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c

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? 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.

The opportunity cost of an item is

what you give up to get that item

c

Refer to Figure 2-1. Which arrow represents the flow of land, labor, and capital? a. A b. B c. C d. D

a

Refer to Figure 2-1. Which arrow represents the flow of spending by households? a. A b. B c. C d. D

d

Refer to Figure 2-1. Which arrow represents the flow of income payments? a. A b. B c. C d. D

d

24. Refer to Figure 2-7. This economy cannot produce at which point(s)? a. L, M b. N, O, P, Q c. N, O, P d. Q

d

According to the circular flow diagram, if Denny is the owner of a landscaping business and he just received $50 for mowing Mrs. Pendleton's lawn, a. the $50 represents a cost of production for Denny's firm. b. the $50 represents wages, rent, and profit to Denny's firm. c. Denny acts as a firm who interacted in the markets for factors of production with Mrs. Pendleton. d. Denny acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton.

A production possibilities frontier is bowed outward when

As the quantity of one good produced increases, the opportunity cost of producing that good also increases.

c

In the circular-flow diagram, a. factors of production flow from government to firms. b. goods and services flow from households to firms. c. income paid to the factors of production flows from firms to households. d. spending on goods and services flows from firms to households.

b

In the circular-flow diagram, a. firms are buyers in the markets for goods and services. b. households are sellers in the markets for the factors of production. c. firms are sellers in the markets for factors of production and in the markets for goods and services. d. dollars that are spent on goods and services flow directly from firms to households.

b

In the circular-flow diagram, a. profit flows from households to firms. b. labor flows from households to firms. c. services flow from households to firms. d. All of the above are correct.

b

In the circular-flow diagram, a. taxes flow from households to firms, and transfer payments flow from firms to households. b. income payments flow from firms to households, and sales revenue flows from households to firms. c. resources flow from firms to households, and goods and services flow from households to firms. d. inputs and outputs flow in the same direction as the flow of dollars, from firms to households.

c

In the circular-flow diagram, which of the following items does not flow from firms to households? a. goods b. services c. capital d. profit

d

In the circular-flow diagram, which of the following items does not flow from households to firms? a. revenue b. land, labor, and capital c. factors of production d. profit

d

Refer to Figure 2-1. Harvey receives his first paycheck for working as an ice cream vendor. To which of the arrows does this transaction directly contribute? a. B only b. A and B c. C only d. C and D

b

Refer to Figure 2-1. Raymond buys a refrigerator for his new home. To which of the arrows does this transaction directly contribute? a. A only b. A and B c. C only d. C and D

b

Refer to Figure 2-1. Which arrow represents the flow of goods and services? a. A b. B c. C d. D

c

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 a. unemployment. b. an improvement in sofa production technology. c. an improvement in tractor production technology. d. an improvement in both sofa and tractor production technology.

c

Refer to Figure 2-10, Panel (a). Production at point Y is a. impossible and inefficient. b. impossible but efficient. c. possible but inefficient. d. possible and efficient.

a

Refer to Figure 2-10, Panel (a). Production is a. possible at points V, W, Y, and Z, but efficient only at points V, W, and Z. b. possible at points V, W, Y, and Z, but efficient only at point Y. c. possible at points U, V, W, and Z, but efficient only at points V, W, and Z. d. possible at points U, V, W, and Z, but efficient only at point U.

b

Refer to Figure 2-10, Panel (a). The movement from point W to point Y could be caused by a. economic growth. b. unemployment. c. an improvement in efficiency. d. an advance in production technology.

d

Refer to Figure 2-10, Panel (a). The opportunity cost of one sofa is highest when the economy produces a. 0 sofas. b. 12 sofas. c. 20 sofas. d. 24 sofas.

a

Refer to Figure 2-10, Panel (a). To gain 2 tractors by moving from point W to point V, society must sacrifice a. 12 sofas. b. employment. c. efficiency. d. More than one of the above is correct.

b

Refer to Figure 2-12. The shift of the production possibilities frontier from A to B can best be described as a. a downturn in the economy. b. economic growth. c. an enhancement of equality. d. an improvement in the allocation of resources.

