Chapter 2 econ 102
12) Allocative efficiency occurs when it is A) not possible to produce more of one good without giving up the production of some other good that is valued more highly. B) possible to produce more of all goods. C) not possible to produce more of one good without giving up the production of some other good that is valued less highly. D) possible to produce more of one good without giving up the production of some other good.
a
13) Allocative efficiency occurs when A) we cannot produce more of any good without giving up some other good that we value more highly. B) marginal benefit exceeds marginal cost. C) we cannot produce more of any one good without giving up some other good. D) opportunity costs are decreasing
a
14) A country produces only pencils and erasers. Pencil production is allocatively efficient if the marginal ________ of a pencil equals the marginal ________ of ________. A) benefit; cost; a pencil B) benefit; benefit; an eraser C) cost; benefit; an eraser D) cost; cost; an eraser
a
15) We measure the marginal ________ of a good by what a ________ for another unit of the good. A) benefit; person is willing to pay B) benefit; person must pay C) cost; person is willing to pay D) cost; person's preferences are
a
26) Suppose the United States discovers a way to produce clean nuclear fuel. The effect of this discovery would be to A) shift the U.S. PPF outward. B) shift the U.S. PPF inward. C) force the United States to produce at a point inside its PPF. D) lead the United States to produce less nuclear fuel.
a
38) Agnes can produce either 1 unit of X or 1 unit of Y in an hour, while Brenda can produce either 2 units of X or 4 units of Y in an hour. The opportunity cost of producing a unit of Y is A) 1 unit of X per unit of Y for Agnes and 1/2 unit of X per unit of Y for Brenda. B) 1 hour for Agnes and 2 hours for Brenda. C) 1 hour for Agnes and 1/2 hour for Brenda. D) 1 unit of X per unit of Y for Agnes and 2 units of X per unit of Y for Brenda.
a
20) If the marginal benefit of consuming another unit of a good is positive, then to reach the allocatively efficient level of output more of the good should be produced and consumed A) no matter what. B) if the marginal benefit of the good is greater than its marginal cost. C) if the total benefit of the good is greater than its total cost. D) as long as the consumer can afford to pay for it.
b
21) Marginal benefit is the benefit A) of producing a good or service when the total benefit from the good or service exceeds its total cost. B) that is received from consuming one more unit of a good or service. C) of consuming another good or service divided by the total number of goods or services produced. D) that your activity provides to someone else.
b
23) An opportunity cost of economic growth is A) so high that places such as Hong Kong have had to do without it. B) the decrease in production of consumption goods in the present time period. C) essentially zero because economic growth leads to such large gains in the long run. D) decreased by the creation of capital goods rather than consumption goods.
b
29) Consider a production possibilities frontier with corn on the vertical axis and cars on the horizontal. Unusually good weather for growing corn shifts A) the horizontal intercept rightward but does not shift the vertical intercept. B) the vertical intercept upward but does not shift the horizontal intercept. C) neither the horizontal intercept nor the vertical intercept. D) the horizontal intercept rightward and the vertical intercept upward.
b
46) In order for societies to reap the gains from trade, it is necessary to A) achieve productive efficiency. B) define and enforce property rights. C) distribute resources equally. D) foster economic growth.
b
47) In a world lacking property rights, it would be ________ to realize the gains from trade and there would be ________ specialization. A) harder; more B) harder; less C) easier; more D) easier; less
b
48) The term "market" refers to A) locations where buyers and sellers physically meet. B) any arrangement that enables buyers and sellers to get information and trade with one another. C) trading arrangements that have been approved by the government. D) physical structures only.
b
11) On the vertical axis, the production possibilities frontier shows ________; on the horizontal axis, the production possibilities frontier shows ________. A) the quantity of a good; a weighted average of resources used to produce the good B) the quantity of a good; the number of workers employed to produce the good C) the quantity of one good; the quantity of another good D) the quantity of a good; the price of the good
c
17) Which of the following statements can be used to describe efficiency? I. Efficiently using resources means that producers make the highest profits possible. II. Using resources efficiently means that we cannot produce more of one good without producing less of another good that has a higher value. III. Resource use is efficient when we produce goods and services that people value most highly. A) I only B) I and II C) II and III D) I, II and III
c
18) Resource use is allocatively efficient A) whenever marginal cost exceeds marginal benefit. B) when the maximum possible quantity is being produced. C) when marginal benefit equals marginal cost. D) whenever marginal benefit exceeds marginal cost.
