ECON 131 CH 2

Refer to Figure 2-5. Efficient production is represented by which point(s)? a. A, B b. A, B, D c. A, B, C d. C

a. A, B

33. Which of the following is an example of a normative, as opposed to positive, statement? a. Universal health care would be good for U.S. citizens. b. An increase in the cigarette tax would cause a decrease in the number of smokers. c. A decrease in the minimum wage would decrease unemployment. d. A law requiring the federal government to balance its budget would increase economic growth.

a. Universal health care would be good for U.S. citizens.

Refer to Figure 2-5. The opportunity cost of obtaining 20 additional dryers by moving from point D to point A is a. 0 washers. b. 20 washers. c. 40 washers. d. None of the above; the economy cannot move from point D to point A.

a. 0 washers.

Refer to Figure 2-5. The opportunity cost of this economy moving from point A to point B is a. 20 dryers. b. 20 washers. c. 20 dryers and 20 washers. d. 60 dryers.

a. 20 dryers

Refer to Figure 2-5. It is possible for this economy to produce a. 60 dryers and 50 washers. b. 60 dryers and 60 washers. c. 80 dryers and 50 washers. d. All of the above.

a. 60 dryers and 50 washers.

The opportunity cost of obtaining more of one good is shown on the production possibilities frontier as the a. amount of the other good that must be given up. b. market price of the additional amount produced. c. amount of resources that must be devoted to its production. d. number of dollars that must be spent to produce it.

a. amount of the other good that must be given up.

In the markets for the factors of production in the circular-flow diagram, a. households are sellers and firms are buyers. b. households are buyers and firms are sellers. c. households and firms are both buyers. d. households and firms are both sellers.

a. households are sellers and firms are buyers.

When a production possibilities frontier is bowed outward, the opportunity cost of producing an additional unit of a good a. increases as more of the good is produced. b. decreases as more of the good is produced. c. does not change as more of the good is produced. d. may increase, decrease, or not change as more of the good is produced.

a. increases as more of the good is produced.

Production is efficient if the economy is producing at a point a. on the production possibilities frontier. b. outside the production possibilities frontier. c. on or inside the production possibilities frontier. d. inside the production possibilities frontier.

a. on the production possibilities frontier.

Unemployment would cause an economy to a. produce inside its production possibilities frontier. b. produce on its production possibilities frontier. c. produce outside its production possibilities frontier. d. experience an inward shift of its production possibilities frontier.

a. produce inside its production possibilities frontier.

Almost all economists agree that tariffs and import quotas a. reduces general economic welfare. b. increases general economic welfare. c. have no effect on general economic welfare. d. stimulate a less than fully employed economy.

a. reduces general economic welfare.

If an economy is producing efficiently, then a. there is no way to produce more of one good without producing less of another good. b. it is possible to produce more of both goods without increasing the quantities of inputs that are being used. c. it is possible to produce more of one good without producing less of another good. d. it is not possible to produce more of any good at any cost.

a. there is no way to produce more of one good without producing less of another good.

21. Refer to Table 2-4. What is the opportunity cost to Picnicland of increasing the production of hotdogs from 450 to 900? a. 150 burgers b. 225 burgers c. 300 burgers d. 450 burgers

b. 225 burgers

Which of the following statements about the circular-flow diagram is correct? a. One must imagine that the economy operates without money in order to make sense of the diagram. b. The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms. c. The government cannot be excluded as a decision maker in a circular-flow diagram. d. All of the above are correct.

b. The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms.

In the simple circular-flow diagram, the participants in the economy are a. firms and government. b. households and firms. c. households and government. d. households, firms, and government.

b. households and firms.

In the circular-flow diagram, which of the following items flows from households to firms through the markets for the factors of production? a. goods and services b. land, labor, and capital c. dollars spent on goods and services d. wages, rent, and profit

b. land, labor, and capital

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 a. society's preferences. b. the available production technology. c. a fair distribution of the output. d. the available demand for the output.

b. the available production technology.

Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that a. the nation is producing beyond its capacity, so inflation will occur. b. the nation is not using all available resources or is using inferior technology or both. c. the nation is producing an efficient combination of goods. d. there will be a large opportunity cost if the nation tries to increase production of any good.

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

A production possibilities frontier can shift outward if a. government increases the amount of money in the economy. b. there is a technological improvement. c. resources are shifted from the production of one good to the production of the other good. d. the economy abandons inefficient production methods in favor of efficient production methods.

b. there is a technological improvement.

Refer to Figure 2-5. If this economy devotes all of its resources to the production of dryers, then it will produce a. 0 dryers and 100 washers. b. 60 dryers and 50 washers. c. 80 dryers and 0 washers. d. 80 dryers and 50 washers.

c. 80 dryers and 0 washers.

Refer to Figure 2-5. It is not possible for this economy to produce at point a. A. b. B. c. C. d. D.

c. C.

Which of the following is an example of a positive, as opposed to normative, statement? a. Inflation is more harmful to the economy than unemployment is. b. If welfare payments increase, the world will be a better place. c. Prices rise when the government prints too much money. d. When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency.

c. Prices rise when the government prints too much money.

Refer to Figure 2-5. Suppose this economy is producing at point D. Which of the following statements would best explain this situation? a. The economy has insufficient resources to produce at a more desirable point. b. The economy's available technology prevents it from producing at a more desirable point. c. There is widespread unemployment in the economy. d. Any of the above statements would be a legitimate explanation for this situation.

c. There is widespread unemployment in the economy.

Which of the following concepts cannot be illustrated by the production possibilities frontier? a. efficiency b. opportunity cost c. equality d. trade-offs

c. equality

Refer to Figure 2-5. This economy cannot currently produce 70 washers and 70 dryers because a. it is not using all of its resources. b. it is not using the most efficient production process. c. it does not have the resources and technology to produce that level of output. d. All of the above are correct.

c. it does not have the resources and technology to produce that level of output.

Which markets are represented in the simple circular-flow diagram? a. markets for goods and services and markets for financial assets b. markets for factors of production and markets for financial assets c. markets for goods and services and markets for factors of production d. markets for goods and services and markets for imports and exports

c. markets for goods and services and markets for factors of production

The production possibilities frontier provides an illustration of the principle that a. trade can make everyone better off. b. governments can sometimes improve market outcomes. c. people face trade-offs. d. people respond to incentives.

c. people face trade-offs.

Refer to Table 2-4. What is the opportunity cost to Picnicland of increasing the production of burgers from 450 to 750? a. 150 hotdogs b. 225 hotdogs c. 300 hotdogs d. 450 hotdogs

d. 450 hotdogs

The country of Gerance produces two goods, cars and wine. Last year, it produced 1,000 cars and 15,000 cases of wine. This year, it produced 1,300 cars and 20,000 cases of wine. Given no other information, which of the following events could not explain this change? a. Gerance experienced a reduction in unemployment. b. Gerance experienced an improvement in car-making technology. c. Gerance acquired more resources. d. Any of these events could explain the change.

d. Any of these events could explain the change.

Refer to Figure 2-5. Inefficient production is represented by which point(s)? a. A, B b. C c. C, D d. D

d. D

In the circular-flow diagram, which of the following is not a factor of production? a. labor b. land c. capital d. money

d. money

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. profit

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.

d. the flows of inputs and outputs and the flow of dollars.

In the circular-flow diagram, which of the following items flows from firms to households through the markets for the factors of production? a. goods and services b. land, labor, and capital c. dollars spent on goods and services d. wages, rent, and profit

d. wages, rent, and profit