Macroeconomics 2.1 Studyguide
26) Increasing marginal opportunity cost implies that A) the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts. B) the more resources already devoted to any activity, the benefits from allocating yet more resources to that activity decreases by progressively larger amounts. C) that rising opportunity costs makes it inefficient to produce beyond a certain quantity. D) the law of scarcity.
A
54) The recession of 2007-2009 would most likely be represented in a production possibilities frontier graph by A) a point inside the frontier. B) a point outside the frontier. C) a point on the frontier. D) an intercept on either the vertical or the horizontal axis
A
7) The ________ production points on a production possibility curve are the points along and inside the production possibility frontier. A) attainable B) unattainable C) productively efficient D) allocatively efficient
A
75) Which of the following would shift a nationȇs production possibilities frontier outward? A) discovering a more efficient process to desalinate water B) an increase in the minimum wage C) a decrease in the unemployment rate D) more restrictive immigration policies
A
Choice Quantity of Ascots Produced Quatity of Bowties produced A 32 0 B 24 6 C 16 12 D 8 18 E 0 24 70) Refer to Table 2-2. Assume Nadiaȇs Neckware only produces ascots and bowties. A combination of 8 ascots and 18 bowties would appear A) along Nadiaȇs production possibilities frontier. B) inside Nadiaȇs production possibilities frontier. C) outside Nadiaȇs production possibilities frontier. D) at the horizontal intercept of Nadiaȇs production possibilities frontier.
A
Choice Quantity of Sliders Produced Quatity of Wings produced A 80 0 B 60 25 C 40 50 D 20 75 E 0 100 30) Refer to Table 2-1. Assume Dinaȇs Diner only produces sliders and hot wings. A combination of 40 sliders and 50 hot wings would appear A) along Dinaȇs production possibilities frontier. B) inside Dinaȇs production possibilities frontier. C) outside Dinaȇs production possibilities frontier. D) at the vertical intercept of Dinaȇs production possibilities frontier.
A
Choice Quantity of Sliders Produced Quatity of Wings produced A 80 0 B 60 25 C 40 50 D 20 75 E 0 100 31) Refer to Table 2-1. Assume Dinaȇs Diner only produces sliders and hot wings. A combination of 60 sliders and 25 hot wings would appear A) along Dinaȇs production possibilities frontier. B) inside Dinaȇs production possibilities frontier. C) outside Dinaȇs production possibilities frontier. D) at the vertical intercept of Dinaȇs production possibilities frontier.
A
98) What does the termȱȈincreasing marginal opportunity costȈȱmean? How are increasing marginal opportunity costs represented on a bowed out production possibilities frontier?
Answer: Increasing marginal opportunity costs means that as more and more of a product is made, the opportunity cost of making each additional unit rises. They are represented by moving down a bowed out production possibilities frontier.
2) To compete in the automobile market, Tesla must make many strategic decisions such as whether to introduce a new car model, how to sell and service its cars, and where to advertise. At Teslaȇs Fremont, California plant, managers must decide on the monthly production quantities of their S and X models. In making this decision, the managers A) face no trade-off because the Fremont plant only produces these two models of the many Tesla models produced worldwide. B) face a trade-off, because producing more of one model means producing less of the others. C) will choose to only produce the quantity of S and X models where marginal cost equals zero. D) will always decide on production quantities in which revenues are maximized.
B
3) The principle of ________ is that the economic cost of using a factor of production is the alternative use of that factor that is given up. A) marginal cost B) opportunity cost C) normative economics D) entrepreneurship
B
4) The production possibilities frontier shows A) the various products that can be produced now and in the future. B) the maximum attainable combinations of two products that may be produced in a particular time period with available resources. C) what an equitable distribution of products among citizens would be. D) what people want firms to produce in a particular time period.
B
40) Without technological advancement, how can a nation achieve economic growth? A) by producing more high-value goods and fewer low-value goods B) through an increase in supplies of factors of production C) by producing more low-value goods and fewer high-value goods D) by decreasing the size of the labor force
B
69) 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) 2 bird houses B) 15 bird houses C) 30 bird houses D) 45 bird houses
B
74) An inward shift of the production possibilities frontier represents A) positive economic growth. B) negative economic growth. C) a rise in the unemployment rate. D) technological improvement.
B
Choice Quantity of Sliders Produced Quatity of Wings produced A 80 0 B 60 25 C 40 50 D 20 75 E 0 100 32) Refer to Table 2-1. Assume Dinaȇs Diner only produces sliders and hot wings. A combination of 40 sliders and 25 hot wings would appear A) along Dinaȇs production possibilities frontier. B) inside Dinaȇs production possibilities frontier. C) outside Dinaȇs production possibilities frontier. D) at the vertical intercept of Dinaȇs production possibilities frontier.
