quiz 2 economics

A firm can produce a single unit of output by combining labor and capital in any of the combinations shown in the following table. Labor costs $2 per unit and capital costs $4 per unit. Technique A B C D Labor 10 8 6 9 Capital 6 8 10 7 Refer to the table. Which is the most efficient technique for producing the output?

technique a

Which of the following is a capital good? Answers: A steel fabrication facility A state highway construction bond A share of Microsoft stock A gallon of milk

A steel fabrication facility

***s and x outside line*** Which combination of points show production possibilities only achievable with improvements in technology or increases in resources? Answers: a. Q, R, U, and V b. S and X c. T and W d. None of the above is correct.

b. S and X

Any point on a country's production possibilities frontier represents a combination of two goods that an economy Answers: a. will never be able to produce. b. can produce using all available resources and technology. c. may be able to produce in the future with more resources and/or superior technology. d. can produce using some portion, but not all, of its resources and technology.

b. can produce using all available resources and technology.

***the whole line move outward*** The shift of the production possibilities frontier from A to B can best be described as Answers: a. an enhancement of equality. b. economic growth. c. a downturn in the economy. d. an improvement in the allocation of resources.

b. economic growth.

Production is efficient if the economy is producing at a point Answers: a. outside the production possibilities frontier. b. on the production possibilities frontier. c. inside the production possibilities frontier. d. on or inside the production possibilities frontier.

b. on the production possibilities frontier.

When a relevant variable that is not named on either axis changes, Answers: a. the curve will rotate clockwise. b. the curve will shift. c. the curve will be unaffected since only the variables on the axis affect the curve. d. there will be a movement along the curve.

b. the curve will shift.

Home is a country that produces two goods, pears and cellular phones. Last year, Home produced 450 bushels of pears and 1050 cellular phones. This year it produced 450 bushels of pears and 2000 cellular phones. Given no other information, which of the following events could explain this change? Answers: a. Home experienced increased unemployment. b. Home experienced a decline in pear-producing technology. c. Home experienced an improvement in cellular phone-making technology. d. Home experienced a reduction in resources.

c. Home experienced an improvement in cellular phone-making technology.

****tractor amount increased*** Refer to Figure 2-10, Panel (a) and Panel (b). A shift of the economy's production possibilities frontier from Panel (a) to Panel (b) could be caused by Answers: a. an improvement in sofa production technology. b. an improvement in both sofa and tractor production technology. c. an improvement in tractor production technology. d. unemployment.

c. an improvement in tractor production technology.

This economy cannot currently produce 70 washers and 70 dryers because Answers: a. it is not using all of its resources. b. it is not using the most efficient production process. c. it does not have the resources and technology to produce that level of output. d. All of the above are correct.

c. it does not have the resources and technology to produce that level of output.

**** points z,w,v on line point y inside point u outside**** Refer to Figure 2-10, Panel (a). Production is Answers: a. possible at points U, V, W, and Z, but efficient only at point U. b. possible at points U, V, W, and Z, but efficient only at points V, W, and Z. c. possible at points V, W, Y, and Z, but efficient only at points V, W, and Z. d. possible at points V, W, Y, and Z, but efficient only at point Y.

c. possible at points V, W, Y, and Z, but efficient only at points V, W, and Z.

What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600? Answers: a. 100 socks b. 200 socks c. 400 socks d. 300 socks

d. 300 socks

Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1000 units of food and 47 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 1050 units of food and 47 machines. Which of the following statements is correct? Answers: a. In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies. b. Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry. c. Because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 47. d. The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.

d. The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.

An economic outcome is said to be efficient if the economy is Answers: a. conserving on resources, rather than using all available resources. b. able to produce more than what is currently being produced without additional resources. c. using all of the scarce resources it has available. d. getting all it can get from the scarce resources it has available.

d. getting all it can get from the scarce resources it has available.

In the markets for the factors of production in the circular-flow diagram, Answers: a. households are buyers and firms are sellers. b. households and firms are both sellers. c. households and firms are both buyers. d. households are sellers and firms are buyers.

d. households are sellers and firms are buyers.

An economy's production of two goods is efficient if Answers: a. the goods are produced using only some of society's available resources. b. all members of society consume equal portions of the goods. c. the opportunity cost of producing more of one good is zero. d. it is impossible to produce more of one good without producing less of the other.

d. it is impossible to produce more of one good without producing less of the other.