Macro ch 3 practice test mindtap

Robert obtained a ticket to the Kentucky Derby and paid the face value of $500 for his ticket. Robert's brother offered him $1,500 for the ticket, but Robert decided to use the ticket and attended the horse race. We can conclude that Robert's opportunity cost of this ticket is $1,500. $1,000. $500. $2,000.

$1500

efficiently

A set of outputs is said to be produced ___ if, given the current technological knowledge, there is no way one can produce larger amounts of any output without using larger input amounts or giving up some quantity of another output.

Which economist first explained the principle of comparative advantage?

David Ricardo

chart 1 Refer to the following graph. Point _____ indicates an inefficient allocation of resources. D E A B

E

Which of the following is the fundamental question in economics? How to reduce human needs and wants? How to maximize the profits of firms? How to make the best use of scarce resources? How to improve the quality of human capital?

How to make the best use of scarce resources

One of the major decisions that every economy needs to take is:

How to utilize resources efficiently?

Which of the following is true according to the concept of "an invisible hand"?

Pursuit of self-interest promotes economic well-being for the society as a whole.

Identify the correct statement about a market economy.

Resource allocation decisions are taken by a system of prices and costs that are determined by markets.

If an economy produces two goods, corn and wheat, and production involves constant opportunity cost, the production possibilities frontier will be

a downward-sloping straight line.

comparative advantage

a producer (individual, firm, or country) has a comparative advantage over another producer in the production of some good if they have a lower opportunity cost of producing that good than the other producer

absolute advantage

a producer (individual, firm, or country) has an absolute advantage over another producer in the production of some good if it can produce more of that good using the same resources (or the same amount of that good using fewer resources)

Division of labor is beneficial to an economy only if

a system of exchange exist

Suppose that an economy cannot increase the output of one good without a corresponding drop in the production of a second good. This economy has no resources that are unemployed. is operating efficiently. is operating at a point on the society's production possibilities frontier. all of these responses are correct.

all of the above

resources

are the instruments provided by nature or by people that are used to create goods and services. natural resources include minerals, soil, water. Labor is a scarce resource, partly because of time limitations. (the day only has 24 hours) and partly bc the number of skilled workers is limited. factories and machines are resources made by people. These three types of resources are often referred to as land, labor, and capital. They are also called inputs or factors of production

Optimal decision making involves taking into account

both explicit costs and implicit costs.

Division of labor can be defined as

breaking up of a task into a number of smaller tasks and assigning each worker a specific task.

Refer to the following graph. Point D can only be attained in a socialist economy. represents scarcity of resources. can be attained through technological innovation. represents a high level of consumption in the economy.

can be attained through technological innovation.

Specialization of labor leads to

efficiency in production.

According to the law of comparative advantage, a NASCAR driver who is also a good chef should

hire a chef if he opens a restaurant

Scarcity is a concept that does not apply to:

human wants and needs

For an economy's production possibilities frontier, all of the points inside the frontier are ______, and all of the points that are on the production possibilities frontier are ______.

inefficient;efficient

production possibilities frontier

is a curve that shows the maximum quantities of outputs it is possible to produce with the available resource quantities and the current state of technological knowledge

market system

is a form of economic organization in which resource allocation decision are left to individual produces and consumers acting in their own best interests without central direction

voluntary exchange

is beneficial to both parties and determines who gets what in a market economy.

optimal decision

is one that best serves the objectives of the decision maker, whatever those objectives may be. It is selected by explicit or implicit comparison with the possible alternative choices. The term optimal does not mean that we, the observers or analysts, approve or disapprove of the objective itself.

According to the _____, a country can gain from trade by importing a good even if that good can be produced more efficiently domestically.

law of comparative advantage

division of labor

means breaking up a task into a number of smaller, more specialized tasks so that each worker can become more adept at a particular job

Robert obtained a ticket to the Kentucky Derby and paid the face value of $500 for his ticket. Robert's brother offered him $1,500 for the ticket, but Robert decided to use the ticket and attended the horse race. We can conclude that Robert's value for the ticket is

more than $1500

opportunity cost

of any decision is the value of the next best alternative that the decision forces the decision maker to forgo

efficient production occurs:

on the production possibilities frontier or at points beyond the production possibilities frontier.

The _____ explains the concave shape of the production possibilities frontier.

principle of increasing cost

Adam Smith's discussion of the production in a pin factory illustrates the

principle of the division of labor.

allocation its scarce resources

refers to society's decisions on how to divide its scarce input resources among the different outputs produce in the economy and among the different firms or other organizations that produce those outputs

Which of the following leads to increasing opportunity cost of production?

specialization of resources

principle of increasing costs

states that as the production of a good expands, the opportunity cost of producing another unit generally increases

An outward shift of the production possibilities frontier can be caused by

tax reductions that reduce the cost and increase the volume of investment in factories and machinery.

Efficiency in a production process can be defined as

the absence of waste

_____ ensures that producers use inputs efficiently and firms produce output that consumers demand.

the desire for profit

Recent reports have shown that the economy of Babylonia is operating efficiently. This indicates that:

the economy is operating on its production possibilities frontier.

chart 2 Refer to the following graph that shows the production possibilities curve of an economy that produces two goods: wine and cheese. If the economy is currently operating at point D, the current consumption level in the economy is too high. the economy faces capital constraints and cannot move beyond point D. the marginal cost of moving to point B is 200 bottles of wine. the opportunity cost of moving to point B is zero.

the opportunity cost of moving to point B is zero.

Chart 3 Refer to the following graph that shows the production possibilities curve of an economy producing wheat and apples. In this case, a movement from point C to D would mean that resources have become less specialized. the opportunity cost of producing apples has increased. the opportunity cost of producing apples has decreased. the marginal utility from consumption of apples has increased.

the opportunity cost of producing apples has increased.

If an economy produces only capital and consumption goods and is operating inside its production possibilities curve, then

the production of consumption goods can be increased without reducing the production of capital goods.

The basic principle of production possibilities frontier is that, if there are no idle resources in an economy,

the production of one good can be increased only if the production of the other good is decreased.

The position and shape of the production possibilities frontier are determined by

the resources and technology available to a society.

The negative slope of a production possibilities frontier can be explained by

the scarcity of resources

According to economists, a major problem faced by economies is

the scarcity of resources.

When a production possibilities frontier for two goods is constructed as a straight line, this means that

there are no specialized resources used in the production of the two goods

Opportunity cost is the

value of the best alternative forgone when the alternative at hand is chosen.