Ch.1 Macroeconomics

Which of the following will shift the production possibilities curve to the right?

a technological advance that allows farmers to produce more output from given inputs

If we say that two variables are inversely related, this means that:

an increase in one variable is associated with a decrease in the other.

Refer to the above diagram. The movement down the production possibilities curve from point A to point E suggests that the production of:

both bicycles and computers are subject to increasing opportunity costs.

The law of increasing opportunity costs is reflected in a production possibilities curve that is:

bowed out from the origin.

The slope of a straight line can be determined by:

comparing the absolute vertical change to the absolute horizontal change between two points on the line.

Refer to the above diagram. Which one of the following would shift the production possibilities curve from PP1 to PP2?

immigration of skilled workers into the economy

Refer to the above table. For these data the law of increasing opportunity costs is reflected in the fact that:

larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods.

Any point inside the production possibilities curve indicates:

that more output could be produced with available resources.

Refer to the above diagram. This production possibilities curve is constructed so that:

the opportunity cost of both bread and tractors increases as more of each is produced.

If a positive relationship exists between x and y:

the relationship will graph as an upsloping line.

Refer to the above diagram. The combination of computers and bicycles shown by point G is:

unattainable, given currently available resources and technology.

The marginal cost curve is:

upsloping because of increasing marginal opportunity costs.

Refer to the above diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost:

will be 2 units of bicycles.

Refer to the above diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles:

will cost 1 unit of computers

Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods:

would involve an inefficient use of the economy's scarce resources.

The marginal benefit curve is:

downsloping because successive units of a specific product yield less and less extra benefit.

If the production possibilities curve is a straight line

economic resources are perfectly substitutable between the production of the two products.

The law of increasing opportunity costs states that:

if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.

Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if:

it chooses point A.

If an economy is operating on its production possibilities curve for consumer goods and capital goods, this means that:

more consumer goods can only be produced at the cost of fewer capital goods.

Assume an economy is incurring unemployment. The effect of resolving this problem will be to:

move the level of actual output on to the economy's production possibilities curve.

Refer to the above diagram. The equation that shows the relationship between Y and X is:

Y = 50 + 1/4 X.

Refer to the above table. For this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods it must:

achieve economic growth.

If two variables are inversely related, then as the value of one variable:

increases, the value of the other decreases.

Refer to the above diagram. The slope of the line:

is + 1/4.

Refer to the above diagram. The vertical intercept:

is 50

The production possibilities curve:

is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced.

Refer to the above diagram. The concept of opportunity cost is best represented by the:

move from B on PP1 to C on PP1.

Which of the following is assumed in constructing a typical production possibilities curve?

production technology is fixed.

When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because:

resources are limited.

A nation's production possibilities curve is bowed out from the origin because:

resources are not generally equally efficient in producing every good.

If the equation y = 15 - 4x was plotted, the:

slope would be -4.

Which of the following is not correct? A typical production possibilities curve:

specifies how much of each product society should produce.

The optimal allocation of resources is found:

where MB = MC.

Refer to the above diagram. The variables X and Y are:

directly related

Refer to the above table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be:

1/3 of a unit of capital goods

Refer to the above diagram. Starting at point E, the production of successive units of bread will cost:

1/8, 1/6, 1/4, and 1/2 units of tractors.

Refer to the above diagram. Starting at point A, the opportunity cost of producing each successive unit of tractors is:

2, 4, 6, and 8 units of bread.

Refer to the above diagram. Other things equal, which of the following positions relative to PP1 would be the most likely to result in a future production possibilities curve of PP3, rather than PP2?

A

Assume a household would consume $100 worth of goods and services per week if its weekly income were zero and would spend an additional $80 per week for each $100 of additional income. Letting C represent consumption and Y represent income, the equation that summarizes this relationship is:

C = 100 + .8Y.

Refer to the above diagram. This economy will experience unemployment if it produces at point:

D

Which of the following statements, if any, is correct for a nation that is producing only consumer and capital goods?

Other things equal, the more capital goods a nation produces, the greater will be its future growth rate.

Refer to the above diagram for athletic shoes. The optimal output of shoes is:

Q2

Which of the following statements is correct?

The value of the dependent variable is determined by the value of the independent variable.

The typical production possibilities curve is:

a downsloping line that is bowed out from the origin.

Other things equal, which of the following would shift an economy's production possibilities curve to the left?

a law requiring mandatory retirement from the labor force at age 55

If we say that two variables are directly related, this means that:

an increase in one variable is associated with an increase in the other variable.

Suppose that an economy is producing on its production possibilities curve, but is not producing quantities of each good where the marginal benefit equals the marginal cost for each good. This economy:

can improve its allocation by producing more of one good and less of the other.

If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it:

can produce more of both consumer goods and capital goods by using resources that are currently idle.

Refer to the above diagram. Points A, B, C, D, and E show:

combinations of bicycles and computers that society can produce by using its resources efficiently.

The basic difference between consumer goods and capital goods is that

consumer goods satisfy wants directly while capital goods satisfy wants indirectly.

Refer to the above diagram. The combination of computers and bicycles shown by point F:

is attainable, but implies that the economy is not using all its resources.

Unemployment

is illustrated by a point inside the production possibilities curve.

A production possibilities curve illustrates:

scarcity

Refer to the above diagram. An improvement in technology will:

shift the production possibilities curve from PP1 to PP2.

Refer to the above diagram for athletic shoes. If the current output of shoes is Q3, then:

society should produce fewer shoes to achieve the optimal allocation of resources.

Refer to the above diagram for athletic shoes. If the current output of shoes is Q3, then:

society would consider additional units of shoes to be less valuable than alternative products.

Refer to the above diagram for athletic shoes. If the current output of shoes is Q1, then:

society would consider additional units of shoes to be more valuable than alternative uses of those resources

The concept of opportunity cost:

suggests that the use of resources in any particular line of production means that alternative outputs must be forgone.

The construction of a production possibilities curve assumes:

technology is fixed

Refer to the above table. As compared to production alternative D, the choice of alternative C would:

tend to generate a more rapid growth rate.

If the output of product X is such that marginal benefit equals marginal cost:

the correct amount of resources is being allocated to X's production.

A production possibilities curve shows:

the maximum amounts of two goods that can be produced assuming the full use of available resources.

(Consider This) An exception to the advice "go to college, stay in college, and earn a degree" occurs when:

the opportunity cost of attending college is extraordinarily high.

If the equation y = -10 + 2.5x was plotted:

the vertical intercept would be -10.

The negative slope of the production possibilities curve is a graphical way of indicating that:

to produce more of one product we must do with less of another.

(Consider This) A direct cost of going to college is:

tuition, while an indirect cost (opportunity cost) is forgone income while in college.