c
19) The principle of decreasing marginal benefit means that as the quantity of a good consumed A) decreases, its marginal benefit decreases. B) increases, its total benefit decreases. C) increases, its marginal benefit decreases.
c
27) After Hurricane Katrina devastated parts of Mississippi and New Orleans in 2005, we can be sure that the production possibilities frontier for that area temporarily A) shifted outward, away from the origin. B) became steeper. C) shifted inward, toward the origin. D) became flatter.
c
30) When economic growth occurs, the A) economy moves along its production possibilities frontier. B) production possibilities frontier becomes steeper. C) production possibilities frontier shifts outward. D) production possibilities frontier shifts outward but no longer limits the amount that can be produced.
c
32) Economic growth is shown on the production possibilities frontier as A) an outward shift in the PPF. B) an inward shift in the PPF. C) a movement from one point on the PPF to another. D) the curvature of the PPF.
c
37) Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A A) can produce more units of X in a given time period than can B. B) can produce X using newer technology than can B. C) has a lower opportunity cost of producing good X than has B. D) has a lower opportunity cost of producing good X than of producing good Y.
c
45) Which of the following does NOT help organize trade? A) markets B) property rights C) the production possibilities frontier D) None of the above because all these answers given help organize trade.
c
5) When the production possibilities frontier bows outward from the origin A) opportunity costs are decreasing. B) opportunity costs are constant. C) opportunity costs are increasing. D) some of society's resources are unemployed.
c
16) Marginal benefit is the benefit ________ one more unit of the good and ________ of the good increases. A) of producing; decreases as production B) of producing; increases as production C) from consuming; increases as consumption D) from consuming; decreases as consumption
d
24) Technological progress makes the production possibilities frontier A) become more linear and less bowed. C) shift inward toward the origin. B) become less linear and more bowed. D) shift outward from the origin.
d
25) One of the opportunity costs of economic growth is A) technological change. C) the gain in future consumption. B) capital accumulation. D) reduced current consumption.
d
28) The tradeoff between current consumption and the production of capital goods also reflects a tradeoff between A) economic growth and technological change. B) the future production of capital goods and future consumption of goods. C) satisfying today the needs of the poor and the wants of the wealthy. D) current consumption and future consumption.
d
3) A point inside a production possibilities frontier A) reflects the fact that more technology needs to be developed to fully employ all resources. B) implies that too much labor and not enough capital is being used. C) is more efficient than a point on the production possibilities frontier. D) could indicate that resources are misallocated.
d
4) At one point along a PPF, 10 pizzas and 7 sandwiches can be produced. At another point along the same PPF, 9 pizzas and 10 sandwiches can be produced. The opportunity cost of a pizza between these points is ________ per pizza. A) 10/7 of a sandwich B) 7/10 of a sandwich C) 1/3 of a sandwich D) 3 sandwiches
d
40) Comparative advantage is A) the ability to perform an activity at a zero opportunity cost. B) the ability to perform an activity at a higher opportunity cost than anyone else. C) another name for absolute advantage. D) the ability to perform an activity at a lower opportunity cost than anyone else.
d
43) Both Mergatroid and the Geebocks produce only gizmos and widgets. It is possible for Mergatroid to have A) a comparative but not an absolute advantage in both products. B) an absolute and a comparative advantage in both products. C) neither a comparative nor an absolute advantage in both products. D) an absolute but not a comparative advantage in both products.
d
49) In goods markets ________ and in factor markets ________. A) firms sell to households; firms sell to households B) households sell to firms; firms sell to households C) households sell to firms; households sell to firms D) firms sell to households; households sell to firms
d
6) Sam's production possibilities frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a point inside his frontier, then he A) is fully using all his resources. B) values good A more than good B. C) values good B more than good A. D) can increase production of both goods with no increase in resources.
d
7) Which of the following is NOT true concerning a society's production possibilities frontier (PPF)? A) It reveals the maximum amount of any two goods that can be produced from a given quantity of resources. B) Production efficiency occurs when production is on the frontier itself. C) Tradeoffs occur when moving along a PPF. D) Consumers will receive equal benefits from the two goods illustrated in the PPF.
d