c

Refer to Figure 2-12. Which of the following would most likely have caused the production possibilities frontier to shift outward from A to B? a. a decrease in unemployment b. a technological advance in the consumer goods industries c. a general technological advance d. an increase in the availability of capital-producing resources

a

Refer to Figure 2-7. Efficient production is represented by which point(s)? a. L, M b. L, M, N, P, Q c. N, O, P d. Q

c

Refer to Figure 2-7. If this economy devotes all of its resources to the production of engines, then it will produce a. 0 engines and 40 tvs. b. 10 engines and 35 tvs. c. 40 engines and 0 tvs. d. 40 engines and 40 tvs.

a

Refer to Figure 2-7. If this economy moved from point P to point N, then a. it still would not be producing efficiently. b. there would be no gain in either engines or tvs. c. it would be producing more engines and more tvs than at point P. d. It is not possible for this economy to move from point P to point N without additional resources.

c

Refer to Figure 2-7. Inefficient production is represented by which point(s)? a. L, M b. N, O, P, Q c. N, O, P d. Q

c

Refer to Figure 2-7. This economy has the ability to produce at which point(s)? a. N, O, P b. L, M c. L, M, N, O, P d. L, M, Q

c

Refer to Figure 2-7. Unemployment could cause this economy to produce at which point(s)? a. L, M b. N, O, P, Q c. N, O, P d. Q

d

Refer to Figure 2-7. What is the opportunity cost of moving from point L to point M? a. zero b. 15 tvs c. 20 engines and 15 tvs d. 20 engines

b

Refer to Figure 2-7. What is the opportunity cost of moving from point M to point L? a. zero b. 15 tvs c. 20 engines and 15 tvs d. 20 engines

b

Refer to Figure 2-9, Panel (a) and Panel (b). A shift of the economy's production possibilities frontier from Panel (a) to Panel (b) could be caused by a. unemployment. b. an improvement in donut production technology. c. an improvement in coffee production technology. d. an improvement in both donut and coffee production technology.

d

Refer to Figure 2-9, Panel (a) and Panel (b). Which of the following is not a result of the shift of the economy's production possibilities frontier from Panel (a) to Panel (b)? a. the tradeoff between the production of donuts and coffee changes b. the opportunity cost of a cup of coffee is higher at all levels of coffee production c. production of 4 donuts and 2 cups of coffee becomes possible d. production of 1 donut and 4 cups of coffee becomes efficient

b

Refer to Figure 2-9, Panel (a). Production at point K is a. possible and efficient. b. possible but inefficient. c. impossible but efficient. d. impossible and inefficient

a

Refer to Figure 2-9, Panel (a). Production is a. possible at points J, K, L, and M, but efficient only at points J, L, and M. b. possible at points J, K, L, and M, but efficient only at point K. c. possible at points J, L, M, and N, but efficient only at points J, L, and M. d. possible at points J, L, M, and N, but efficient only at point N.

d

Refer to Figure 2-9, Panel (a). The movement from point M to point K could be caused by a. an advance in production technology. b. an improvement in efficiency. c. economic growth. d. unemployment.

c

Refer to Figure 2-9, Panel (a). The opportunity cost of moving from point J to point L is a. 2 donuts. b. 2 donuts and 2 cups of coffee. c. 2 cups of coffee. d. 6 cups of coffee.

a

Refer to Figure 2-9, Panel (a). The opportunity cost of moving from point K to point L is a. 0 cups of coffee. b. 1 donut. c. 2 donuts. d. 4 cups of coffee.

a

Refer to Figure 2-9, Panel (a). The opportunity cost of moving from point M to point L is a. 2 donuts. b. 2 donuts and 4 cups of coffee. c. 4 donuts. d. 4 cups of coffee.

d

Refer to Figure 2-9, Panel (a). The opportunity cost of one cup of coffee is highest when the economy produces a. 0 cups of coffee. b. 2 cups of coffee. c. 4 cups of coffee. d. 6 cups of coffee.

c

Refer to Figure 2-9, Panel (a). To gain 2 donuts by moving from point L to point M, society must sacrifice a. efficiency. b. employment. c. 4 cups of coffee. d. More than one of the above is correct.

