Ref 2-6 Figure: Omar's Production Possibilities) Use Figure: Omar's Production
Possibilities. Which point or points represent(s) a combination of coconuts and fish that
is efficient in production?
A)
A only
B)
A and B
C)
B and C
D)
D only
61.
(Ref 2-6 Figure: Omar's Production Possibilities) Use Figure: Omar's Production
Possibilities. Which point or points represent(s) an inefficient combination of coconuts
and fish?
A)
A only
B)
A and B
C)
C only
D)
B and D
Page 16
62.
(Ref 2-6 Figure: Omar's Production Possibilities) Use Figure: Omar's Production
Possibilities. Which point or points represent(s) an infeasible combination of coconuts
and fish?
A)
A only
B)
A and B
C)
B and C
D)
D only
63.
(Ref 2-6 Figure: Omar's Production Possibilities) Use Figure: Omar's Production
Possibilities. Which point or points represent(s) a feasible combination of coconuts and
fish?
A)
A only
B)
A and B
C)
A, B, and C
D)
D only
64.
(Ref 2-6 Figure: Omar's Production Possibilities) Use Figure: Omar's Production
Possibilities. The opportunity cost for Tom to move from point A on the curve to point B
is:
A)
10 coconuts.
B)
10 fish.
C)
5 coconuts.
D)
5 fish.
65.
(Ref 2-6 Figure: Omar's Production Possibilities) Use Figure: Omar's Production
Possibilities. The opportunity cost for Tom to move from point B on the curve to point A
is:
A)
10 coconuts.
B)
10 fish.
C)
5 coconuts.
D)
5 fish.
66.
(Ref 2-6 Figure: Omar's Production Possibilities) Use Figure: Omar's Production
Possibilities. The opportunity cost for Tom to move from point C on the curve to point
A is:
A)
10 coconuts.
B)
30 fish.
C)
5 coconuts.
D)
There is no opportunity cost.
Page 17
67.
The _____ illustrates the trade-offs facing an economy that produces only two goods.
A)
production possibility frontier
B)
circular-flow diagram
C)
all else equal assumption
D)
income distribution
Use the following to answer questions 68-70:
68.
(Ref 2-7 Table: Trade-off of Study Time and Leisure Time) Use Table: Trade-off of
Study Time and Leisure Time. Suppose a student sleeps 8 hours per day and divides the
remaining time between study time and leisure time. The table shows the combinations
of study and leisure time that can be produced in the 16 waking hours of each day. If a
student decides to consume one additional hour of leisure time, how many hours of
study time must she give up?
A)
4
B)
0.25
C)
1
D)
16
69.
(Ref 2-7 Table: Trade-off of Study Time and Leisure Time) Use Table: Trade-off of
Study Time and Leisure Time. Suppose a student sleeps 8 hours per day and divides the
remaining time between study and leisure time. The table shows the combinations of
study and leisure time that can be produced in the 16 waking hours of each day.
Suppose this student is studying 4 hours and spending 10 hours doing leisure activities.
This point is:
A)
outside the production possibility frontier.
B)
inside the production possibility frontier.
C)
on the production possibility frontier.
D)
both efficient and feasible.
Page 18
70.
(Ref 2-7 Table: Trade-off of Study Time and Leisure Time) Use Table: Trade-off of
Study Time and Leisure Time. Suppose a student sleeps 8 hours per day and divides the
remaining time between study time and leisure time. The table shows the combinations
of study and leisure time that can be produced in the 16 waking hours of each day.
Suppose the student completes a speed-reading course that allows him to do the same
amount of studying in half as many hours. His opportunity cost:
A)
of leisure has increased.
B)
of studying has increased.
C)
of leisure has decreased.
D)
has not changed.
71.
If a production possibility frontier is a straight line, it tells us that the opportunity cost of
producing one more unit of good X is:
A)
an increasing amount of good Y.
B)
a decreasing amount of good Y.
C)
equal to the inverse of the amount of good Y.
D)
a constant amount of good Y.
72.
Suppose Indiana produces only steel and corn, with fixed amounts of land, labor, and
capital resources. Which scenario best sets the stage for economic growth?
