StudyPlan Chapter 2
Whether carried out by an individual or a country, production beyond the production possibilities frontier A) is not physically possible B) happens as a result of forced saving C) can occur by acquiring more productive resources D) is possible only through trade
A) Is not physically possible
Which of the following is not an opportunity cost of attending college? A) The cost of housing B) Wages you could have made instead of attending class and studying C) The cost of textbooks D) Money spent on tuition
A) The cost of housing
Is specialization and trade between individuals and countries more about having a job or more about obtaining a higher standard of living? A) While specialization and trade facilitate the attainment of higher living standards, the immediate or proximate motive behind it is most likely jobs. B) It is more about a standard of living because jobs per se yield little meaningful satisfaction C) It is more about having a job because one can have no meaningful standard of living without a job.
Correct Answer: A
Using the same amount of resources, suppose that Nicaragua can produce twice as much coffee as Columbia. Nevertheless, Columbia could still have the comparative advantage in producing coffee if A) it is even less efficient than Nicaragua in the production of goods other than coffee B) it possesses more than double the coffee-making resources as Nicaragua C) its currency is more than double the value of Nicaragua's currency D) it negotiates trade agreements that assign it the comparative advantage in coffee
Correct Answer: A
What does increasing marginal opportunity costs mean? A) Increasing the production of a good requires larger and larger decreases in the production of another good B) Increasing the production of a good requires decreases in the production of another good C) Production is not occurring on the production possibilities frontier D) The economy is unable to produce increasing quantities of goods and services E) Increasing the production of a good requires smaller and smaller decreases in the production of another good
Correct Answer: A
A production possibilities frontier: A) shows how participants in the market are linked B) shows the maximum attainable combinations of two goods that may be produced with available resources C) shows the act of buying and selling D) shows the market for a good or service E) shows how unlimited wants exceed the limited resources available to fulfill those wants
Correct Answer: B
Suppose that the federal government is deciding which of two cancer treatment therapies it will allow Medicare funds to be used to pay for (assume that only one treatment therapy will be funded): Therapy A, which will prolong the average lifespan of patients receiving the treatment by 24 months and will cost $200,000 per patient treated; and Therapy B, which will prolong the average lifespan of patients receiving the treatment by 30 months and will cost $450,000 per patient treated. What factors should the federal government take into account in making its decision of which therapy it will allow medicare funds to be used to pay for? A) The funds available for Medicare B) The number of months the average lifespan is prolonged, compared to the cost C) The age of the patient D) The average lifespan for all Medicare patients
Correct Answer: B
Suppose we can divide all the goods produced by an economy into two types: consumption goods and capital goods. Capital goods, such as machinery, equipment, and computers, are good used to produce other goods. Is it likely that the production possibilities frontier would be a straight line? A) The ppf would likely be bowed out because resources are likely equally well suited to produce both consumption B) The ppf would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods C) The ppf would likely be a straight line because resources are likely equally well suited to produce both consumption and capital goods D) The ppf would likely be a straight line because not all resources are equally well suited to produce both consumption and capital goods
Correct Answer: B
We can show economic efficiency: A) with points inside and on the production possibilities frontier B) with points on the production possibilities frontier C) with points inside the production possibilities frontier D) with points outside the production possibilities frontier E) with points on and outside the production possibilities frontier
Correct Answer: B
What are the implications of this idea for the shape of the production possibilities frontier? A) The production possibilities frontier will be bowed inward B) The production possibilities frontier will be bowed outward C) The production possibilities frontier will be a straight line D) The production possibilities frontier will have a positive slope E) The production possibilities frontier will have a negative slope
Correct Answer: B
How should policymakers determine the amount of money that should be allocated for research curing heart disease? They should base their decision on A) the value of the total benefit of the research on heart disease B) the number of people who die from heart disease compared to the number of people who die from other diseases C) whether the last dollar devoted to research on heart disease results in more benefit than the last dollar spent on research for curing other diseases D) the number of people who have heart disease compared to the number of people who have other diseases E) the value of the total benefit of research on curing other diseases
Correct Answer: C
Suppose the president is attempting to decide whether the federal government should spend more on research to find a cure for heart disease. What is the opportunity cost of spending more money to find a cure for heart disease? A) The cost of the Medicare/Medicaid program B) The monetary value of a human life C) The reduction in funding for research to cure other diseases D) The reduction in future health-related costs of heart disease E) The total explicit cost of the research to cure heart disease
Correct Answer: C
You shouldn't necessarily do what you are better than anyone else at doing A) because others may come to resent your superiority B) because it detracts from your ability to become self sufficient C) unless your advantage in that activity is greater than advantages you possess in other activities D) because it may not be your favorite activity
Correct Answer: C
Is it possible for a country to have a comparative advantage in producing a good without also having an absolute advantage? A country without an absolute advantage in producing a good A) will not have a comparative advantage because it has fewer resources B) will have a comparative advantage if it produces more efficiently C) will have a comparative advantage if it is able to produce that good at a low total cost D) will have a comparative advantage if it has a lower opportunity cost of producing that good E) will have a comparative advantage if it devotes more resources toward that good's production
Correct Answer: D
The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the __________ the payoff to devoting additional resources to that activity A) more proportional B) more instant C) greater D) smaller
Correct Answer: D
Which of the following events would create economic growth, that is, shift the production possibilities frontier outward? A) An increase in the available natural resources B) An increase in the available labor C) An increase in technology that affects the production of both goods D) All of the above
Correct Answer: D
The production possibilities frontier will shift outward A) if resources are used to produce consumption goods B) if production occurs outside the production possibilities frontier C) if technology declines D) if resources are not used in production E) if resources are used to produce capital goods
Correct Answer: E
Which of the following is not scarce according to the economic definition? A) Food B) Workers C) Oil D) Time E) None of the above
Correct Answer: E