Chapter 2

Which statement is NOT part of a market economy? A. most economic decisions are made by central governments B. product prices are the principal mechanism for communicating information in the system C. consumers are free to decide what goods and services to purchase D. the government plays a primary role in protecting private property rights.

A. most economic decisions are made by central governments

Economists refer to the payment to land as: A. rent B. wages C. interest D. profit

A. rent

Why is entrepreneurial ability considered a factor of production? A. because it is a physical input such as land, labor, and capital B. because entrepreneurs assume the risk of producing output, an important part of the production process C. because entrepreneurs work very long hours and demand large profits for the work that they accomplish D. because it is an input that can be used by itself to produce many goods and services desired by society

B. because entrepreneurs assume the risk of producing output, an important part of the production process

Using the productivity rates for Spain and Portugal, which statements is TRUE? A. Spain has a comparative advantage in olives B. Portugal has a compartir advantage in olives C. Both portugal and spain have a comparative advantage in oranges D. Both spain and Portugal have a comparative advantage in olives

C. Both portugal and spain have a comparative advantage in oranges

____ combine land, labor, and capital to produce goods and services and assume the risks associated with running businesses A. economists B. capital marketers C. entrepreneurs D. financiers

C. entrepreneurs

In the graph, a move from point A to point B costs: A. 70 jars of honey B. 75 loaves of bread C. 90 loaves of bread D. 15 loaves of bread

D. 15 loaves of bread

Which of these would NOT be considered a factor of production? A. mineral deposits B. a large copy machine at the office C. college graduates seeking a job D. a bank loan used to start a new business

D. a bank loan used to start a new business

China producers many products at the lowest cost possible, even though Chinese consumers do not desire many of these products A. production efficiency only B. allocative efficiency only C. both productive efficiency and allocative efficiency D. neither production efficiency nor allocative efficiency

A. production efficiency only

Using the productivity rates for spain and portugal, which statement is true? A. spain has a comparative advantage in olives B. Portugal has a comparativa advantage in olives C. Both Portugal and Spain have a comparative advantage in oranges D. Both spain and Portugal has a comparative advantage in Olives

A. spain has a comparative advantage in olives

In the graph a movement from point F to point G could occur if: A. technological improvements occur B. unemployed workers find jobs C. people decide they prefer bread to honey D. people decide the prefer honey to bread

A. technological improvements occur

If a farmer can grow 100 tubs of grapefruit of 250 tubs of oranges per acre of land, what is the opportunity cost of growing one orange? A. 0.4 of an orange B. 0.4 of a grapefruit C. 2.5 oranges D. 2.5 grapefruit

B. 0.4 of a grapefruit

The table shows the production possibilities schedule for guns and butter. The opportunity cost of increasing gun production from 100 units to 200 units is: A. 0 tons of butter B. 5 tons of butter C. 10 tons of butter D. 15 tons of butter

B. 5 tons of butter

In the graph, point B represents: A. a point of inefficiency B. a point where all of society's resources are fully employed C. a better economic situation that point A D. economic growth

B. a point where all of society's resources are fully employed

As more honey is produced, the opportunity cost of producing honey: A. decreases B. increases C. remains the same D. is constant for the first 50 jars and then decreases as productive efficiency is achieved

B. increases

In the graph, a move from point f to point g: A. is a move from full employment to less than full employment B. is impossible with the resources that are available C. is a move from an inefficient point to one that fully utilizes all the available resources D. reflects a positive opportunity cost tradeoffs

B. is impossible with the resources that are available

For a country to have a comparative advantage in a good, it must have: A. more labor to produce that good B. more capital to produce that good C. an ability to produce more of that good than another country has D. a lower opportunity cost of producing that good

B. more capital to produce that good

Increasing opportunity costs occur along the production possibilities frontier because: A. of unemployment in the economy B. not all resources are equally well suited to produce all goods C. resources lack specialization D. of inequities in the distribution of income

B. not all resources are equally well suited to produce all goods

Which of the following is not possible for two countries who trade computers and automobiles with one another? A. one of the countries has an absolute advantage in the production of both products B. one of the countries has a comparative advantage in the production of both products C. One country has an absolute advantage in one product and a comparative advantage in other product D. One country does not have an absolute advantage in either product but has a comparative advantage in one product.