B
Choice Quantity of Sliders Produced Quatity of Wings produced A 80 0 B 60 25 C 40 50 D 20 75 E 0 100 33) Refer to Table 2-1. Assume Dinaȇs Diner only produces sliders and hot wings. A combination of 20 sliders and 60 hot wings would appear A) along Dinaȇs production possibilities frontier. B) inside Dinaȇs production possibilities frontier. C) outside Dinaȇs production possibilities frontier. D) at the vertical intercept of Dinaȇs production possibilities frontier.
B
13) 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) 5 pedicures B) 20 pedicures C) 25 pedicures D) 45 pedicures
C
24) Increasing opportunity cost along a bowed out production possibilities frontier occurs because A) of inefficient production. B) of ineffective management by entrepreneurs. C) some factors of production are not equally suited to producing both goods or services. D) of the scarcity of factors of production
C
56) 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) technology advances B) resources are underutilized C) all resources are fully utilized D) new resources are discovered
C
6) The production possibilities frontier model assumes all of the following except A) labor, capital, land and natural resources are fixed in quantity. B) the economy produces only two products. C) any level of the two products that the economy produces is currently possible. D) the level of technology is fixed and unchanging.
C
66) 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) students are more concerned about good grades than good health. B) society should value sleep more highly than good grades. C) there is a trade-off between studying and sleep. D) society should value good grades more highly than sleep because students can catch up on their sleep once final exams are over.
C
67) 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) $5,500 B) $8,500 C) $11,500 D) $14,500
C
68) The opportunity cost of taking an on-line history class is A) the knowledge and enjoyment you receive from taking the class. B) the value of the time spent on line. C) equal to the highest value of an alternative use of the time and money spent on the class. D) zero because there is no classroom time involved if you are enrolled in the course. E) the cost of tuition and fees only
C
76) 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) $10,000 B) $13,000 C) $15,000 D) $18,000
C
Choice Quantity of Ascots Produced Quatity of Bowties produced A 32 0 B 24 6 C 16 12 D 8 18 E 0 24 73) Refer to Table 2-2. Assume Nadiaȇs Neckties only produces ascots and bowties. Nadia faces ________ opportunity costs in the production of ascots and bowties. A) increasing B) decreasing C) constant D) negative
C
Choice Quantity of Sliders Produced Quatity of Wings produced A 80 0 B 60 25 C 40 50 D 20 75 E 0 100 34) Refer to Table 2-1. Assume Dinaȇs Diner only produces sliders and hot wings. A combination of 60 sliders and 50 hot wings would appear A) along Dinaȇs production possibilities frontier. B) inside Dinaȇs production possibilities frontier. C) outside Dinaȇs production possibilities frontier. D) at the vertical intercept of Dinaȇs production possibilities frontier
C
Choice Quantity of Sliders Produced Quatity of Wings produced A 80 0 B 60 25 C 40 50 D 20 75 E 0 100 35) Refer to Table 2-1. Assume Dinaȇs Diner only produces sliders and hot wings. A combination of 50 sliders and 50 hot wings would appear A) along Dinaȇs production possibilities frontier. B) inside Dinaȇs production possibilities frontier. C) outside Dinaȇs production possibilities frontier. D) at the vertical intercept of Dinaȇs production possibilities frontier.
C
Choice Quantity of Sliders Produced Quatity of Wings produced A 80 0 B 60 25 C 40 50 D 20 75 E 0 100 36) Refer to Table 2-1. Dina faces ________ opportunity costs in the production of sliders and hot wings. A) increasing B) decreasing C) constant D) negative
C
14) If the production possibilities frontier is linear, then A) opportunity costs are decreasing as more of one good is produced. B) it is easy to efficiently produce output. C) opportunity costs are increasing as more of one good is produced. D) opportunity costs are constant as more of one good is produced.
D
25) The slope of a production possibilities frontier measures the ________ of producing one more unit of a good. A) marginal revenue B) total revenue C) marginal cost D) opportunity cost
D
27) If opportunity costs are ________, the production possibilities frontier would be graphed as a negatively sloped straight line. A) decreasing B) increasing C) negative D) constant
D
37) An outward shift of a nationȇs production possibilities frontier can occur due to A) a reduction in unemployment. B) a natural disaster like a hurricane or bad earthquake. C) a change in the amounts of one good desired. D) an increase in the labor force.
D
41) Which of the following would shift a nationȇs production possibilities frontier inward? A) discovering a cheap way to convert sunshine into electricity B) producing more capital equipment C) an increase in the unemployment rate D) a law requiring workers to retire at age 50
D
5) ________ shows that if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. A) Comparative advantage B) Absolute advantage C) The mixed market system D) The production possibilities frontier model
D
8) The unattainable points in a production possibilities diagram are A) the points within the production possibilities frontier. B) the points along the production possibilities frontier. C) the points of the horizontal and vertical intercepts. D) the points outside the production possibilities frontier.
