Econ 2101 Chapter 2

Without government, the "for whom" question could not be solved. True/False

False

If the United States has a lower opportunity cost than Mexico in the production of wheat, then it will import wheat from Mexico. True/False

False

Money is a factor of production because it is part of capital. True/False

False

Money is considered to be a factor of production. True/False

False

For a factor of production to be called capital it must: A)be produced. B)occur in the natural environment. C)be a part of human skill. D)be a result of a stock issue.

A)be produced.

If an economy has to sacrifice increasing amounts of good X for each additional unit of good Y produced, then its production possibilities curve is: A)bowed out from the origin. B)bowed in toward the origin. C)a straight line. D)a vertical line.

A)bowed out from the origin.

If the United States decides to allocate more resources to capital goods and less to consumer goods, the United States will obtain a greater degree of: A)economic growth. B)full employment. C)price stability. D)technical efficiency.

A)economic growth.

Technology is: A)knowledge that can be applied to the production of goods and services. B)generally unlimited in modern economies. C)a graphical illustration of the alternative combinations of goods and services an economy can produce. D)the resources the economy has available to produce goods and services.

A)knowledge that can be applied to the production of goods and services.

An example of a natural resource is: A)oil in the ground. B)oil in storage tanks. C)a factory. D)a computer program.

A)oil in the ground.

Inefficient production or unemployment exists when the economy is ________ the production possibilities curve. A)operating inside B)operating on C)operating outside D)moving along

A)operating inside

When the government provides national defense, it is: A)providing goods and services. B)enforcing the legal system. C)maintaining the money supply. D)stabilizing the economy.

A)providing goods and services.

Factors of production are: A)the resources the economy has available to produce goods and services. B)generally unlimited in modern economies. C)always employed in modern economies. D)the knowledge that can be applied to the production of goods and services.

A)the resources the economy has available to produce goods and services.

Two friends, one an engineer and the other an accountant, decide to form a partnership. If the accountant takes care of the books and the engineer runs the factory, they are likely to enhance the economy's productivity through: A)scarcity. B)specialization of labor. C)a shift in the production possibilities curve. D)a movement along the production possibilities curve.

B)specialization of labor.

Who may benefit from technological progress?A)consumers B)workers C)firms. D)all of the above.

D)all of the above.

A point inside the production possibilities curve may indicate that resources are not being used efficiently. True/False

True

Society can operate on the production possibilities curve only if it has achieved efficiency. True/False

True

The three broad types of resources used to produce goods and services are also known as: A)economic systems. B)factors of production. C)production possibilities. D)financial capital.

B)factors of production.

The three broad types of factors of production are: A)capital, labor, and natural resources. B)money, profit, and interest. C)stocks, bonds, and financial assets. D)technology, human capital, and comparative advantage.

A)capital, labor, and natural resources.

In a market capitalist economy: A)factors of production are owned privately and decisions about their use are basically made by individuals. B)factors of production are owned by the government but decisions about their use are made privately. C)private ownership exists but decisions about resource allocation are usually made centrally by the government. D)there is no role for the government.

A)factors of production are owned privately and decisions about their use are basically made by individuals.

In market capitalism: A)factors of production are privately owned and decisions are made privately. B)factors of production are owned by the government but decisions are made privately. C)there is no role for government. D)the consumer has few choices to make.

A)factors of production are privately owned and decisions are made privately.

Human capital is: A)the set of acquired skills and abilities that workers bring to the production of goods and services. B)the financial wealth the economy has available to produce goods and services. C)the ability to produce one of two goods at relatively lower cost. D)a factor of production only if it occurs naturally.

A)the set of acquired skills and abilities that workers bring to the production of goods and services.

If an economy is producing a combination of goods that places it on the production possibilities curve, then it has: A)economic growth. B)full employment. C)inefficiency. D)idle factors of production.

B)full employment.

Capital is best considered as: A)the natural environment. B)a factor of production that has been produced. C)financial assets. D)money.

B)a factor of production that has been produced.

