2.1 Test Bank

Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. Tomaso faces ________ opportunity costs in the production of pizzas and calzones.

constant

Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. Billie faces ________ opportunity costs in the production of pillows and blankets.

constant

Refer to Table 2-3. Dina faces ________ opportunity costs in the production of sliders and hot wings.

constant

Refer to Figure 2-4. A movement from X to Y

could occur because of an influx of immigrant labor.

Which of the following would shift a nation's production possibilities frontier outward?

discovering a cheap way to convert sunshine into electricity

A production possibilities frontier with a bowed outward shape indicates

increasing opportunity costs as more and more of one good is produced.

Refer to Figure 2-1. Point A is

inefficient in that not all resources are being used.

In a production possibilities frontier model, a point ________ the frontier is productively inefficient.

inside

Refer to Table 2-3. Assume Dina's Diner only produces sliders and hot wings. A combination of 80 sliders and 50 hot wings would appear

inside

Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. A combination of 5 pillows and 21 blankets would appear

inside Billie's production possibilities frontier.

Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 15 calzones would appear

inside Tomaso's production possibilities frontier.

Refer to Figure 2-4. A movement from Y to Z

is the result of advancements in plastic production technology.

If society decides it wants more of one good and all resources are fully utilized, then

it has to give up some of another good and incur some opportunity costs.

If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced.

linear

The production possibilities frontier shows the ________ combinations of two products that

maximum attainable

The principle of opportunity cost is that

the economic cost of using a factor of production is the alternative use of that factor that is given up.

The attainable production points on a production possibility curve are

the points along and inside the production possibility frontier.

Suppose your expenses for this term are as follows: tuition: $10,000, room and board: $6,000, books and other educational supplies: $1,000. Further, during the term, you can only work part-time and earn $8,000 instead of your full-time salary of $20,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?

$23,000

Suppose your expenses for this term are as follows: tuition: $12,000, room and board: $6,500, books and other educational supplies: $1,500. Further, during the term, you can only work part-time and earn $3,500 instead of your full-time salary of $14,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?

$24,000

Suppose your expenses for this term are as follows: tuition: $28,000, room and board: $9,000, books and other educational supplies: $2,500. Further, during the term, you can only work part-time and earn $16,000 instead of your full-time salary of $42,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college?

$56,500

Refer to Figure 2-2. If Mendonca chooses to produce 160 pounds of vegetables, how much meat can it produce to maximize production?

0 pounds of meat

If Mendonca chooses to produce 120 pounds of meat, how much vegetables can it produce to maximize production?

0 pounds of vegetables

Refer to Figure 2-6. If the economy is currently producing at point C, what is the opportunity cost of moving to point B?

10 thousand hammers

Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing an additional 15 neckties?

15 bow ties

Refer to Figure 2-8. What is the opportunity cost of 80 dozen orchids?

200 dozen roses

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses?

25 silk leaves

Refer to Figure 2-2. What is the opportunity cost of one pound of vegetables?

3/4 pound of meat

Refer to Figure 2-8. Suppose Vidalia is currently producing 120 dozen roses per period. How many orchids is it also producing, assuming that resources are fully utilized?

32 dozen orchids

Refer to Figure 2-2. What is the opportunity cost of one pound of meat?

4/3 pounds of vegetables

Refer to Figure 2-8. What is the opportunity cost of 100 dozen roses?

40 dozen orchids

Refer to Figure 2-5. If the economy is currently producing at point W, what is the opportunity cost of moving to point X?

5 million tons of paper

Refer to Figure 2-5. If the economy is currently producing at point X, what is the opportunity cost of moving to point Y?

5 million tons of steel

Sarita can bake either a combination of 25 cakes and 15 pies or a combination of 10 cakes and 20 pies. If she now bakes 10 cakes and 20 pies, what is the opportunity cost of baking an additional 15 cakes?

5 pies

Refer to Figure 2-8. Suppose Vidalia is currently producing 60 dozen orchids per period. How many roses is it also producing, assuming that resources are fully utilized?

50 dozen roses

Refer to Figure 2-6. If the economy is currently producing at point A, what is the opportunity cost of moving to point B?

6 thousand hammers

Refer to Figure 2-2. Suppose Mendonca is currently producing 60 pounds of vegetables per period. How much meat is it also producing, assuming that resources are fully utilized?

75 pounds of meat

Refer to Figure 2-6. If the economy is currently producing at point E, what is the opportunity cost of moving to point D?

8 thousand

According to the production possibility model, if more resources are allocated to the production of physical and human capital, then which of the following is likely to happen?

Fewer goods will be produced for consumption today.

Refer to Figure 2-3. Sergio Vignetto raises cattle and llamas on his land. His land is equally suitable for raising either animal. Which of the graphs in Figure 2-3 represent his production possibilities frontier?

Graph A

Refer to Figure 2-3. Sergio Vignetto raises cattle and llamas on his land. A portion of his land is more suitable for raising cattle, and the other portion is better suited for raising llamas. Which of the graphs in Figure 2-3 represent his production possibilities frontier?

Graph C

________ marginal opportunity cost implies that the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

Increasing

Suppose there is no unemployment in the economy and society decides that it wants more of one good. Which of the following statements is true?

It will have to give up production and consumption of some other good.

The production possibilities frontier model assumes which of the following?

The economy produces only two products.

Refer to Figure 2-4. A movement from ________ could occur because of an influx of immigrant labor.

W to Z

Refer to Figure 2-4. A movement from ________ is the result of negative technological change in plastic production.