A)
The unemployment rate in Indiana rises from 5% to 6%.
B)
The Midwest has a devastating drought.
C)
The percentage of Indiana residents with a college degree rises from 25% to 30%.
D)
The United States imports more and more low-cost steel from Asian countries.
73.
The production possibility frontier illustrates:
A)
the maximum quantity of one good that can be produced given the quantity of the
other good produced.
B)
that, when markets don't achieve efficiency, government intervention can improve
society's welfare.
C)
the inverse relation between price and quantity of a particular good.
D)
that people usually exploit opportunities to make themselves better off.
Page 19
Use the following to answer questions 74-79:
74.
(Ref 2-8 Figure: Wine and Wheat) Use Figure: Wine and Wheat. If this economy is
producing 12 tons of wheat and 9,000 bottles of wine, we know the economy:
A)
is using its resources efficiently.
B)
is using its resources inefficiently.
C)
is producing at an unattainable point.
D)
has unemployment.
75.
(Ref 2-8 Figure: Wine and Wheat) Use Figure: Wine and Wheat. If this economy is
producing at point A, we know the economy is:
A)
using its resources efficiently.
B)
using its resources inefficiently.
C)
producing at an unattainable point.
D)
trading with another country.
76.
(Ref 2-8 Figure: Wine and Wheat) Use Figure: Wine and Wheat. If this economy is
producing at point A and wants to produce at point B, it must:
A)
trade with another country.
B)
increase its resources.
C)
decrease production.
D)
use its existing resources efficiently.
Page 20
77.
(Ref 2-8 Figure: Wine and Wheat) Use Figure: Wine and Wheat. The opportunity cost
of moving from producing only wheat to producing only wine is _____ tons of wheat.
A)
3
B)
6
C)
9
D)
15
78.
(Ref 2-8 Figure: Wine and Wheat) Use Figure: Wine and Wheat. The opportunity cost
of moving from producing only wheat to producing at point D is _____ tons of wheat.
A)
3
B)
6
C)
9
D)
15
79.
(Ref 2-8 Figure: Wine and Wheat) Use Figure: Wine and Wheat. If this economy is
producing on the production possibility frontier, what would allow it to produce at point
C?
A)
an improvement in technology
B)
a decrease in resources
C)
a decrease in production
D)
policies expanding social programs for seniors
80.
The U.S. production possibility frontier would _____ if all computers using Microsoft
operating systems contracted a virus that corrupted all information on those computers.
A)
shift in
B)
shift out
C)
not change
D)
The answer cannot be determined from the information provided.
81.
The U.S. production possibility frontier will _____ if there is a large influx of
working-age immigrants.
A)
shift in
B)
shift out
C)
not change
D)
The answer cannot be determined from the information provided.
Page 21
82.
In Kessy's old kitchen, he could bake 10 cookies or mix 15 glasses of lemonade in one
day. Now Kessy has a larger oven and refrigerator. How does this affect his production
possibility frontier?
A)
It shifts his production possibility frontier out.
B)
It shifts his production possibility frontier in.
C)
He will be less efficient.
D)
He will not be able to produce as much as before.
Use the following to answer questions 83-89:
83.
(Ref 2-9 Figure: Production Possibility Frontier) Use Figure: Production Possibilities
Frontier. Points A, B, E, and F:
A)
indicate combinations of cars and computers that society can produce using all of
its resources efficiently.
B)
show that the opportunity cost of cars increases as more cars are produced but that
of more computers decreases as more computers are produced.
C)
indicate that society wants computers more than cars.
D)
indicate constant opportunity costs for cars and increasing opportunity costs for
computers.
Page 22
84.
(Ref 2-9 Figure: Production Possibility Frontier) Use Figure: Production Possibilities
Frontier. This production possibility frontier is:
A)
bowed out because of increasing opportunity costs.
B)
bowed in because of increasing opportunity costs.
C)
bowed out because of constant cost of cars and computers.
D)
linear because of constant costs.
85.
