Econ 2
Production possibilities frontier
A curve showing the maximum attainable combinations of 2 goods that can be produced with available resources and current technology
Market
A group of buyers and sellers of good or service and the institution or arrangement by which they come together to trade
Product market
A market for goods such as a computer or services such as medial treatment
Factor market
A market for the factors of production such as labor capital natural resources and entrepreneurial ability
Free market
A market with few government restrictions on how a good or services can be produced or sold on how a factor of production can be employed
Circular flow digram
A model that illustrates how participants in markers are linked
Sacristy
A situation in which unlimited wants exceed the limited resources available to fulfill those wants
Factor of production
Labor capital natural resources and other inputs used to make goods and services
Which of the following would shift a nation's production possibilities frontier inward? A) producing more capital equipment B) a law requiring workers to retire at age 50 C) an increase in the unemployment rate D) discovering a cheap way to convert sunshine into electricity
b
Entrepreneur
Someone who operates a business bringing together the factors of production labor capital and natural resources to produce goods and services.
Comparative advantage
The ability of an individual a firm or a county to produce good or service at a lower opportunity cost than competitors
Absolute advantage
The ability of an individual a firm or a county to produce more of a good service than competitors using the same about of resources
Economic growth
The ability of the economy to increase the production of goods and services
Trade
The act of buying and selling
Opportunity cost
The highest valued alternative the must be given up to engage in an activity
Property rights
The rights individual or firms have to the exclusive use of their property including the right to buy and sell it
A guild is A) an organization of producers that limits the amount of a good produced. B) a nation that is a free market benchmark. C) a group of nations who agree not to compete with each other. D) a group of independent producers competing with each other.
a
A successful market economy requires well defined property rights and A) an independent court system to adjudicate disputes based on the law. B) balanced supplies of all factors of production. C) a safety net to ensure that those who cannot participate in the market economy can earn an income. D) detailed government regulations.
a
A worker is hired in a A) factor market. B) product market. C) goods and services market. D) government market.
a
Adam Smith's ________ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole. A) invisible hand B) survival of the fittest theory C) Utopian society D) comparative advantage model
a
All of the following are examples of spending on goods and services in the circular flow model except A) Chaitanya buys a new spa pedicure chair for her expanding nail salon business. B) Hernan buys a pizza at Papa C's. C) Lenny buys a new digital camera to take pictures at his son's graduation. D) Amanda purchases a new electric guitar to pursue her hobby seriously.
a
Carmelita can perform either a combination of 35 manicures and 70 pedicures or a combination of 50 manicures and 45 pedicures. If she now performs 35 manicures and 70 pedicures, what is the opportunity cost of performing an additional 15 manicures? A) 25 pedicures B) 5 pedicures C) 20 pedicures D) 45 pedicures
a
For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces. Which of the following is true about the comparative advantage between the two countries? A) Switzerland has the comparative advantage in watches. B) Germany has the comparative advantage in watches. C) Switzerland has the comparative advantage in chocolate. D) Germany has the comparative advantage in watches and chocolate.
a
Suppose your expenses for this term are as follows: tuition: $5,000, room and board: $3,000, books and other educational supplies: $500. Further, during the term, you can only work part-time and earn $4,000 instead of your full-time salary of $10,000. 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? A) $11,500 B) $5,500 C) $8,500 D) $14,500
a
Which of the following are represented by the same flow in the circular flow model? A) the flow of costs and the flow of revenue B) the flow of income earned from the sale of resources and the flow of expenditures on goods and services C) the flow of income received by households and the flow of tax revenues paid by firms D) the flow of goods and the flow of factors of production
a
Which of the following is not a flow in the circular flow model? A) the flow of profit and the flow of revenue B) the flow of revenue received by producers and the flow of payments to resource owners C) the flow of income earned by households and the flow of expenditures incurred by households D) the flow of goods and services and the flow of resources to produce goods and services
a
An outward shift of a nation's production possibilities frontier can occur due to A) a change in the amounts of one good desired. B) an increase in the labor force. C) a reduction in unemployment. D) a natural disaster like a hurricane or bad earthquake.
b
If you can produce more of something than others with the same resources, you have A) an efficient production system. B) an absolute advantage. C) a free-market economy. D) a comparative advantage.
b
Published in 1776, ________ was written by Adam Smith. A) "The Declaration of Economics" B) "An Inquiry into the Nature and Causes of the Wealth of Nations" C) "The General Theory of Employment, Interest, and Money" D) "The Communist Manifesto"
b
Suppose your expenses for this term are as follows: tuition: $9,000, room and board: $1,500, books and other educational supplies: $1,000. Further, during the term, you can only work part-time and earn $3,000 instead of your full-time salary of $8,000. 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? A) $13,000 B) $15,000 C) $18,000 D) $10,000
b
Which of the following is an examples of spending on factors of production in the circular flow model? A) Yvette pays $50 to join a softball league. B) The "Lucky Ducky" casino buys a new craps table for the casino floor. C) Tuan purchases a cappuccino at the student union. D) Laurence rents a car to drive to a wedding in San Diego.