Z to Y

Refer to Figure 2-4. Consider the following events: a. an increase in the unemployment rate b. general technological advancement c. a decrease in consumer wealth Which of the events listed above could cause a movement from X to V?

a

Refer to Figure 2-4. Consider the following events: a. a reduction in the patent protection period to no more than 2 years b. a war that destroys a substantial portion of a nation's capital stock c. the lack of secure and enforceable property rights system Which of the events listed above could cause a movement from W to V?

a and c

Refer to Figure 2-4. Consider the following events: a. an increase in the patent protection period to 30 years b. an increase of a nation's capital stock c. an improved property rights system Which of the events listed above could cause a movement from V to W?

a and c

An inward shift of a nation's production possibilities frontier can occur due to

a natural disaster like a hurricane or bad earthquake.

If opportunity costs are constant, the production possibilities frontier would be graphed as

a negatively sloped straight line.

Refer to Figure 2-4. Consider the following events: a. a decrease in the unemployment rate b. general technological advancement c. an increase in consumer wealth Which of the events listed above could cause a movement from V to W?

a only

The Great Depression of the 1930s with a large number of workers and factories unemployed would be represented in a production possibilities frontier graph by

a point inside the frontier.

Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. A combination of 9 pillows and 21 blankets would appear

along Billie's production possibilities frontier.

Refer to Table 2-3. Assume Dina's Diner only produces sliders and hot wings. A combination of 80 sliders and 100 hot wings would appear

along Dina's production possibilities frontier.

Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 24 pizzas and 30 calzones would appear

along Tomaso's production possibilities frontier.

Refer to Figure 2-4. Consider the following movements: a. from point V to point W b. from point W to point Y c. from point Y to point Z Which of the movements listed above represents economic growth?

b and c only

Increasing opportunity cost is represented by a ________ production possibilities frontier.

bowed out

Refer to Figure 2-4. Consider the following events: a. a decrease in the unemployment rate b. an increase in a nation's money supply c. an influx of immigrant workers Which of the events listed above could cause a movement from X to Z?

c

Refer to Figure 2-4. Consider the following movements: a. from point V to point W b. from point W to point Y c. from point Y to point Z Which of the movements listed above represents advancements in technology with respect to only plastic production?

c

Refer to Figure 2-4. Consider the following events: a. an increase in the unemployment rate b. a decrease in a nation's money supply c. a war that kills a significant portion of a nation's population Which of the events listed above could cause a movement from Y to W?

c only

An outward shift of a nation's production possibilities frontier represents

economic growth.

The opportunity cost of taking a semester-long economics class is

equal to the highest value of an alternative use of the time and money spent on the class

The opportunity cost of going to an outdoor music festival is

equal to the highest value of an alternative use of the time and money spent on the festival.

Tesla Motors manufacturers its cars at a plant in Fremont, California. At this plant, Tesla is able to take advantage of the high level of technical training possessed by its American workers, but it also sacrifices the ability to pay lower wages had it chosen to open its plant in a low-wage country such as Mexico, India, or China. In deciding to open the Fremont plant, Tesla

faced a trade-off between higher cost and lower precision.

The production possibilities frontier model shows that

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

The slope of a production possibilities frontier

measures the opportunity cost of producing one more unit of a good

Refer to Figure 2-7. Assume a technological advancement greatly reduces the cost to produce electric-engine vehicles. This is best represented by the

movement from E to F in Graph A

Refer to Figure 2-7. Assume that in response to changing consumer demands, Mercedes cuts back on the production of electric vehicles and increased its production of gasoline-powered vehicles. This strategy is best represented by the

movement from J to H in Graph B

Refer to Figure 2-7. Assume that in 2014, Mercedes reopened one of its factories after an extensive remodelling which now allows for the production of both types of vehicles. This is best represented by the

movement from L to K in Graph C

Refer to Table 2-3. Assume Dina's Diner only produces sliders and hot wings. A combination of 120 sliders and 100 hot wings would appear

outside

Refer to Table 2-2. Assume Billie's Bedroom Shop only produces pillows and blankets. A combination of 9 pillows and 14 blankets would appear

outside Billie's production possibilities frontier.

Refer to Table 2-1. Assume Tomaso's Trattoria only produces pizzas and calzones. A combination of 36 pizzas and 30 calzones would appear

outside Tomaso's production possibilities frontier

Economic decline (negative growth) is represented on a production possibilities frontier model by the production possibility frontier

shifting inward

Scarcity

stems from the incompatibility between limited resources and unlimited wants.

Refer to Figure 2-1. Point B is

technically efficient.

Refer to Figure 2-2. The linear production possibilities frontier in the figure indicates that

the tradeoff between meat and vegetables is constant.

In a report made to the U.S. Congress in 2001, the National Academy of Sciences cautioned that if fuel economy encourages the production of smaller and lighter cars, "Some additional traffic fatalities would be expected." This statement suggests that

there is a tradeoff between safety and fuel economy.

Without an increase in the supplies of factors of production, how can a nation achieve economic growth?

through technological advancement which enables more output with the same quantity of resources

Refer to Figure 2-1. Point C is

unattainable with current resources.

The points outside the production possibilities frontier are

unattainable.

Refer to Figure 2-5. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W?

zero

Refer to Figure 2-6. If the economy is currently producing at point D, what is the opportunity cost of moving to point B?

zero

Refer to Figure 2-6. If the economy is currently producing at point E, what is the opportunity cost of moving to point B?

zero