(Ref 2-9 Figure: Production Possibility Frontier) Use Figure: Production Possibilities
Frontier. If the economy is operating at point B, producing 16 cars and 12 computers per
period, a decision to move to point E and produce 18 computers:
A)
indicates that you can have more computers and more cars simultaneously.
B)
makes it clear that this economy has decreasing opportunity costs.
C)
entails a loss of 8 cars per period.
D)
entails a loss of 4 cars per period.
86.
(Ref 2-9 Figure: Production Possibility Frontier) Use Figure: Production Possibilities
Frontier. The combination of cars and computers at point H:
A)
can be attained but would cost too much.
B)
cannot be attained given the level of technology and the resources available.
C)
has no meaning since it is not what consumers want.
D)
is attainable but would increase unemployment.
87.
(Ref 2-9 Figure: Production Possibility Frontier) Use Figure: Production Possibilities
Frontier. If the economy is producing 8 cars and 12 computers per period:
A)
the economy has ongoing unemployment or inefficiency.
B)
the notion of increasing opportunity cost is invalidated.
C)
the economy is still efficient but has made a decision not to buy as much as it
could.
D)
something must be done to reduce the amount of employment.
88.
(Ref 2-9 Figure: Production Possibility Frontier) Use Figure: Production Possibilities
Frontier. A movement from point C producing 12 cars and 16 computers per period to
point B means a _____of _____ cars and a _____ of _____ computers per period.
A)
gain; 4; loss; 4
B)
gain; 2; loss; 4
C)
gain; 4; loss; 6
D)
loss; 2; gain; 4
Page 23
89.
(Ref 2-9 Figure: Production Possibility Frontier) Use Figure: Production Possibilities
Frontier. Which rate of production per period is not efficient?
A)
18 cars and no computers
B)
8 cars and 18 computers
C)
16 cars and 12 computers
D)
no cars and 18 computers
90.
If farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no
cabbages and 100 pounds of potatoes and if he faces a linear production possibility
frontier, the opportunity cost of producing an additional pound of potatoes is _____
pound(s) of cabbage.
A)
0.5
B)
2
C)
100
D)
200
91.
If farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no
cabbages and 100 pounds of potatoes and if he faces a linear production possibility
frontier, the opportunity cost of producing an additional pound of cabbage is _____
pound(s) of potatoes.
A)
0.5
B)
2
C)
100
D)
200
92.
The slope of a typical production possibility frontier is:
A)
0.
B)
vertical.
C)
positive.
D)
negative.
Use the following to answer questions 93-95:
Page 24
93.
(Ref 2-10 Table: Production Possibilities Schedule II) Use Table: Production
Possibilities Schedule II. If the economy is producing at Y, the opportunity cost of
producing at Z is _____ units of consumer goods per period.
A)
1
B)
6
C)
8
D)
14
94.
(Ref 2-10 Table: Production Possibilities Schedule II) Use Table: Production
Possibilities Schedule II. If an economy is producing at X, the opportunity cost to it of
producing at Y is _____ units of consumer goods per period.
A)
2
B)
1
C)
6
D)
18
95.
(Ref 2-10 Table: Production Possibilities Schedule II) Use Table: Production
Possibilities Schedule II. The production of 8 units of consumer goods and 2 units of
capital goods per period would result in:
A)
full employment.
B)
no unused resources.
C)
some unused or inefficiently used resources.
D)
increased economic growth.
Use the following to answer questions 96-97:
Page 25
96.
(Ref 2-11 Figure: Bicycles and Radishes I) Use Figure: Bicycles and Radishes I. The
figure shows the production possibility frontiers for two countries that produce only
radishes and bicycles. The axes of the two graphs are measured in equivalent units.
Country A is operating at point M, and country B is operating at point N. The
opportunity cost of producing an additional ton of radishes would be greater in:
A)
country A.
B)
country B.
C)
neither; the opportunity cost would be the same in both countries.
D)
There is not enough information to answer the question.
97.
(Ref 2-11 Figure: Bicycles and Radishes I) Use Figure: Bicycles and Radishes I. The
figure shows production possibility frontiers for two countries that produce only
radishes and bicycles. The axes of the two graphs are measured in equivalent units.
