ECON2301 Chapter 2

The process through which an economy's production possibilities curve is shifted outward is: A) comparative advantage. B) economic growth. C) full employment. D) specialization.

economic growth.

A person who seeks to earn profits by finding ways to organize factors of production is called a(n): A) foreman B) finance capitalist. C) entrepreneur. D) manager.

entrepreneur.

In enforcing the legal system, the government in a market capitalist economy acts to: A) enforce contracts. B) enforce property rights. C) discourage fraud. D) do all of the above.

do all of the above.

The set of acquired skills and abilities that workers bring to the production of goods and services is: A) money. B) wealth. C) human capital. D) natural ability.

human capital.

Resources from nature that can be used to produce other goods and services are called: A) money. B) natural resources. C) labor. D) capital.

natural resources.

(Exhibit: Production Possibilities Schedule 1) If the economy produces 10 units of capital goods per period, it also can produce at most _______ unit(s) of consumer goods per period. A) 5 B) 4 C) 3 D) 2

4

(Exhibit: Production Possibilities Schedule 1) The opportunity cost of producing the fourth unit of consumer goods is ___ __ units of capital goods. A) 2 B) 4 C) 6 D) 8

8

During the Great Depression: A) By 1933, 25 percent of the nation's workers had lost their jobs. B) output reached its lowest level in 1929. C) the production possibilities curve shifted sharply inward, which explains the drop in output, jobs, and overall prosperity. D) firms increased output but used fewer workers

By 1933, 25 percent of the nation's workers had lost their jobs.

Improvements in technology provide benefits to: A) consumers, through lower prices. B) workers, although some jobs may be eliminated. C) firms, through lower production costs. D) all of the above.

all of the above.

The law of increasing opportunity cost says that: A) opportunity costs of production always tend to increase. B) increases in wages cause increases in the opportunity costs of production. C) as output increases for one good on its production possibilities curve, the opportunity cost of additional units of the other good will be greater and greater. D) along a production possibilities curve, as output increases in the production of one good, the opportunity costs of additional units of the other good will be less and less.

as output increases for one good on its production possibilities curve, the opportunity cost of additional units of the other good will be greater and greater.

For a factor of production to be called capital it must: A) be produced. B) occur in the natural environment. C) be a part of human skill. D) be a result of a stock issue.

be produced.

(Exhibit: Guns and Butter) This production possibilities curve is: A) linear because of the constant cost. B) bowed in toward the origin because of increasing opportunity costs. C) bowed in toward the origin because of constant cost of guns and butter. D) bowed out from the origin because of increasing opportunity costs.

bowed out from the origin because of increasing opportunity costs.

(Exhibit: Guns and Butter) The combination of guns and butter at point H: A) can be obtained, but would cost too much. B) cannot be attained given the level of technology and the factors of production available. C) has no meaning since it does not relate to the preferences of consumers. D) Is attainable but would increase unemployment.

cannot be attained given the level of technology and the factors of production available.

The three broad types of factors of production are: A) capital, labor, and natural resources. B) money, profit, and interest. C) stocks, bonds, and financial assets. D) technology, human capital, and comparative advantage.

capital, labor, and natural resources.

(Exhibit: Guns and Butter) Points A, B, E, and F: A) indicate combinations of guns and butter that society can produce using all of its factors efficiently. B) show that the opportunity cost of more guns increases, but that of more butter decreases as more of each good is produced. C) indicate that society wants butter more than guns. D) indicate constant costs for guns and increasing costs for butter.

indicate combinations of guns and butter that society can produce using all of its factors efficiently.

Technology is: A) knowledge that can be applied to the production of goods and services. B) generally unlimited in modern economies. C) a graphical illustration of the alternative combinations of goods and services an economy can produce. D) the resources the economy has available to produce goods and services.

knowledge that can be applied to the production of goods and services.

The factors of production are: A) money, labor, natural resources, and capital. B) technology, human capital, and natural resources. C) money, capital, and natural resources. D) labor, capital, and natural resources.

labor, capital, and natural resources.

Knowledge that can be applied to the production of goods and services is: A) natural resources. B) specialization. C) technology. D) comparative advantage

technology.

Factors of production are: A) the resources the economy has available to produce goods and services. B) generally unlimited in modern economies. C) always employed in modern economies. D) the knowledge that can be applied to the production of goods and services.

the resources the economy has available to produce goods and services.

Human capital is: A) the set of acquired skills and abilities that workers bring to the production of goods and services. B) the financial wealth the economy has available to produce goods and services. C) the ability to produce one of two goods at relatively lower cost. D) a factor of production only if it occurs naturally.

the set of acquired skills and abilities that workers bring to the production of goods and services.