b

Refer to Table 2-3. What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600? a. 400 socks b. 300 socks c. 200 socks d. 100 socks

d

Refer to Table 2-3. Which of the following statements is correct? a. The opportunity cost of an additional 200 shoes is constant at 200 socks. b. The opportunity cost of an additional 200 shoes is constant at 300 socks. c. Footville's production possibilities frontier is a straight, downward-sloping line. d. The opportunity cost of an additional 200 shoes increases as more socks are produced.

a

Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Based on the values in the table, the production possibilities frontier is a. bowed outward indicating increasing opportunity costs. b. bowed outward indicating decreasing opportunity costs. c. a straight line indicating constant opportunity costs. d. bowed inward indicating increasing opportunity costs.

c

Refer to Table 2-5. Table 2-5 shows one set of production possibilities. What is the opportunity cost of an increase in the production of wheat from 700 bushels to 1300 bushels? a. 800 bushels of corn b. 600 bushels of corn c. 400 bushels of corn d. 400 bushels of wheat

b

Refer to Table 2-5. Table 2-5 shows one set of production possibilities. What is the opportunity cost of increasing the production of corn from 400 bushels to 800 bushels? a. 200 bushels of wheat b. 400 bushels of wheat c. 600 bushels of wheat d. 800 bushels of wheat

c

Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Which of the following combinations of corn and wheat is not currently attainable but would be attainable if there was an improvement in overall production technology? a. 1600 bushels of corn and 300 bushels of wheat b. 1400 bushels of corn and 800 bushels of wheat c. 1000 bushels of corn and 2000 bushels of wheat d. 600 bushels of corn and 1800 bushels of wheat

b

Refer to Table 2-5. Table 2-5 shows one set of production possibilities. Which of the following statements is correct? a. The opportunity cost of a bushel of corn does not depend on how many bushels of wheat are being produced. b. The opportunity cost of a bushel of corn increases as more corn is produced. c. The opportunity cost of a bushel of corn decreases as more corn is produced. d. The opportunity cost of a bushel of wheat decreases as more wheat is produced.

Production possibilities frontiers are usually bowed outward. This is because

Resources are specialized; that is, some are better at producing particular goods rather than other goods.

b

The essence of science is a. the laboratory experiment. b. the scientific method. c. the study of nature, but not the study of society. d. All of the above are correct.

c

The outer loop of the circular-flow diagram represents the flows of dollars in the economy. Which of the following does not appear on the outer loop? a. wages b. income c. capital d. rent

c

The scientific method is a. the use of modern technology to understand the way the world works. b. the use of controlled laboratory experiments to understand the way the world works. c. the dispassionate development and testing of theories about how the world works. d. the search for evidence to support preconceived theories about how the world works.

c

The scientific method is applicable to studying a. natural sciences, but not social sciences. b. social sciences, but not natural sciences. c. both natural sciences and social sciences. d. None of the above is correct.

d

The two loops in the circular-flow diagram represent a. the flow of goods and the flow of services. b. the flow of dollars and the flow of financial assets. c. the flow of inputs into production processes and the flow of outputs from production processes. d. the flows of inputs and outputs and the flow of dollars.

Which of the following is not an assumption of the productions possibilities frontier?

There is a fixed quantity of money.

b

Which types of models are built with assumptions? a. economic models, but not models in other disciplines such as physics and biology b. economic models as well as models in other disciplines such as physics and biology c. models that are built for teaching purposes but not for research purposes d. bad models

For which of the following individuals would the opportunity cost of going to college be highest?

a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree

A decrease in supply is represented by

a leftward shift of a supply curve.

Which point on a PPF represents that not every conceivable outcome is feasible?

a point outside of the curve

In the production possibilities model, the vertical and horizontal axes measure.

quantities of goods and services

The opportunity cost of this economy moving from point I to point F is a. 120 pillows b. 360 blankets c. zero d. 40 blankets

a.

In a competitive market, the quantity of a product produced and the price of the product are determined by

all buyers and all sellers

Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that a. rational people think at the margin. b. people face trade offs c. people respond to incentives d. improvements in efficiency sometimes come at the expense of equality.

b.

