Economics Exam Review 2

All of the following are examples of spending on goods and services in the circular flow model except a. Amanda purchases a new electric guitar to pursue her hobby seriously. b. Chaitanya buys a new spa pedicure chair for her expanding nail salon business. c. Hernan buys a pizza at Papa C's. d. Lenny buys a new digital camera to take pictures at his son's graduation.

B

An inward shift of the production possibilities frontier represents a. positive economic growth. b. negative economic growth. c. a rise in the unemployment rate. d. technological improvement.

B

Comparative advantage means a. the ability to produce more of a product with the same amount of resources than any other producer. b. the ability to produce a good or service at a lower opportunity cost than any other producer. c. the ability to produce a good or service at a higher opportunity cost than any other producer. d. compared to others you are better at producing a product.

B

The circular flow model demonstrates a. the role of the government in overseeing the market system. b. the roles played by households and firms in the market system. c. how shortages and surpluses are eliminated in a market. d. how demand and supply for goods and services are brought into equilibrium.

B

The production possibilities frontier shows a. the various products that can be produced now and in the future. b. the maximum attainable combinations of two products that may be produced in a particular time period with available resources. c. what an equitable distribution of products among citizens would be. d. what people want firms to produce in a particular time period.

B

Adam Smith's ________ refers to the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole. a. Utopian society b. comparative advantage model c. invisible hand d. survival of the fittest theory

C

Izzy Amador is a highly talented tattoo artist. She has chosen to specialize in tattoo art because of all of the following except __ a. her tattoos are highly esteemed by tattoo lovers who are willing to pay very high prices. b. for her, this is the most lucrative way to purchase the products that she wants to consume. c. her opportunity cost of pursuing another career is very low. d. she obviously has a comparative advantage in tattoo art.

C

If property rights are not well enforced, all of the following are likely to occur except a. fewer goods and services will be produced. b. economic efficiency will be reduced. c. an economy will produce inside its production possibilities frontier. d. a significant number of people will be willing to risk their funds by investing them in local businesses.

D

Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following? a. never have to engage in trade with other nations b. increase the variety of products that it can produce with a decrease in resources c. consume a combination of goods that lies outside its own production possibilities frontier d. produce a combination of goods that lies outside its own production possibilities frontier

C

Which of the following is a factor of production? a. a sofa produced by a furniture manufacturer b. 20 shares of Microsoft stock c. the janitor at the local elementary school d. $500 in cash

C

The unattainable points in a production possibilities diagram are a. the points within the production possibilities frontier. b. the points along the production possibilities frontier. c. the points of the horizontal and vertical intercepts. d. the points outside the production possibilities frontier.

D

Which of the following would shift a nation's production possibilities frontier inward? a. discovering a cheap way to convert sunshine into electricity b. producing more capital equipment c. an increase in the unemployment rate d. a law requiring workers to retire at age 50

D

If Blake can pick more cherries in one hour than Cody, then Blake has a comparative advantage in cherry picking. True False

False