b
Which of the following statements about an entrepreneur is true? A) sells his entrepreneurial services in the output market B) develops the vision for the firm and funds the producing unit C) purchases other factors of production in the output market D) does not face personal risk
b
hich of the following would shift a nation's production possibilities frontier outward? A) a decrease in the unemployment rate B) discovering a more efficient process to desalinate water C) more restrictive immigration policies D) an increase in the minimum wage
b
A critical function of the government in facilitating the operation of a market economy is A) ensuring an equal distribution of income to all citizens. B) controlling the market prices of food items. C) setting up and enforcing private property rights. D) producing goods and services for low income households.
c
Comparative advantage means A) the ability to produce more of a product with the same amount of resources than any other producer. B) compared to others you are better at producing a product. C) the ability to produce a good or service at a lower opportunity cost than any other producer. D) the ability to produce a good or service at a higher opportunity cost than any other producer.
c
For each pound of salami that Hungary produces, it gives up the opportunity to make 10 bottles of beer. Slovakia can produce 1 pound of salami for every 8 bottles of beer it produces. Which of the following is true about the comparative advantage between the two countries? A) Hungary has the comparative advantage in salami. B) Slovakia has the comparative advantage in salami and beer. C) Hungary has the comparative advantage in beer. D) Slovakia has the comparative advantage in beer.
c
If society decides it wants more of one good and ________, then it has to give up some of another good and incur some opportunity costs. A) new resources are discovered B) resources are underutilized C) all resources are fully utilized D) technology advances
c
In the circular flow model, households A) sell goods and services in the input market. B) hire resources sold by firms in the factor market. C) spend earnings from resource sales on goods and services in the product market. D) and firms spend earnings from resource sales on goods and services in the factor market.
c
Question 16 0 / 1 point Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following? A) produce a combination of goods that lies outside its own production possibilities frontier B) never have to engage in trade with other nations C) consume a combination of goods that lies outside its own production possibilities frontier D) increase the variety of products that it can produce with a decrease in resources
c
The unattainable points in a production possibilities diagram are A) the points of the horizontal and vertical intercepts. B) the points within the production possibilities frontier. C) the points outside the production possibilities frontier. D) the points along the production possibilities frontier.
c
Which of the following is an example of spending on goods and services in the circular flow model? A) Lily purchases a new massage table for use in her therapy center. B) Toby buys a new lawn mower to use in his lawn care business. C) Chester buys a first-class ticket from Atlanta to London for his long-awaited vacation. D) Micah purchases a new wrench for his auto repair business.
c
f opportunity costs are ________, the production possibilities frontier would be graphed as a negatively sloped straight line. A) increasing B) decreasing C) constant D) negative
c
A student comments to his roommate that the only way he will be able to pass his final exams is to not sleep for the next three days. This statement suggests that A) society should value good grades more highly than sleep because students can catch up on their sleep once final exams are over. B) society should value sleep more highly than good grades. C) students are more concerned about good grades than good health. D) there is a trade-off between studying and sleep.
d
Horatio can produce either a combination of 15 bird houses and 25 wind chimes or a combination of 30 bird houses and 15 wind chimes. If he now produces 30 bird houses and 15 wind chimes, what is the opportunity cost of producing an additional 10 wind chimes? A) 30 bird houses B) 45 bird houses C) 2 bird houses d 15 bird houses r
d
Households A) purchase resources in the factor market. B) purchase final goods and services in the factor market. C) purchase resources in the product market. D) purchase final goods and services in the product market.
d
In the desire to have a celebrity's image protected to prevent it from being used in ways he would not approve, a celebrity's estate A) will probably not be successful, since there are no laws regulating this kind of use in the United States. B) will have to be granted a patent declaring the celebrity's image a new product, and this will give the estate protection for 7 years. C) will most likely be more successful in developing countries than in high-income countries, since property regulations are better enforced in developing countries. D) can rely on U.S. laws that protect intellectual property rights to prevent the unauthorized use of his image.
d
Izzy Amador is a highly talented tattoo artist. She has chosen to specialize in tattoo art because of all of the following except__ A) her tattoos are highly esteemed by tattoo lovers who are willing to pay very high prices. B) for her, this is the most lucrative way to purchase the products that she wants to consume. C) she obviously has a comparative advantage in tattoo art. D) her opportunity cost of pursuing another career is very low.
d
Suppose there is some unemployment in the economy and society decides that it wants more of one good. Which of the following statements is true? A) It will have to give up production and consumption of some other good. B) It will have to increase resource supplies. C) It is not possible to achieve this unless technology advances. D) It can increase output without giving up another good by employing more resources.
d
Which of the following is a factor of production? A) 20 shares of Microsoft stock B) $500 in cash C) a sofa produced by a furniture manufacturer D) the janitor at the local elementary school
d
Which of the following is a factor of production? A) $25,000 in cash B) 20 shares of Ford stock C) a U.S. Treasury bond D) an acre of forested land
d
________ a nation's production possibilities frontier represents economic growth. A) Moving up along B) Moving down along C) An inward shift of D) An outward shift of
d