D
85) If additional units of a good could be produced at a constant opportunity cost, the production possibility frontier would be linear.
TRUE
94) On a diagram of a production possibility frontier, economic decline (negative growth) is represented by the production possibility frontier shifting inward.
TRUE
81) If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is with an advance in technology.
FALSE
92) A decrease in the labor force shifts the production possibility frontier inwards over time.
TRUE
55) 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 is not possible to achieve this unless technology advances. B) It can increase output without giving up another good by employing more resources. C) It will have to increase resource supplies. D) It will have to give up production and consumption of some other good.
B
57) According to the production possibility model, if more resources are allocated to the production of physical and human capital, then all of the following are likely to happen except A) fewer goods will be produced for consumption today. B) the production possibilities frontier will be shift outward in the future. C) future economic growth is enhanced. D) the countryȇs total production will fall.
D
Choice Quantity of Ascots Produced Quatity of Bowties produced A 32 0 B 24 6 C 16 12 D 8 18 E 0 24 71) Refer to Table 2-2. Assume Nadiaȇs Neckware only produces ascots and bowties. A combination of 16 ascots and 6 bowties would appear A) along Nadiaȇs production possibilities frontier. B) inside Nadiaȇs production possibilities frontier. C) outside Nadiaȇs production possibilities frontier. D) at the horizontal intercept of Nadiaȇs production possibilities frontier.
B
80) An increase in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point inside the frontier.
TRUE
82) Consider a country that produces only two goods: pineapples and tractors. Suppose it is possible for this country to increase its production of pineapples without producing fewer tractors. In this case, its current output combination is inefficient.
TRUE
83) Any output combination inside a production possibility frontier is associated with unused or underutilized resources.
TRUE
86) On a diagram of a production possibility frontier, opportunity cost is represented by the slope of the production possibility frontier.
TRUE
88) A decrease in the unemployment rate may be represented as a movement from a point inside the production possibilities frontier to a point on the frontier.
TRUE
89) If a country is producing efficiently and is on the production possibilities frontier, producing more of one good would result in a movement along the frontier.
TRUE
90) Consider a country that produces only two goods: bird feeders and binoculars. Suppose it is possible for this country to increase its production of bird feeders without producing fewer binoculars. In this case, its current output combination is inefficient
TRUE
93) If additional units of a good are produced at an increasing opportunity cost, the production possibility frontier would be bowed outward (concave).
TRUE
1) ________ exists because unlimited wants exceed the limited resources available to fulfill those wants. A) Scarcity B) Productive efficiency C) The command economy D) Economic growth
A
38) ________ a nationȇs production possibilities frontier represents economic growth. A) An outward shift of B) An inward shift of C) Moving up along D) Moving down along
A
84) An increase in population shifts the production possibility frontier inwards over time.
FALSE
39) Economic growth is represented on a production possibilities frontier model by the production possibility frontier A) shifting outward. B) shifting inward. C) becoming steeper. D) becoming flatter.
A
96) What causes a production possibilities frontier to shift inward?
Answer: A production possibilities curve shifts inward with economic decline, or negative growth. This occurs with a decrease in resources or a negative technology change.
95) What causes a production possibilities frontier to shift outward?
Answer: A production possibilities curve shifts outward with economic growth, which occurs with an increase in resources or a positive technology change.
23) A production possibilities frontier with a ________ shape indicates increasing opportunity costs as more and more of one good is produced. A) linear B) bowed inward C) bowed outward D) perfectly horizontal
C
Choice Quantity of Ascots Produced Quatity of Bowties produced A 32 0 B 24 6 C 16 12 D 8 18 E 0 24 72) Refer to Table 2-2. Assume Nadiaȇs Neckware only produces ascots and bowties. A combination of 24 ascots and 12 bowties would appear A) along Nadiaȇs production possibilities frontier. B) inside Nadiaȇs production possibilities frontier. C) outside Nadiaȇs production possibilities frontier. D) at the horizontal intercept of Nadiaȇs production possibilities frontier.
C
12) In a production possibilities frontier model, a point inside the frontier is A) allocatively efficient. B) productively efficient C) allocatively inefficient. D) productively inefficient.
D
87) To increase gas mileage, automobile manufacturers make cars small and light. Large cars absorb more of the impact of an accident than small cars but yield lower gas mileage. These facts suggest that a positive relationship exists between safety and gas mileage.
FALSE
91) Any output combination along a production possibility frontier is associated with overused or unattainable resources.
FALSE