Which of the following is not capital? A)a computer in the office of an accountant B)a migrant worker in the fields of California C)a wrench in an auto-repair shop D)a new machine used for producing microchips

B)a migrant worker in the fields of California

One of the two criteria for a resource to be considered as a natural resource is that it must: A)have been produced. B)be found in nature. C)be part of a factory or building. D)not be used to produce goods and services.

B)be found in nature.

An economy that has the lowest cost for producing a particular good is said to have a(n): A)technological advantage. B)comparative advantage. C)convex news production possibilities curve. D)all of the above are correct and

B)comparative advantage.

The process through which an economy's production possibilities curve is shifted outward is: A)comparative advantage. B)economic growth. C)full employment. D)specialization.

B)economic growth.

Economic resources used in the production process are called: A)free gifts of the natural environment. B)factors of production. C)consumer items. D)money capital.

B)factors of production.

In a market capitalist economy: A)markets are not competitive. B)individual ownership and decision making are relied upon. C)consumers have few choices. D)the government owns the factors of production.

B)individual ownership and decision making are relied upon.

The proposition that states that as output increases for one good in an economy that is on its production possibilities curve, the cost of additional units of the good on the horizontal axis will be greater and greater is the: A)law of absolute advantage. B)law of increasing opportunity cost. C)law of policy ineffectiveness. D)law of demand.

B)law of increasing opportunity cost.

Resources from nature that can be used to produce other goods and services are called: A)money. B)natural resources. C)labor. D)capital.

B)natural resources.

Efficient production exists when the economy is: A)operating inside its production possibilities curve. B)operating on its production possibilities curve. C)operating outside its production possibilities curve. D)moving beyond its production possibilities curve.

B)operating on its production possibilities curve.

The best example of a command socialist economy is: A)Russia. B)China after 1979. C)Cuba. D)the United States.

C)Cuba.

The law of increasing opportunity cost says that: A)opportunity costs of production always tend to increase. B)increases in wages cause increases in the opportunity costs of production. C)as output increases for one good on its production possibilities curve, the opportunity cost of additional units of the other good will be greater and greater. D)along a production possibilities curve, as output increases in the production of one good, the opportunity costs of additional units of the other good will be less and less.

C)as output increases for one good on its production possibilities curve, the opportunity cost of additional units of the other good will be greater and greater.

A factor of production that has been produced for use in the production of other goods and services is: A)labor. B)money. C)capital. D)natural resources.

C)capital.

The North Korean economy is currently classified as: A)a mixed economy. B)market capitalism. C)command socialism. D)the same kind of economy as Sweden.

C)command socialism.

A person who seeks to earn profits by finding ways to organize factors of production is called a(n): A)foreman B)finance capitalist. C)entrepreneur. D)manager.

C)entrepreneur.

If all factors of production that are available for use under current market conditions are being utilized, then the economy has: A)economic growth. B)comparative advantage. C)full employment. D)inefficient production.

C)full employment.

According to the Case in Point on economic growth, which pattern describes the historical record on growth? A)growth has been strong throughout history B)growth was robust before the Industrial Revolution C)growth was very strong between 1870 and 1970 D)none of the above

C)growth was very strong between 1870 and 1970

The set of acquired skills and abilities that workers bring to the production of goods and services is: A)money. B)wealth. C)human capital. D)natural ability.

C)human capital.

The production possibilities curve represents the fact that: A)the economy will automatically end up at full employment. B)an economy's productive capacity increases proportionally 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.

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.

Human effort that can be applied in the production process is called: A)natural resources. B)technology. C)labor. D)specialization.

C)labor.

Assume an economy is operating on its production possibilities curve, 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.

C)must decrease.

In general, production possibilities curves are "bowed out" because: A)it's wasteful to produce too much of any one good. B)people generally prefer to consume goods in appropriate combinations. C)of the law of increasing opportunity cost. D)of the law of demand.

C)of the law of increasing opportunity cost.

The model that shows the goods and services the economy is capable of producing is the model of: A)utility. B)the fallacy of composition. C)production possibilities. D)scarcity.

C)production possibilities

Government's role of taxing some citizens and transferring income to others is considered: A)enforcing a legal system. B)providing certain goods and services. C)redistributing income. D)maintaining the money supply.

