ECON 212 CH.2

______ analysis means additions to or subtractions from a current situation.

marginal

The basic approach that compares additional benefits of a change against the additional costs of the change is called .

marginal analysis

The __ states that the opportunity cost increases as production of an output expands.

law of increasing opportunity cost

The best alternative sacrificed

opportunity cost

_____ is the best alternative forgone for a chosen option.

opportunity cost

The ____ possibilities curve shows the maximum combinations of two outputs than an economy can produce, given its available resources and technology

production

The -- represents the maximum possible combinations of two outputs that can be produced in a given period of time. Inefficient production occurs at any point inside the curve and all points along the curve are efficient points.

production possibilities curve

The application of knowledge to production

technology

The body of knowledge and skills applied to how goods are produced is____ .

technology

The basic economics question of which goods and services to produce

what

In economics, investment refers to the process of accumulating: a. capital goods. b. inefficiency. c. money. d. stocks and bonds.

A

Any point on the production possibilities curve illustrates: a. minimum production combinations. b. maximum production combinations. c. economic growth. d. a nonfeasible production combination.

B

Which of the following cause(s) economic growth? a. Answers c and d are correct. b. Answers d and e are correct. c. The production of more scarce goods d. A technological improvement e. The production of more capital goods

B

A production possibilities curve has "good X" on the horizontal axis and "good Y" on the vertical axis. On this diagram, the opportunity cost of good X, in terms of good Y, is represented by the: a. distance to the curve from the horizontal axis. b. distance to curve from the vertical axis. c. movement along the curve. d. None of the answers above are correct.

C

On a production possibilities curve, a change from economic inefficiency to economic efficiency is obtained by: a. movement along the curve. b. movement from outside the frontier to a point on the curve. c. movement from a point inside the frontier to a point on the curve. d. a change in the slope of the curve.

C

One of the assumptions underlying the production possibilities curve for any given economy is that: a. the state of technology is changing. b. there is an unlimited supply of available resources. c. there is full employment and no underemployment of resources when the economy is operating on the curve. d. goods can be produced in unlimited quantities.

C

Which of the following does not illustrate opportunity cost? a. If I study, I must give up going to the football game. b. If I buy a computer, I must do without a 35" television. c. More consumer spending now means more spending in the future. d. If I spend more on clothes, I must spend less on food.

C

A source of economic growth is: a. unemployment. b. inefficiency. c. less resources. d. greater entrepreneurship.

D

As production of a good increases, opportunity costs rise because: a. there will be more inefficiency. b. people always prefer having more goods. c. of inflationary pressures. d. workers are not equally suited to all tasks.

D

Which of the following is not one of the three fundamental economic questions? a. What happens when you add to or subtract from a current situation? b. For whom to produce? c. How to produce? d. What to produce?

D

Which of the following would be most likely to cause the production possibility curve for computers and education to shift outward? a. A choice of more computers and less education. b. A choice of more education and less computers. c. A reduction in the labor force. d. An increase in the quantity of resources.

D

Which of the following would be most likely to cause the production possibility curve for tanks and cars to shift outward? a. A reduction in the labor force. b. A choice of more tanks and fewer cars. c. A choice of more cars and fewer tanks. d. An increase in the quantity of natural resources.

D

T F If more of one good can be produced without loss of output of another along the same production possibilities curve, the economy must have been operating efficiently.

False

T F If some resources were used inefficiently, the economy would tend to operate outside its production possibilities curve.

False

T F Investment is an economic term for the act of increasing the stock of money available for business loans.

False

T F Of all the points on the production possibilities curve, only one point represents an efficient division of labor.

False

T F The most efficient point on the production possibilities curve is the midpoint on the curve.

False

T F All points on the production possibilities curve represent efficient levels of production.

True

T F On the production possibilities curve, a movement between points that yields a loss of one good in order to raise the output of another good will maintain efficient production.

True

T F The opportunity cost of a good is the good or service forgone for a chosen good or service.

True

T F Unemployment or underemployment of labor might explain why an economy would be operating inside its production possibilites curve (PPC).

True

T F What to produce, how to produce, and for whom to produce are the three fundamental economic questions.

True

The accumulation of capital

investment

An outward shift of the production possibilities curve

economic growth

____ occurs when the production possibilities curve shifts outward as the result of changes in the resource base or advance in technology.

economic growth

The basic economic question of who receives goods and services

for whom

The _ problem concerns the division of output among society's citizens. The _ question asks exactly which goods are to be produced and in what quantities. The _ question requires society to decide the resource mix used to produce goods.

for whom what how

The basic economic question of which resourced to use in production

how

Factories, equipment, and inventories produced in the present are called ____ which can be used to shift the production possibilities curve outward in the future.

investment