Country A is operating at point M, and country B is operating at point N. Suppose
country A discovers a new technology that greatly increases its ability to produce
bicycles but has no effect on its ability to produce radishes. This would:
A)
lower the opportunity cost of producing radishes in country A.
B)
increase the opportunity cost of producing radishes in country A.
C)
not affect the opportunity cost of producing radishes in country A.
D)
increase the opportunity cost of producing radishes in country B.
Use the following to answer question 98:
Page 26
98.
(Ref 2-12 Figure: Bicycles and Radishes II) Use Figure: Bicycles and Radishes II. The
country depicted in this figure is operating at point M. It could achieve production at
point I only if it:
A)
used its resources more efficiently.
B)
devoted more resources to radish production.
C)
devoted more resources to bicycle production.
D)
increased the quantities of capital, natural resources, or labor available or improved
its technology.
Use the following to answer questions 99-100:
\\
99.
(Ref 2-13 Figure: Sugar and Freight Trains) Use Figure: Sugar and Freight Trains.
Suppose the economy is operating at point B. The opportunity cost of producing the
third freight train would be _____ tons of sugar.
A)
6
B)
19
C)
45
D)
80
Page 27
100.
(Ref 2-13 Figure: Sugar and Freight Trains) Use Figure: Sugar and Freight Trains.
Suppose the economy is operating at point C. The opportunity cost of producing the
fourth freight train would be:
A)
19 tons of sugar.
B)
45 tons of sugar.
C)
80 tons of sugar.
D)
3 freight trains.
Use the following to answer questions 101-105:
\
101.
(Ref 2-14 Figure: Strawberries and Submarines II) Use Figure: Strawberries and
Submarines II. Point F is:
A)
unattainable, all other things unchanged.
B)
attainable if the quantity and/or quality of factors decreases.
C)
attainable if the economy is able to reach full employment.
D)
feasible but not efficient.
Page 28
102.
(Ref 2-14 Figure: Strawberries and Submarines II) Use Figure: Strawberries and
Submarines II. Suppose the economy is operating at point A. The first submarine, which
is achieved at point B, would have an opportunity cost of _____ million tons of
strawberries.
A)
50
B)
150
C)
400
D)
950
103.
(Ref 2-14 Figure: Strawberries and Submarines II) Use Figure: Strawberries and
Submarines II. Assume that the economy is operating at point A. The opportunity cost of
moving to point C is equal to _____ million tons of strawberries:
A)
800
B)
200
C)
2
D)
50
104.
(Ref 2-14 Figure: Strawberries and Submarines II) Use Figure: Strawberries and
Submarines II. The downward slope of the production possibility frontier implies that
resources:
A)
must be used efficiently.
B)
are scarce.
C)
should not be wasted.
D)
should be allocated so that approximately equal amounts of both goods are
produced.
105.
(Ref 2-14 Figure: Strawberries and Submarines II) Use Figure: Strawberries and
Submarines II. Suppose the economy is operating at point B. Achieving production at
point F would require that the economy:
A)
achieve full employment and an efficient allocation of resources.
B)
reduce its production of strawberries.
C)
reduce its production of submarines.
D)
improve its technology or increase its resources.
106.
Efficient production occurs when the economy is _____ its production possibility
frontier.
A)
operating inside
B)
operating on
C)
operating outside
D)
moving beyond
Page 29
107.
Assume an economy is operating on its production possibility frontier, which shows the
production of military and civilian goods. If the output of military goods is increased,
the output of civilian goods:
A)
will increase, too.
B)
will not change.
C)
must decrease.
D)
may increase or decrease.
108.
The process observed when an economy's production possibility frontier shifts outward
is:
A)
comparative advantage.
B)
economic growth.
C)
full employment.
D)
specialization.
109.
Increases in resources or improvements in technology will tend to cause a society's
production possibility frontier to:
A)
shift inward.
B)
shift outward.
C)
remain unchanged.
D)
become vertical.
110.
Technological improvements will:
A)
leave the production possibility frontier unchanged.
B)
shift the production possibility frontier inward.
C)
shift the production possibility frontier outward.
D)
necessarily lead to increased unemployment.