C)redistributing income.

If an economy is operating efficiently and with full employment, the production of more of one commodity will necessarily lead to less of something else being produced because of: A)the unlimited wants of people. B)perfectly adaptability of resources in the production of various goods. C)scarcity. D)the lack of money capital.

C)scarcity.

Knowledge that can be applied to the production of goods and services is: A)natural resources. B)specialization. C)technology. D)comparative advantage.

C)technology.

There are several advantages that a market economy possesses. These do not include the fact that market economies: A)tend to result in high living standards. B)tend to encourage greater economic growth. C)tend to prevent entrepreneurial activity that would result in large accumulations of wealth in the hands of a few people. D)none of the above is true

C)tend to prevent entrepreneurial activity that would result in large accumulations of wealth in the hands of a few people.

In a market capitalist economy, which of the following is not an accepted role for government? A)provision of national defense B)enforcing a legal system C)establishing policies to encourage full employment D)All of the above are acceptable roles for government.

D)All of the above are acceptable roles for government.

One of the two criteria for a resource to be considered as a natural resource is that it must: A)have been produced. B)not be part of the environment. C)be part of a factory or building. D)be available for the production of goods and services.

D)be available for the production of goods and services.

A factor of production that is produced in order to produce something else is called: A)money. B)labor. C)technology. D)capital.

D)capital.

An increase in capital goods and a decrease in consumer goods will: A)eventually lead to a shift to the right of the production possibilities curve. B)increase a nation's capacity to produce. C)lead to more rapid economic growth. D)do all of the above.

D)do all of the above.

In enforcing the legal system, the government in a market capitalist economy acts to: A)enforce contracts. B)enforce property rights. C)discourage fraud. D)do all of the above.

D)do all of the above.

If an economy is producing a level of output that is on its production possibilities curve, the economy A)has idle resources. B)has idle resources but is using resources efficiently. C)has no idle resources but is using them inefficiently. D)has no idle resources and is using resources efficiently.

D)has no idle resources and is using resources efficiently.

An economy is said to have a comparative advantage in producing a particular good if it: A)can produce more of all goods than another economy. B)can produce less of all goods than another economy. C)has the highest cost for producing that good. D)has the lowest cost for producing that good.

D)has the lowest cost for producing that good.

If an economy is producing a combination of goods that places it inside the production possibilities curve, then it has: A)economic growth. B)full employment. C)efficiency. D)idle factors of production or inefficient use of resources.

D)idle factors of production or inefficient use of resources.

The factors of production are: A)money, labor, natural resources, and capital. B)technology, human capital, and natural resources. C)money, capital, and natural resources. D)labor, capital, and natural resources.

D)labor, capital, and natural resources.

An economy is said to have a comparative advantage in the production of a good if it can: A)produce that good with more resources than another economy. B)produce that good with a higher opportunity cost than another economy. C)produce that good outside its production possibilities curve. D)produce the good at a lower opportunity cost than another economy.

D)produce the good at a lower opportunity cost than another economy.

The law of increasing opportunity costs is a result of the fact that: A)the value of the dollar has declined over time. B)wage rates rise as the economy reaches full employment. C)consumers tend to value a good more when they don't have much of it. D)resources are not equally productive in all output categories.

D)resources are not equally productive in all output categories.

A student receives a bachelor's degree in economics and then achieves gainful employment as an economic analyst with a Fortune 500 company. This new worker is likely to enhance the economy's productivity through: A)scarcity. B)free goods. C)stable prices. D)specialization of labor.

D)specialization of labor.

Comparative advantage and trade allow nations to specialize in the production of a larger number of different goods. True/False

False

Government in the United States plays an unimportant role in the economy because the rules for the functioning of the private economy are inherent in the markets themselves. True/False

False

The major difference between natural resources and capital is that the former refers to naturally occurring resources whereas the latter refers to produced resources. True/False

True

The present position of a nation on its production possibilities curve will influence the future position of the production possibilities curve. True/False

True

The production possibilities curve shows various combinations of two products that an economy can produce when there is full employment and economic efficiency. True/False

True