B. one of the countries has a comparative advantage in the production of both products

The ___ shows the combination of two goods that are possible for a society to produce at full employment A. full employment B. production possibilities frontier C. goods and services frontier D. maximal productivity curve

B. production possibilities frontier

A point to the right of the production possibilities frontier is: A. inefficient B. unattainable C. improbable D. efficient

B. unattainable

What would be a reason why an economy is operating at point D? A. a reduction in business investment causes unemployment to increase B. there is a new technological breakthrough in the production of energy-efficient airplanes. C. an economy uses all of its input efficiently but changes the ratio of the goods produced D. an economy experiences an influx of immigrants seeking jobs

C. an economy uses all of its input efficiently but changes the ratio of the goods produced

Which statement is NOT correct regarding point X? A. the combination produced at point X is productively efficient B. society might prefer other combinations on the line to the mix of output a point X C. because it is one the line, combination at point X has no opportunity cost D. the combination of output at point X might not be allocatively efficient

C. because it is one the line, combination at point X has no opportunity cost

Which is NOT one of the basic economic questions that each society must answer? A. what goods and services are to be produced? B. how are these goods and services to be produced? C. how much do we pay those who produce the goods and services? D. who will receive these goods and services?

C. how much do we pay those who produce the goods and services?

When we move from point B to point C, the opportunity cost of producing more corn is ___ the opportunity cost of moving from point D to point E A. greater than B. exactly the same as C. less than D. indeterminately related to

C. less than

A laissez-faire approach to the question of "how to produce" would be found in a: A. socialist economy B. communist economy C. market economy D. planned economy

C. market economy

Which of these is NOT an economic factor of production? A. land B. entrepreneural ability C. money D. labor

C. money

Which of the following is part of a planned economy? A. private individuals and firms own most resources B. product prices are primarily determined by the interaction of demand and supply C. most of the productive resources are owned by the state D. consumers are free to decide what goods and services to purchase

C. most of the productive resources are owned by the state

A change from a technically or productively inefficient mix to an efficient mix of output would BEST be represented with a production possibilities frontier (PPF) as a: A. a shift outward of the PPF B. a shift inward of the PPF C. movement from inside the PPF onto the PPF D. movement from a point on the PPF to a point inside the PPF

C. movement from inside the PPF onto the PPF

Which point in the graph represents unemployed resources? A. point a B. point b C. point f D. point g

C. point f

Which of these questions would NOT be considered one of the basic economic questions? A. should brazil continue to produce ethanol? B. What production method should be used to make batteries for plug-in cars? C. when will the new high-speed train in California be completed? D. to whom will the production of solar panels be sold to

C. when will the new high-speed train in California be completed?

Which is NOT one of the three basic economic questions that each society must answer? A. what goods and services are to be produced? B. how are the goods and services to be produced?' C. who decides what goods and services are demanded? D. who will receive the goods and services?

C. who decides what goods and services are demanded?

A point to the right of the production possibilities frontier indicates: A. an undesirable combination of goods and services B. combinations of output that are unattainable, given the current stock of resources and technology C. levels of production that will cause both unemployment and inflation D. that resources are fully utilized in producing the given combination of goods and services

D. that resources are fully utilized in producing the given combination of goods and services

Suppose that Costa Rica is able to produce 50k pounds of coffee or 10k medical devices per day; Vietnam is able to produce 40k pounds of coffee or 5k medical devices per day. Which statement is TRUE A. Costa rica has an absolute advantage in medical device production, while Vietnam has an absolute advantage in coffee production B. Costa rica has a comparative advantage in the production of both coffee and medical devices C. Cost rica has a comparativa advantage in coffee production of medical devices D. Costa rica has a comparative advantage in production of medical devices, while Vietnam has a comparative advantage in coffee production

D. Costa rica has a comparative advantage in production of medical devices, while Vietnam has a comparative advantage in coffee production

Land as a productive resource does NOT include: A. mineral deposit B. oil C. water D. computers

D. computers

The area between which two points on the production possibilities frontier could represent an improvement in productive efficiency? A. from A to B B. from B to C C. from C to B D. from D to B

D. from D to B

Natural resources in the production process are called ____, and their payment is called___. A. capital; rent B. labor; interests C. land; rent D. land; wages

D. land; wages

The graph describes a situation in which: A. both industries have experienced technological improvements B. only industry 1 has had a technological improvement C. neither industry has had a technological improvement D. only industry 2 has had a technological improvement

D. only industry 2 has had a technological improvement

____ occurs when goods and services are produced with as few resources as possible, while ____ occurs when the mix of goods and services produced is the most desired by society. A. allocative efficiency; production efficiency B. production efficiency; social efficiency C. allocative efficiency; social efficiency D. production efficiency; allocative efficiency

D. production efficiency; allocative efficiency

The table shows the production possibilities schedule for guns and butter. As the production of butter increases, the opportunity cost of butter: A. first rises, then falls B. first falls, then rises C. falls continuously D. remains constant

D. remains constant

Economic growth is shown as a: A. leftward shift of the PPF B. movement inside the PPF C. movement along the PPF D. rightward shift of the PPF

D. rightward shift of the PPF

What does the term "laissez-faire" mean in economic? A. Government plays a major role regulating businesses to protect consumers B. government does not intervene in personal decisions but it controls economic decisions C. the market economy requires intervention to ensure efficiency D. the role of government should be as minimal as possible

D. the role of government should be as minimal as possible