Page 30
Use the following to answer questions 111-113:
111.
(Ref 2-15 Figure: Consumer and Capital Goods) Use Figure: Consumer and Capital
Goods. If the economy is operating at point Y and its relevant production possibility
frontier is curve 1:
A)
the economy is at full employment and is efficient.
B)
the economy is less than fully employed.
C)
the economy is not efficient.
D)
economic growth is not possible in the future.
112.
(Ref 2-15 Figure: Consumer and Capital Goods) Use Figure: Consumer and Capital
Goods. The movement from curve 1 to curve 2 indicates a(n):
A)
growing ability of the economy to produce capital and consumer goods.
B)
increase in the stock market.
C)
decrease in the factors of production.
D)
shift of the production possibility frontier toward producing fewer goods.
Page 31
113.
(Ref 2-15 Figure: Consumer and Capital Goods) Use Figure: Consumer and Capital
Goods. Technological improvements will likely:
A)
shift the production possibility frontier inward to curve 1.
B)
shift the production possibility frontier outward to curve 2.
C)
lead to increased unemployment.
D)
leave the production possibility frontier unchanged.
114.
Abe starts exercising regularly, and after a few months he can do twice as much of
everything. In a single day, Abe can now make 10 hamburgers or 8 milkshakes, rather
than the 5 hamburgers and 4 milkshakes he made in the past. We now know that Abe's
production possibility frontier has _____, but his opportunity costs of making
milkshakes have _____.
A)
shifted right; not changed
B)
shifted right; decreased
C)
not changed; increased
D)
not changed; decreased
115.
When a nation's economy grows:
A)
True
B)
False
C)
it has been able to reach full employment.
D)
it has moved to a more consumer-oriented position on its production possibility
frontier.
116.
It is impossible for economists to use computers to simulate how the economy works.
A)
True
B)
False
117.
In building models, economists avoid making any assumptions that might leave out any
aspect of reality.
A)
True
B)
False
118.
In building models, economists often assume that opportunity costs don't matter.
A)
True
B)
False
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119.
The assumption ceteris paribus in a model means "other things equal."
A)
True
B)
False
120.
Because models make simplifying assumptions, they are of very little use in the real
world.
A)
True
B)
False
121.
An economic model is a simplified version of reality that is used to analyze real-world
economic situations.
A)
True
B)
False
122.
On any given production possibility frontier, we see the minimum quantity of one good
that can be produced for any given production of the other.
A)
True
B)
False
123.
Suppose residents of Montana operate on their production possibility frontier, and they
want to increase production of both wheat and fly-fishing rods. According to the
production possibility frontier, this cannot happen without new resources or
technological improvement.
A)
True
B)
False
124.
A typical bowed-out production possibility frontier between two goods, guns and butter,
shows that the opportunity cost of butter in terms of guns increases as more butter is
produced. This implies that the opportunity cost of guns in terms of butter decreases as
more guns are produced.
A)
True
B)
False
125.
Consider a point inside the production possibility frontier for a simple economy that
produces only two goods, X and Y. Why is this point described as feasible but not
efficient?
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126.
Explain why economists believe that production possibility frontiers have a bowed-out
curvature, rather than a straight line.
127.
Leaders of a small town are tired of looking at a vacant and dilapidated warehouse that
sits on a prime piece of real estate. The town finds an investor who purchases the
warehouse and promises to renovate the old building and build condominiums in the old
building. Is this economic growth?
128.
Explain how technological progress is a source of economic growth.
Use the following to answer question 129:
129.
(Ref 2-16 Table: Crab and Cake Production in Chesapeake) Use Table: Crab and Cake
Production in Chesapeake. What is the opportunity cost of increasing the production of
crabs from zero to 100? What is the opportunity cost of increasing the production of
crabs from 400 to 500? Explain the difference in your answers.
Use the following to answer question 130:
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130.
(Ref 2-16 Table: Crab and Cake Production in Chesapeake) Use Table: Crab and Cake
Production in Chesapeake. The table shows the maximum annual output combinations
of crabs and cakes. Given the scarce resources and limited technology, as Chesapeake
uses more resources for the production of cakes, fewer resources are available to
produce crabs. Can this nation produce 200 crabs and 500 cakes? Is this efficient?