When computing the opportunity cost of attending a basketball game you should include a. the price you pay for the ticket, but not the value of your time. b. the price you pay for the ticket and the value of your time c. neither the price of the ticket nor the value of your time. d. the value of your time, but not the price you pay for the ticket.

b.

Which of the following statements is correct? a. The opportunity cost of an additional 200 shoes is constant at 300 socks. b. The opportunity cost of an additional 200 shoes increases as more socks are produced. c. The opportunity cost of an additional 200 shoes is constant at 200 socks. d. Footville's production possibilities frontier is a straight, downward-sloping line.

b.

The scientific method is applicable to studying

both natural sciences and social sciences.

In a perfectly competitive market, at the market price

buyers can buy all they want and sellers can sell all they want.

Which is the most accurate statement about trade? a. Trade helps rich nations and hurts poor nations. b. Trading for a good can make a nation better off only if the nation cannot produce that good itself. c. Trade can make every nation better off. d. Trade makes some nations better off and others worse off.

c.

The most obvious benefit of specialization and trade is that they allow us to

consume more goods than we otherwise would be able to consume.

Which of the following events will definitely cause equilibrium price to fall?

demand decreases and supply increases

A statement describing how the world should be a. would only be made by an economist employed by the government. b. is a positive statement. c. would only be made by an economist speaking as a scientist. d. is a normative statement.

d.

Economics deals primarily with the concept of a. money b. banking c. poverty d. scarcity

d.

It is possible for an economy to increase its production of both goods if the economy a. moves upward and to the left along its production possibilities frontier and the frontier is bowed outward. b. moves downward and to the right along its production possibilities frontier and the frontier is bowed outward. c. moves in either direction along its production possibilities frontier and the frontier is a straight line. d. moves from a situation of inefficient production to a situation of efficient production.

d.

The production possibilities frontier is a graph that shows the various combinations of output that an economy a. wants to produce b. demands c. should produce d. can produce

d.

This economy has the ability to produce at which point(s)? a. T b. R, U c. Q, R, T, U d. R, T, U

d.

The property of society getting the most it can from its scarce resources is called

efficiency.

For an economist, the idea of making assumptions is regarded generally as a

good idea, since doing so helps to simplify the complex world and make it easier to understand.

The opportunity cost of production is zero

inside the production possibilities frontier

Allocative Efficiency

is the one point on the PPF that provides for the most happiness for society.

On a bowed production possibilities frontier, as you move down along the curve

more of one good must be given up to receive one unit of the other good AND the available production technology does not change AND the opportunity cost increases.

"Allowing all individuals access to Medicare and Medicaid for health insurance is the fair thing to do" is an example of

normative economic statement

Production is efficient if the economy is producing at a point

on the production possibilities frontier.

The production possibilities frontier provides an illustration of the principle that

people face trade-offs.

Which point on a PPF represents efficient production?

points directly on the line

Which points on a PPF represent inefficient production?

points inside of the line

"Prices rise when the quantity of money rises rapidly" is an example of a

positive economic statement.

A demand schedule is a table that shows the relationship between

price and quantity demanded.

he signals that guide the allocation of resources in a market economy are

prices.

The phenomenon of scarcity stems from the fact that

resources are limited

The production possibilities frontier is a graph that shows the various combinations of output that an economy can possibly produce given the available factors of production and

the available production technology.

The production possibilities frontier illustrates

the combinations of output that an economy can produce

A microeconomist — as opposed to a macroeconomist — might study

the effect of rising oil prices on employment in the airline industry.

If a person has a comparative advantage in a particular activity:

they can accomplish that activity at the lowest opportunity cost.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that

the nation is not using all available resources or is using inferior technology or both.

Which of the following does not affect an individual's demand curve?

the number of buyers

A production possibilities frontier is a straight line when

the opportunity cost of producing goods is constant (always the same).

The opportunity cost of going to college is

the value of the best alternative a student gives up to attend college.

When an economy is operating at a point on its production possibilities frontier, then

there is no way to produce more of one good without producing less of the other.