unit 1 test
Economic growth can be depicted using a production possibilities curve by which of the following? a) A rightward shift of the curve b) A movement upward on an existing curve c) A movement downward on an existing curve d) A movement from a point outside the curve to a point on the curve e) A movement from a point on the curve to a point inside the curve
a
If it were possible to increase the output of military goods and simultaneously to increase the output of the private sector of an economy, which of the following statements about the economy and its current position relative to its production possibilities curve would be true? a) The economy is inefficient and inside the curve. b) The economy is inefficient and on the curve. c) The economy is efficient and on the curve. d) The economy is efficient and inside the curve. e) The economy is efficient and outside the curve.
a
The chart below shows the number of resource units the countries Gamma and Omega must use to produce one unit of food or one unit of clothing. Which of the following statement is true,according to the chart below? a) Trade should take place, with Gamma specializing in clothing production and Omega specializing in food production. b) Trade should take place, with Gamma specializing in food production and Omega specializing in clothing production. c) Each country should devote half of its resources to food production and half to clothing production and not trade. d) Since Omega can produce both food and clothing using fewer resources than Gamma, it cannot benefit from trade with Gamma. e) Since Gamma can produce both food and clothing using fewer resources than Omega, it cannot benefit from trade with Omega
a
The diagram below shows an economy's current production possibilities curve for capital goods and consumer goods. If society chooses point B over point A, society is choosing a) more future consumption in exchange for less current consumption b) more current capital goods in exchange for less future consumption c) more future and current consumption d) less future consumption in exchange for more current consumption e) less current capital goods in exchange for greater future consumption
a
Country A can produce either 2 tons of cocoa or 4 cars with 10 units of labor. Country B can produce either 5 tons of cocoa or 25 cars with 10 units of labor. Based on this information, which of the following is true? a) Country A has an absolute advantage in the production of cocoa, while Country B has a comparative advantage in the production of cocoa. b) Country A has a comparative advantage in the production of cocoa, while Country B has a comparative advantage in the production of cars. c) Country A has an absolute advantage in the production of cocoa, while Country B has a comparative advantage in the production of cars. d) Country A has a comparative disadvantage in the production of both goods. e) Neither country has a comparative advantage in the production of either good.
b
The basic economic problem of all countries is the existence of a) tax increases and budgets deficits b) limited resources and unlimited wants c) unemployment and inflation d) government and private industry e) unions and monopoly firms
b
The study of economics is primarily concerned with which of the following? a) The testing of hypotheses under controlled conditions. b) The allocation of scarce resources, given unlimited wants. c) The fair and equal treatment of all households. d) The provision of conclusive answers to public policy issues. e) The development of the dynamics of group behavior.
b
The opportunity cost of owning a business is equal to which of the following? I. The economic profits earned in the business II. The accounting profits earned in the business III. The profits that could be earned in another business using the same amount of resources a) I only b) II only c) III only d) I and III only e) I, II, and III
c
Which of the following best explains the shape of the production possibilities curve for the two commodity economy shown below? a) The opportunity cost of producing an additional unit of each commodity stays the same as production of the commodity expands. b) The opportunity cost of producing an additional unit of each commodity decreases as production of the commodity expands. c) The opportunity cost of producing an additional unit of each commodity increases as production of the commodity expands. d) The quantity demanded of each commodity decreases as consumption of the commodity increases. e) The quantity demanded of each commodity increases as the production of the commodity expands.
c
All of the following are included in computing the opportunity cost of attending college EXCEPT a) interest paid on student loans b) wages the student gave up to attend college c) money spent on college tuition d) money spent on clothing expenses e) money spent on books and supplies
d
Opportunity cost is defined as a) excess demand for a good b) unlimited resources and unlimited wants c) a comparative advantage in the production of a good d) the value of the next best alternative that is forgone when an activity is pursued. e) the value of all other possible alternatives that are forgone when an activity is pursued.
d
The diagram below shows a linear production possibilities curve for a country. If the economy is currently producing 10 units of good A and 90 units of good B, the opportunity cost of increasing the production of good A from 10 units to 20 units is how many units of good B? a) 0.5 b) 1 c) 5 d) 10 e) 20
d
A production possibilities curve is bowed out, indicating increasing opportunity cost because of a) the law of demand b) the law of diminishing marginal utility c) the existence of unemployment d) differences in consumer tastes e) imperfect adaptability of resources to alternative uses
e
A student who attends college would pay $10,000 annually for tuition, books, and fees. If the student's next best alternative is to work and earn $15,000 a year, the opportunity cost of a year in college would be equal to a) zero, since the lost opportunity to earn income is offset by the opportunity to attend college b) $5,000, representing the difference between forgone income and college costs c) $10,000, since opportunity costs include only actual cash outlays d) $15,000, representing forgone income, since the costs of tuition, books, and fees will be more than offset by additional income earned after graduation e) $25,000, representing the sum of tuition, books, fees, and forgone income
e
The diagram below shows the production possibilities curves for two countries. Country X and Country Y. Assume that both countries use equal amounts of resources in production. If the two countries engage in trade, both would be better off under which of the following conditions? a) Country X produced both cars and planes, because it has an absolute advantage in the production of both goods. b) Country Y produced both cars and planes, because it has a comparative advantage in the production of both goods. c) Country X specialized in the production of cars, because it has an absolute advantage in the production of cars. d) Country X specialized in the production of cars, because it has a comparative advantage in the production of cars. e) Country Y specialized in the production of cars, because it has a comparative advantage in the production of cars.
e