Explain.
131.
Economists use models to explain real-life situations because:
A)
such models tend to be exactly what is occurring in each situation.
B)
assumptions found in such models tend to make analyzing the situation more
difficult.
C)
simplifications and assumptions often yield results that can help to explain the
more difficult real-life situations.
D)
real-life situations are not relevant to the building of models.
132.
Economic models often:
A)
vary greatly in assumptions and simplifications.
B)
are correct.
C)
provide similar answers.
D)
fail to explain any of the real-life scenarios they are supposed to help solve.
133.
“All other relevant factors remain unchanged” is another way of saying:
A)
all other things equal.
B)
allow several variables to change to understand how those variables affect one
variable held constant.
C)
allow all variables to change and attempt to understand how the variables interact
with each other.
D)
no variables change.
134.
Alexander has a straight-line, or linear, production possibility frontier when he produces
soybeans and corn. If he uses all of his resources to grow soybeans, he can produce 200
bushels of soybeans; if he uses all of his resources for corn production, he can produce
400 bushels of corn. Alexander cannot produce _____ bushels of soybeans and _____
bushels of corn.
A)
200; 0
B)
200; 600
C)
0; 400
D)
100; 200
Page 35
135.
Frances has a linear production possibility frontier when she produces tomatoes and
green beans. If she uses all of her resources, she can produce 400 bushels of tomatoes or
800 bushels of green beans. Frances is not producing efficiently if she produces _____
bushels of tomatoes and _____ bushels of green beans.
A)
400; 0
B)
200; 400
C)
200; 200
D)
0; 800
136.
Alison has a linear production possibility frontier in bracelets and necklaces. In one
hour, she can produce 5 bracelets or 10 necklaces. What is the opportunity cost to make
1 necklace?
A)
5 bracelets
B)
10 necklaces
C)
0.5 bracelet
D)
2 necklaces
137.
Scenario: Linear Production Possibility Frontier
What is the maximum number of pairs of socks Largetown can produce?
A)
40
B)
20
C)
2
D)
4
Page 36
138.
Scenario: Linear Production Possibility Frontier
If Largetown decides to devote half of its labor time to the production of socks and half
of the time to the production of shirts, it can produce _____ shirts and _____ pairs of
socks.
A)
10; 20
B)
20; 10
C)
30; 30
D)
0; 30
139.
Scenario: Linear Production Possibility Frontier
If Largetown's labor resource decreases by 40 hours, the opportunity cost of producing
shirts:
A)
increases.
B)
decreases.
C)
does not change.
D)
may or may not change depending upon the number of pairs of socks it wishes to
produce.
Page 37
140.
Scenario: Linear Production Possibility Frontier
Largetown CANNOT produce _____ shirts and _____ pairs of socks.
A)
20; 0
B)
40; 40
C)
0; 40
D)
10; 20
141.
Smallville has a linear production possibility frontier in the production of good X and
good Y. It can produce 6 of X per hour or 8 of Y per hour. Suppose it has 240 hours of
labor and divides labor hours equally between production of good X and good Y. What
is the maximum number of good Y it can produce in the time it has allocated to Y
production?
A)
960
B)
30
C)
720
D)
6
Page 38
142.
Table: Production of Good Z and Good X in Urbanville
Use Table: Production of Good Z and Good X in Urbanville. This table shows the
production possibility frontier for Urbanville. Suppose Urbanville is producing 5 of Z
and 50 of X; this combination is:
A)
feasible but inefficient.
B)
feasible and efficient.
C)
not feasible but efficient.
D)
neither feasible nor efficient.
143.
Table: Production of Good Z and Good X in Urbanville
Use Table: Production of Good Z and Good X in Urbanville. This table shows the
production possibility frontier for Urbanville. Suppose Urbanville is producing 15 of Z
and 45 of X; this combination is:
A)
both allocatively and productively efficient.
B)
productively efficient.
C)
allocatively efficient.
D)
neither productively nor allocatively efficient.
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